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Author Archives: Chris Broussard

About Chris Broussard

I'm the Co-Founder and President of Tematica Research and editor of Thematic Signals, which aims to uncover confirming data points and items to watch for our list of investing themes. Whether its a news item, video clip, or company commentary, we've included this full list of items literally "ripped from the headlines." I have been involved in financial services marketing and publishing for over 20 years – having held senior level positions with financial publishers, financial services corporations and providing marketing support and consulting services to financial institutions and independent financial advisors. My background in digital marketing, financial services and consumer research provides me with a unique perspective on how to uncover the underlying proof points that are driving the themes our Chief Investment Officer Chris Versace utilizes in our various Tematica publications.
Weekly Issue: More Data Points To An Economic Slowdown Ahead

Weekly Issue: More Data Points To An Economic Slowdown Ahead

Key points in this issue:

  • The Fed, recent economic data and downside guidance are setting up a rocky March quarter earnings season. 
  • We will continue to hold shares of Guilt Pleasure thematic leader Del Frisco’s Restaurant Group (DFRG) as we patiently wait for the next step of its strategic review process. Our price target of $14 remains in place. 
  • Be sure to check back on TematicaResearch.com later this week when I follow up on the announcements that Select List resident Apple (AAPL) made yesterday. There we are a number of things to cover, several of which position Apple’s business inside the Digital Lifestyle tailwind. 

Data points to a slower economy ahead

Stocks finished last week on different footing compared to the start of the week. I type this, however, there is an attempt at a market rebound. While the major market indices trended higher ahead of Federal Reserve Chair Jerome Powell’s post-monetary policy press conference last Wednesday, the revelation the Fed would adopt a far more dovish stance, with no expected rate hikes in 2019, took the market by surprise. I talked about this on last week’s Cocktail Investing podcast, which if you missed it you can find it here.

As you can see in the chart below, the market initially liked what it read in the FOMC statement – dovish as expected – but as it digested the Fed’s latest economic projections and Powell’s comments it traded off its 2 PM surge. There’s dovish and then there is, “Uh oh, they are worried!” To better understand what put a bitter aftertaste in the market’s mouth let’s have a blow by blow account of what it heard.

First, let’s turn to the Fed’s monetary policy press release. Right off the bat, it agreed with the data we’ve been getting of late that “growth of economic activity has slowed from its solid rate in the fourth quarter” due to in part to slower household spending and business fixed investment. We touched on this in our note yesterday, which means those comments were of little surprise as was the lack of rate hike as the Fed maintained its target range for the federal funds rate.

Now here comes the dovish statement that popped the market – “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.” In other words, the Fed’s patience means a more dovish stance in the near term and basically took any more hikes in 2019 off the table with just one possible in 2020.

Now let’s turn to the Fed’s latest iteration of economic projections, which show the Fed has reduced its 2019 GDP forecast to 2.1% from 2.3% in December and 2.5% in September. Interesting, given the CNBC March Fed Survey findings we shared yesterday that put 2019 GDP at 2.3%. We say interesting because the Fed tends to be the cheerleader for the economy, yet its forecast is below the CNBC consensus, but in line with the Economic Forecast Survey published by The Wall Street Journal. The Fed also trimmed its forecast for GDP in 2020 to 1.9% from 2.0% and left its 2020 view unchanged at 1.8%. No matter how you slice it, it’s slower growth ahead compared to what we saw in the second half of 2018. 

Inside this forecast, the Fed also took a knife to its federal funds forecast for 2019 through 2021. For this year it now sees the federal funds rate at 2.4%, pretty much in between the 2.25% to 2.50% range it said it would maintain. For 2020-2021, the Fed now forecasts the federal funds rate will remain at 2.6%, down from its prior forecast of 3.1%. In other words, the prior view to boost rates to cool the economy and keep inflation tame is no longer. This goes hand in hand with the revised GDP forecast and comments issued in the formal press release. 

