Typically during recessions, we tend to see a large number of mergers and acquisitions (here is a great Mckinsey article on this topic) as struggling companies are strategically bought for pennies on the dollar. While we have seen acquisitions spike during the last four months, specifically within the retail space, we have also seen a new type of strategic partnership form amongst some of the largest names in retail.
Retail tech companies are beginning to collaborate with legacy incumbents, working together to leverage each other’s strengths. Amazon x Vogue was first, launching a digital shop for small designers on Amazon’s site. Now Walmart is firing back, announcing a new partnership with Shopify. Annnd the fight of the retail giants begins…
1. Retail Giants Getting Bigger?
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Background: Shopify is one of the most talked-about companies in the retail space, and for good reason. Not only has their stock skyrocketed (+57%) since the pandemic, they’ve relaunched their Shop app, and have just announced a new partnership with the retail giant Walmart.
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Details: Shopify merchants can now sell on Walmart’s eCommerce site, giving them access to Walmart’s 120M monthly online visitors. Experts are predicting that Shopify could quadruple their revenues by 2025! This is huge for both companies, and could finally give Walmart the upper hand in the eCommerce space.
Jeff Besos to be Interview by Congress
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Background: Amazon’s CEO agrees to be interviewed by Congress, alongside other major tech CEOs, regarding the market power of tech companies.
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Why? This interrogation of sorts is prompted by US Anti-Trust laws, which attempt to protect consumers from predatory business practices and ensure that there is fair competition within an industry. As tech companies become some of the most powerful forces in our world, it’s Congress’ job to ensure that they’re not becoming too powerful.
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Details: Besos will likely be asked about claims that Amazon boxes out small businesses, abuses its power, and mistreats warehouse workers.
2. More Closures?
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Background: H&M, the fast-fashion retailer, has 5,058 stores worldwide! This huge real estate footprint is quickly becoming the companies biggest liability. H&M gradually started reopening stores beginning in late April, however, 18% of their stores are still currently closed.
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Details: H&M reported a 50% decline in net sales over the three months since the pandemic, despite seeing an uptick in their online business. This isn’t surprising given that eCommerce sales generate only 17% of their total revenue. Keep in mind that throughout all of this, they are still paying rent on their some 5,000+ stores, a hefty bill to foot when you’re sales are down so significantly.
Gap Sued for $2M in Missed Rent
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Background: In their Q1 earnings report, Gap reported a 43% year-over-year sales decline driven by COVID-19 related store closures. The company has had many issues with paying rent over the past few months; a large mall owner, sued Gap for failure to pay $65.9 million in rent and in May, a New York landlord filed a lawsuit for not paying rent at a store near times square.
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Details: Now, Brookfield Property Partners, which owns shopping malls across the U.S., claimed that the retailer is refusing to open stores at the company’s properties in Texas and owes more than $2 million in rent.
24hr Fitness Files for Bankruptcy
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Background: 24-hour fitness files for chapter 11 bankruptcy, closing 100 gyms across the country. The company says that this is directly related to the Coronavirus pandemic (duh).
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Details: The chain has secured $250M in financing in hopes of restructuring the company to come out stronger on the other side. However, a full recovery may be an overly optimistic stance given the recent at-home-workout movement stemming from shelter-in-place.
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xoxo Jackie
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