What’s different this time around is the why as the Fed is reacting to the slowing economy and is aware that a more aggressive interest rate policy could erode the expected speed of GDP in the coming quarters. What we have here is a Fed that is looking to avoid, as best it can, one of the classic mistakes of the past, which is boosting interest rates into a slowing economy or recession. 

Now let’s turn to the press conference to determine what was said that put that after taste in the market’s mouth. During Powell’s prepared remarks, his message was summed up in the following words – “We continue to expect that the American economy will grow at a solid pace in 2019, although likely slower than the very strong pace of 2018. We believe that our current policy stance is appropriate.” A pretty succinct was of summarizing the press release and economic projections. 

Powell also addressed the Fed’s Balance Sheet Normalization Principles and Plans, noting the news the Fed intends “to slow the runoff of our assets starting in May, and to cease runoff entirely in September of this year.” In other words, a more dovish stance at the Fed and significantly so compared to that coming out of its last few FOMC meetings. 

To recap and put this all of this into context, the “normal” federal funds rate for this business cycle sits between 2.25% and 2.5% versus 2.75% at the end of the Fed’s last tightening cycle in 2006 and 4% at the end of 2000 cycle – that’s not a whole lot of monetary ammunition for the next downturn.

By September the Fed will still hold over $3.5 trillion in bonds which equates to about 17% of GDP versus just 6% back in 2006. 

Materially lower “normal” rates and a balance sheet that is nearly 3x heavier after over 10 years since the last recession, unprecedented monetary stimulus, solid tax cuts and a level of government spending the likes of which have not been seen outside of a recession or a war. Yeah, the markets got spooked.

This brings us to the likely question that spooked the markets – what is the Fed seeing that it has taken on a more pronounced dovish tone? 

More than likely it viewed the slowing global economy, the pushouts in the US-China trade conversation and the potential for a Brexit delay as fanning the flames of uncertainty. Generally speaking, during periods of uncertainty both consumers and businesses tend to tighten their belts, could be another reason why March quarter guidance could be weaker than expected. 

Those slower growing economy concerns were back in action Friday morning following the publication of March Flash PMI data for Japan, the EU and the U.S.

For Japan, the Flash Manufacturing PMI remained in contraction territory, with new order activity falling at a faster rate pointing to a “sustained downturn.” 

Later this week we will close the books on the March quarter and prepare for the upcoming earnings season that is only a few weeks away. We’ll continue to listen to the Thematic Signals and other thematic signposts as we navigate what is likely to be another challenging period for the overall stock market. 

Tematica Investing

Holding steady with Del Frisco’s shares

In aggregate our Thematic Leaders continue to perform well so far this year despite the recent fall off in Guilty Pleasure leader Del Frisco’s Restaurant Group (DFRG). Following its recent earnings report that shed no light on where the company is in its strategic review process, the shares continued to move lower over the last several days bringing the decline over the last month to more than 25%. Candidly, I am growing frustrated with this leader, but I know it’s simply the lack of news that is weighing on the shares. There have been a few reports suggesting the company could be cleaved into two parts to different buyers, which if true would explain the pronounced timetable. 

Despite this frustration, and especially because the shares are deep into in oversold territory, our plan is to hold DFRG as the takeout story evolves further. 

  • We will continue to hold shares of Guilty Pleasure thematic leader Del Frisco’s Restaurant Group (DFRG) as we patiently wait for the next step of its strategic review process. Our price target of $14 remains in place. 

Be sure to check back on TematicaResearch.com later this week when I follow up on the announcements that Select List resident Apple (AAPL) made yesterday. There we are a number of things to cover, several of which position Apple’s business inside the Digital Lifestyle tailwind.

Weekly Issue: Luxury Goods Are No Longer Scarce

Weekly Issue: Luxury Goods Are No Longer Scarce

Key Points from This Week’s Issue:

  • LVMH Moët Hennessy Louis Vuitton S.E. is the obvious way to gain exposure to our Living the Life investment theme; however the lack of liquidity in the shares has us take a pass. 
  • Instead, we are issuing a Buy on the shares of Del Frisco’s Restaurant Group (DFRG) and adding them to the Tematica Investing Select List with a $14 price target. 

 

Global Demand for Luxury Goods Is Exploding, Giving Rise to Our Living the Life Investment Theme

When we think of the term “living the life” we tend to think of an existence filled with joy, personal satisfaction and the ability to live life to the fullest, which usually implies the finer things in life be it food and drink, travel and hospitality, automobiles, clothing and other personal goods. The word “luxury” originates from the Latin word “Luxus,” which means indulgence of the senses, regardless of cost. Premium to luxury products and services are defined by McKinsey & Co. as ones that have “constantly been able to justify a significantly higher price than the price of products with comparable tangible functions.” The Boston Consulting Group (BCG), meanwhile, defines luxury goods as “items, products and services that deliver higher levels of quality, taste and aspiration than conventional ones.” Between those two definitions are luxury brands like Louis Vuitton, Tiffany, Hermès, Gucci, Ferrari, Prada, Porsche, Rolex and Burberry.

Tematica’s Living the Life investing theme looks to capture the global spending on higher-end affordable luxury as well as luxury branded goods and services that from an economic perspective have a high-income elasticity of demand. As people become wealthier, which we are seeing with the Rise of the Middle Class across many emerging economies, especially China, they will buy more luxury goods.

According to data published by Deloitte, the luxury market reached annual sales of $1 trillion at the end of 2017, of which more than 80% was comprised of luxury cars, luxury hospitality and personal luxury goods. In 2017, the core of the luxury market remained the personal goods category with apparel, beauty and handbags still account for the bulk of the market with shoes, jewelry and handbags ranked as the three fastest-growing product categories for the year.

Data collected by consulting firm Capgemini and published in its World Wealth Report 2018 showed the combined wealth of the world’s millionaires rose for a sixth straight year in 2017, topping $70 trillion for the first time ever due to an improving global economy and strong stock market performance. The number of high net worth individuals (HNWI) — which Capgemini defines as those having investable assets of $1 million or more (excluding primary residence, collectibles, consumables and consumer durables) —  reached 18.1 million in 2017, up almost 10% year over year. The four largest geographic markets for millionaires, accounting for 61% of the world’s high net worth individuals, were the US, Japan, Germany and China.

 

China: the driving force of luxury goods spending

One of the demonstrative forces that is driving and shaping the luxury market is the increasing wealth of Chinese consumers. Our Living the Life investing theme isn’t the only one benefitting from the improving economics or shifting demographics in China. While our Rise of the New Middle Class and our Aging of the Population investing themes are also taking cues from China, our Living the Life investing theme focuses on the explosive growth to be had in China high net worth individuals (HNWIs) and their impact on the demand for luxury goods and services. As you’ll see in the coming paragraphs, luxury goods companies have already recognized that opportunity and positioned their businesses accordingly.

From 2008 to 2014, the number of Chinese households purchasing luxury products doubled, fueled by growing incomes and greater access to luxury goods. Since 2015, the primary driver of increases in luxury spending has shifted from consumers making their first purchases of luxury goods to incremental spending from existing luxury consumers.

In 2016, it’s estimated that 7.6 million Chinese households purchased luxury goods. That number represents less than 2% of total households in China but is more than the total number of households in Malaysia or in the Netherlands. Each of these 7.6 million households spent twice as much as French or Italian households, leaving Chinese luxury consumers to account for almost a third of the global luxury market.

In 2008, wealthy Chinese represented only a third of Chinese luxury consumers; in 2017 they represented half of the shoppers in this category and account for 88% of Chinese luxury spend. With the number of Chinese millionaires expected to surpass that of any other nation in the coming years, according to Gartner, by 2024 Chinese consumers are expected to make up 40% of all luxury spending.

According to Gartner the top luxury brands in China today include Cartier, BVLGARI, Louis Vuitton, Coach, Gucci, Burberry, Mont Blanc, Valentino, Swarovski and Chow Tai Fook.

According to Hurun’s The Chinese Luxury Traveler 2017 report, enthusiasm for overseas travel shows no signs of abating, with the proportion of time spent on overseas tourism among luxury travelers rising 5% to become 70% of the total. Cosmetics, (45%), local specialties (43%), luggage (39%), clothing and accessories (37%) and jewelry (34%) remain the most sought-after items among luxury travelers. High domestic import duties and concerns about fake products both contribute to the popularity of shopping abroad. These high-end travelers prefer top class hotel accommodations such as The Ritz-Carlton, Banyan Tree, the Four Seasons, Mandarin Oriental, the Fairmont and the Peninsula.

During this past June 2018 earnings season, brands including Kering’s Gucci to Britain’s Burberry and French luxury handbag-maker Hermes all reported resilient demand from Chinese shoppers during the quarter, even as escalating China-U.S. trade tensions took hold. One of the factors that helped buoy demand was the reduction in import duties on certain goods that led brands such as  Gucci, Hermès and others to trim prices, thereby closing the price gap between the US and China.
 

Examining LVMH Moët Hennessy Louis Vuitton S.E. shares

An example of a well-positioned company for the Living the Life investing theme is LVMH Moët Hennessy Louis Vuitton S.E. (LVMHF) and its collection of 70 premium brands that span wine and spirits (10% of sales), Fashion and Leather Goods (39%), Perfumes and Cosmetics (13%), Watches and Jewelry (9%), and Selective Retailing (29%). The Selective Retailing component of LVHHF is comprised of retail aimed at international travel customers through LVMH’s ownership of Hong Kong based DFS, a leading luxury traveler retail and its network of duty free stores 11 major global airports and 20 downtown T Galleria locations, as well as affiliate and resort locations; its ownership in Miami Cruiseline, the leading provider of duty-free retail shops to the cruise ship industry; and select retail with Sephora SA and Le Bon Marché in Paris. Recognizable brands that all fall under the LVMH corporate umbrella include Dom Perignon, Hennessey, Moët & Chandon, Louis Vuitton, Fendi, Christian Dior, Aqua Di Parma, Guerlain, Kenzo Parfumes, BVLGARI, Tag Heuer and Chaumet.

In examining LVMH’s business portfolio, it’s one that tackles numerous aspects of the luxury goods industry, and its geographic position bodes well for continued success. In 2016, 25% of the company’s revenue was derived from Asia excluding Japan, and as the influence of the increasingly wealthy Chinese population that exposure rose to 31% in the June 2018 quarter. That geographic mix shift came primarily at the expense of LVMH’s US business, which slipped to 23% of revenue exiting the June quarter vs. 27% in 2016. That shift was hardly surprising given the emphasis on the company’s Asian store network that hit 1,195 locations halfway through 2018 vs. 991 in 2016, and now accounts for 27% of its overall store footprint. As one might suspect, that makes Asia LVMH’s largest market for its Wine and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, and Watches and Jewelry business units.

That emphasis on China is paying off for LVMH as its sales and profits in the first half of 2018 rose more than 10% year over year before adjusting for currency, led by its Fashion and Leather Goods business that climbed nearly 25% year over year. All of the other segments generated positive reported sales growth save for Wines & Spirits, which was flat on a reported basis as strong volume demand in Asia, particularly China, was offset by exchange rate fluctuations.

From a profit generation perspective, the two businesses we as investors should focus on when it comes to LVHM are its Fashion and Leather Goods (58% of profits) and Wines & Spirits (15%). Not only are these the two largest profit generators that contribute the bulk of LVMH’s earnings, they are also the higher margin businesses at roughly 32% of sales vs. the corporate average near 22%. As these two business lines go, so goes LVMH’s profit stream and its stock price. Margin improvement across all of its businesses, combined with its more than 10% top line increase, led company profits to climb more than 25% in the first half of 2018.

As one might expect, both the luxury goods industry and LVMH’s business are seasonal in nature owing to the heavy gift-giving season and holidays that span from the December quarter into the March quarter, owing to the growing influence of Chinese New Year which typically falls around either late January or February. As one might suspect it means a disproportional amount of revenue and profits for LVMH come during the second half of the year. In 2017, 68% of the company’s revenue and 69% of its profits were delivered in the second half of the year.

As we once again head into that holiday and shopping filled season, LVMH’s portfolio and geographic positioning have it well positioned to capture the growth in luxury goods spending. The continued focus on cost containment and the benefit of select price increases, with a more favorable mix of product bode well for LVMH’s profit growth to outpace that for its top line. It’s hard to argue with a well-positioned company that is delivering positive operating leverage.

Year to date, LVMHF shares have had a strong run, up some 24%, and are up nearly 150% since the beginning of 2016, but there is more upside to be had as the growing impact of the increasingly wealthy Chinese consumer is felt and as the company continues to grow its bottom line and dividend payments. By 2020, consensus expectations call for LVMH to deliver EPS of €14.90, up from €10.20 in 2017, with its dividend per share hitting €6.93 compared to €5.00 in 2017.

As alluring as LVMH’s business may be to investors, following the strong move in the share price, the shares are currently trading at the upper end of their historical P/E multiple and dividend yield ranges. From a risk to reward profile, while upside to the $420 level in LVMHF shares is likely, the downside risk to $320 doesn’t offer enough net upside to warrant getting involved at current levels. A more favorable entry point for the shares would be below $345.

The other item we must consider with LVMHF shares is the lack of liquidity. Fortunately, LVMH also has a US-listed ADR in LVMUY shares, which while not the most liquid stock it’s far, far better compared to LVMHF shares. In adjusting the above analysis for LVMUY shares, the net upside to downside tradeoff based on historical multiples would be 5%. Also in keeping with the comments above, a preferred entry point for LVMUY shares would be below $69, which offers more than 20% upside to the implied $84 price target.

 

Del Frisco shares offer a tasty Living the Life offering

Now let’s turn to Del Frisco’s Restaurant Group (DFRG), and if you’ve had the pleasure of eating there, you’ll recognize it’s a high-end experience with a bill to match. Quite a different business model compared to the recently exited Habit Restaurant (HABT) shares that netted more than an 80% return for the Tematica Investing Select List. Also unlike Habit shares that are now trading north of 270x expected 2019 EPS, Del Frisco shares are currently trading at just over 21x expected 2019 EPS of $0.44 and less than 1.0 on a 2019 enterprise value to sales basis).

While best known for its Del Frisco’s Double Eagle Steak House, the company’s portfolio also includes Sullivan’s Steakhouse, Del Frisco’s Grille, Barcelona Wine Bar, and bartaco that emphasizes steaks, chops, fresh seafood, tapas, street food, and wines and cocktails. In full the company operates 84 restaurants in 24 states and as one might expect for a company known for its steakhouse, it has a location in DC for those power dining folks. By comparison, Del Frisco’s is a far smaller restaurant footprint than its competition that includes Bloomin Brands’ (BLMN) Fleming’s Prime Steakhouse and Wine Bar, Darden’s (DRI) The Capital Grille, Smith & Wollensky, The Palm, Ruth’s Chris Steak House (RUTH) and Morton’s The Steakhouse. All pricey experiences that fit the mold of Tematica’s Living the Life investing theme.

When examining these kinds of companies, we have to keep a close watch on their cost structure and one of those key areas is food cost. In the case of these establishments that serve steaks, chops and other higher-end fare, Del Frisco’s it means beef, pork and chicken prices. The most recent data from the Livestock Monitor shows cattle and hog slaughter levels are higher year over year in aggregate, which has led to higher production levels and lower prices. We’ve seen the benefit of falling commodity prices in the past and what it means for margins, and as alluded to above Starbucks (SBUX) was a great example of margin expansion during periods of falling coffee prices. When Ruth’s Hospitality reported its quarterly results in offered some confirming comments:

“Food and beverage costs as a percentage of restaurant sales decreased 180 basis points year over year to 28.1%. This decrease was primarily driven by a 10% decrease in total beef costs as well as by 1.4% increase in average checks. Last summer, beef prices were driven to record high levels due to increased retail demand for prime beef. This year, we have not experienced increased retail demand, and as a result, we now expect full-year beef deflation of 1% to 4%. We currently expect this deflation to be the highest in the third quarter before returning to more normal levels in the fourth quarter.”

This wind up of this beef deflation led Ruth’s Hospitality to reduce its costs of goods sold to 28% to 30% of restaurant sales from its prior guidance of 29%-31%. We see that as a positive for the peer group, and especially for Del Frisco’s high margin Double Eagle business, which is also its largest revenue generator (roughly 48% of company revenue).

In examining Del Frisco’s shares, there is visible upside to $14 price target (roughly 32x 2019 EPS, but roughly 1.0 on a 2019 enterprise value to sales basis) vs. the 52-week bottom near $8. From risk-to-reward perspective, that equates to 45% upside as we head into the seasonally strong part of the year with falling beef prices vs. downside of 20%. Odds are that downside level is somewhat higher than $8 given the seasonal strength and falling beef prices, but nonetheless, the current risk-reward in the shares offers net upside of roughly 25%. That has us adding DGRG shares to the Tematica Investing Select List with a Buy rating. Should DFRG shares move lower, we’d look to scale into the position below $9 aggressively provided our thesis on the shares remains intact.

As we do this, it’s worth noting the company is pursuing strategic alternatives for its Sullivan’s Steakhouse business and has shared it has received “several bids from interested parties to purchase the concept and continue to engage in discussions.” A sale of this business which was its lowest margin business during the first half of 2018 would leave a stronger business mix and add cash to the company’s coffers. In my opinion, it also makes for a cleaner takeout story of the remaining Del Frisco’s business by a larger entity such as Bloomin Brands, Darden or privately held Landry’s that own Morton’s Steakhouse.

In terms of catalysts to watch, Darden will report its quarterly earnings on Sept. 20 and we’ll be looking for confirmation in beef deflation as well as improving restaurant traffic sales and margins, particularly at its Capital Grille business.

  • We are issuing a Buy on the shares of Del Frisco’s Restaurant Group (DFRG) and adding them to the Tematica Investing Select List with a $14 price target. 

 

Companies riding the Living the Life Tailwind

  • American Express (AXP)
  • Burberry Group (BURBY)
  • Constellation Brands (STZ)
  • Coty (COTY)
  • Diageo plc (DEO)
  • Estēe Lauder Companies (EL)
  • Ferrari NV(RACE)
  • Inter Parfums (IPAR)
  • Hermès (HESAY)
  • Ruth’s Hospitality (RUTH)
  • Prada S.p.A (PRDSY)
  • Tapestry (TPR)
  • Tiffany & Co. (TIF)
  • Volkswagen (VLKAY)

 

MODERN WALL STREET: Chris Versace Giving His Insights Prior to Earnings from Apple

MODERN WALL STREET: Chris Versace Giving His Insights Prior to Earnings from Apple

 

Literally from “the street”, Tematica Chief Investment Officer joined Olivia Voznenko of Modern Wall Street from just outside the New York Stock Exchange to discuss what we were looking to see from Apple’s quarterly earnings announcement:

 

As a bonus question, Olivia asked Chris the question we always like to hear: “what industries are you liking right now?”  Always a great opportunity to talk thematics and why we see the how sector investing is dead . . .

 

 

 

Car Maker Renault Acquires . . . a Magazine Company?

Car Maker Renault Acquires . . . a Magazine Company?

We’ve spent our fair share of time looking into the future of autonomous vehicles — the technology behind them, the players that are making it happen and the implications this new technology could have on everything from the car manufacturers to parking systems to rental car companies.

One comment, in particular, stands out from our special podcast with Brad Stertz of Audi USA when he mentioned that one of the regular comments he hears from those that have ridden in their autonomous test vehicles is that after the first few minutes, it’s well, kind of boring.  The full podcast can be played on the bottom of this post.

All of this brings us to the news out of France:

Renault SA is buying a stake in a media company as Chief Executive Officer Carlos Ghosn plans to stretch the carmaker’s suite of products to entertaining passengers in future driverless vehicles.The French automaker will purchase a 40 percent stake in Challenges Group, that publisher of the namesake weekly economic magazine as well as four monthly science and history journals, it said in a statement Wednesday. Renault and French media group will work on new content specially designed for autonomous vehicles.

Read Full Article Here: Renault Strikes Magazine Deal to Entertain Robo-Car Riders | Media – AdAge

For most, this move by Renault probably seems crazy. But for us and our thematic lens, it makes more than a fair bit of sense. If a company is going to spend enormous sums of money and effort to remove the task of driving from drivers, well then don’t you want to own a piece of the businesses that will thrive will all this new-found time on drivers’ hands? We could argue that a magazine company might not be the place to start — we’d probably look more at streaming video content as it’s such a key part of our Connected Society investment theme right now. But we applaud Renault’s foresight and a focus on what we call the Content is King investment theme.

 

 

Rent the Runway seeks to broaden appeal with new monthly service |Chain Store Age

Rent the Runway seeks to broaden appeal with new monthly service |Chain Store Age

Source: Rent the Runway seeks to broaden appeal with new monthly service |Chain Store Age

 

Yesterday, apparel Rent the Runway company announced a new, lower-priced service to broaden its target audience:

The New York-based company on Monday announced a less costly membership option that allows women to rent four items from its website, choosing from a curated selection of everyday styles from more than 200 brands. At the end of each month, members can either send the goods back or buy them at the company’s members-only discount.The new service, called RTR Update, costs $89 a month. The company’s other membership service for everyday wear, which launched in 2016 and is called RTR Unlimited, is going up from $139 per month to $159 per month.

We always like it when we see news such as this that touches on a number of themes! The most obvious investment themes we see are Affordable Luxury, Cash-Strapped Consumer and Connected Society themes. Affordable Luxury since Rent the Runway is simply allowing women to have access to clothing brands (Luxury brands) that they might not necessarily purchase on a regular basis (Cash-Strapped, all done online and through the mail (Connected Society.)

Rent the Runway has been around for a while — since 2009 — so it’s Netflix-like model for women’s fashion isn’t anything new. But as a privately held company, we don’t get too many glimpses into its business model, so we dug right into this article on Chainstoreage.com.  One thing, in particular, caught our attention was this stat from the CEO:

Our subscription business is up 125% year-over-year and is projected to triple in 2018. We’ve made clothing rental a utility in women’s lives, and I’m thrilled to be bringing the closet in the cloud to millions more women with ‘RTR Update.’”

Further on, we get another view into the on-going Clicks vs Bricks war. The simplistic view, of course, is that online shopping is killing retail and we’re going to be seeing an American landscape of empty shopping malls and strip retail centers. But then why is Amazon buying Whole Foods and opening its own bookstores? And then we have this:

In addition to its online presence, Rent the Runway operates five physical locations (New York City, Chicago, San Francisco, Washington, D.C., and Woodland Hills, California). It is looking to grow its brick-and-mortar footprint.

The old adage in retail marketing has always been that the three most important factors in success are location, location, location. In today’s multi-channel world, the definition of “location” has certainly changed. But what has also changed is that success is also dependent on tapping into other significant economic factors, which in our world we call themes. Most relevant are ones such as Affordable Luxuries, Guilty Pleasures, Cash-Strapped Consumers, Connected Society, Content is King.

 

 

Millennials Unearth an Amazing Hack to Get Free TV: the Antenna – WSJ

Millennials Unearth an Amazing Hack to Get Free TV: the Antenna – WSJ

Dan Sisco has discovered a technology that allows him to access half a dozen major TV channels, completely free.“I was just kind of surprised that this is technology that exists,” says Mr. Sisco, 28 years old. “It’s been awesome. It doesn’t log out and it doesn’t skip.”Let’s hear a round of applause for TV antennas, often called “rabbit ears,” a technology invented roughly seven decades ago, long before there was even a cord to be cut, which had been consigned to the technology trash can along with cassette tapes and VCRs.The antenna is mounting a quiet comeback, propelled by a generation that never knew life before cable television, and who primarily watch Netflix , Hulu and HBO via the internet. Antenna sales in the U.S. are projected to rise 7% in 2017 to nearly 8 million units, according to the Consumer Technology Association, a trade group.

Source: Millennials Unearth an Amazing Hack to Get Free TV: the Antenna – WSJ

 

Maybe after we lift up our lower jaw from the floor we’ll be able to comment on this story . . . for now we’ll just post it here.

 

 Netflix racks up $20B in debt as it knows Content is King

 Netflix racks up $20B in debt as it knows Content is King

You’ve got to spend money to make money. That appears to be the mantra over at Netflix, where the DVD-by-mail service turned mega-streaming outlet has racked up nearly $20 billion in debt expanding its platform to new areas, producing original content, and buying the rights to show other company’s movies and TV shows.The Los Angeles Times recently took a look behind Netflix’s financial curtain, detailing how the streaming service has changed over the years and how its transformation has added to the company’s debt load.From investing tens of millions of dollars in new original programing to spending billions of dollars to enter new markets in Asia, Netflix doesn’t appear to be worried about its spending habits.The L.A. Times offers a more granular look at Netflix’s spending spree in recent years, but here are a few things we found interesting.

Read Full Article: Is A Content Bubble Responsible For Netflix’s $20B In Debt? – Consumerist

 

It’s not a closely guarded secret at all that consumers will migrate to venues that offer content they find compelling — be it at the theater, on the radio, TV or increasingly through streaming and mobile services. The notion of “must see” programming dates back decades, with the companies creating the content as well as those making it available benefitting along the way. Branded content that has been the backbone of movies, TV, music, games and even sports have become tent poles that drive cross-selling opportunities across various businesses.

As streaming services such as Netflix become more and more ubiquitous, we are seeing new players enter the content creation arena as a means to differentiate itself from the competition. This move by companies such as Netflix, Hulu and Amazon is disrupting the playing field not just within streaming services, but on other platforms as well, as some are winning awards and accolades at the expense of the entrenched players.

None of this comes cheap, however. Great content costs great money, and in a global Connected Society that content investment must appeal to consumers in various age groups and across the globe. In short, we are now seeing the creative destruction unleashed by the internet of newspapers, magazines, books and other publishers reach how, where and when people consume all forms of content on screens of all shapes and sizes in a variety of locations.

Comcast Giving Its Customers the Scissors to Cut the Cord

Comcast Giving Its Customers the Scissors to Cut the Cord

Would you consider getting a cable-replacement TV service from a cable company? If so, Comcast has a proposal for you.The company says it is rolling out an internet-based streaming video service, called Instant TV, this fall. The service will join other streaming video services from pay TV providers, including Dish’s Sling TV and DirecTV Now from AT&T. These services aim to deliver conventional cable TV channels, unlike services such as Netflix that offer individual movies and series.The new Comcast service has already been tested in two markets, Boston and Chicago, where it was called Stream TV. The service will only be available in locations where Comcast already has a footprint. One target is the millennial audience, which may be looking for alternatives to conventional pay TV, according to the company

Read Full Article: Comcast to Launch ‘Instant TV’ Streaming Service This Fall – Consumerist

 

Content is King.  That’s the reality of today’s digital world, and the reason why we’ve broken our Content is King investment theme out from the Connected Society.  Same is true for the Cashless Consumption theme.

Can one survive without the other?  Probably not. But the dynamics of the content business are such that they reach across more platforms than just the internet.  Disney is a great example of this reality as it pushes content across platforms — from movies, to amusement parks, to apps and back.