| Here's your daily business briefing. - 👗 A&F beats holiday sales targets with price hike boost
- 🔍 Deep Dive: Pharma targets small firms amid megadeal slump
- 🎯 Target debuts its own toy brand
Thanks for reading! Shriram
p/Shriram | |
| 1 | | Abercrombie & Fitch ($ANF) exceeded holiday-quarter expectations, reporting a 21% surge in sales and notable profit growth, with fiscal fourth-quarter earnings per share reaching $2.97, surpassing the expected $2.83, and revenue hitting $1.45B, exceeding the anticipated $1.43B. CEO Fran Horowitz emphasized growth across regions and brands, noting a 35% increase in sales for Abercrombie brands and a 9% growth for Hollister brands. More: - Comparable sales increased by 16%, while the gross margin went from 60.1% to 62.9%, a considerable rise over the prior year.
- Abercrombie predicts low double-digit sales growth for the current quarter and between 4% and 6% growth for the entire year.
- Abercrombie's stock has risen by around 59% in 2024 after surging by nearly 283% in 2023 and closing the year at around $88.
- After generating $4.28B in revenue for the fiscal year 2023, the company wants to grow its global client base and meet its long-term goal of $5B in global yearly sales.
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What the numbers say: This year has witnessed six pharmaceutical sector deals surpassing $1B, with Eli Lilly & Co. and Novartis emerging as the most active players in the past 12 months, securing seven and six deals, respectively. Relevance: Pharmaceutical companies are favoring smaller, targeted acquisitions to address specific drug gaps in their pipelines over pursuing mega-deals, driven by concerns about regulatory pushback exemplified by Amgen Inc.'s Horizon Therapeutics acquisition. This strategy is reflected in the focus of companies like Novartis and GSK on bolstering core operations through targeted acquisitions while divesting peripheral businesses. More data: Novartis, led by CEO Vas Narasimhan, acquired MorphoSys AG for an experimental blood cancer medicine, aligning with its strategy of focusing on acquisitions valued at $5B or less. Similarly, GSK's bid for Aiolos Bio Inc. reflects the pharmaceutical trend of targeted acquisitions to strengthen existing focus areas, with some contemplating the separation of peripheral businesses, seen with Novartis, GSK, and potentially Sanofi. | | | |
| 3 | | Target ($TGT) has unveiled Gigglescape, its new in-house toy brand, offering stuffed animals, books, and games, all priced at $20 or less, with most plush toys under $10 and books at $5. The collection features items like a rainbow-maned unicorn, a giraffe, a smiling shark, and traditional teddy bears, introduced alongside Target's fourth-quarter and full-year earnings report. More: - Designed for durability and sustainability, the brand incorporates packaging elements that are over 90% plastic-free.
- Target positions itself for development in the toy industry by adding Gigglescape, which targets Generation Alpha and fills a void in its private label range.
- Along with announcing relaunches across its current portfolio of over 50 owned brands, Target has also introduced new private labels, such as Dealworthy.
- Target Circle 360, a delivery-focused premium membership option, will be added to the company's redesigned Target Circle loyalty program to better compete with rivals like Amazon and Walmart.
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| 4 | | New York Community Bank ($NYCB) plans to secure over $1B in a financial deal led by Steven Mnuchin's investment firm to enhance its financial position. Former Comptroller of the Currency Joseph Otting has been appointed as NYCB's new CEO, succeeding Alessandro DiNello, with Mnuchin set to join NYCB's board as part of the arrangement. More: - Following the deal's announcement, NYCB's shares saw a more than 40% decline before rising more than 7% to close at $3.46.
- The investment group will buy convertible preferred stock at the same price as common stock at NYCB for $2 per share, including Mnuchin's Liberty Strategic Capital.
- Hedge fund Citadel, Hudson Bay Capital, and Reverence Capital Partners are among the other investors in the organization.
- Mnuchin's participation in NYCB stems from his prior experience heading a consortium of private equity investors that acquired IndyMac during the 2008 financial crisis.
- Among the latest financial issues facing NYCB are an unexpected loss disclosed in late January and Moody's reduction of its credit rating to junk status.
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| 5 | | Dine Brands Global ($DIN), overseeing Applebee's and IHOP, is considering joint restaurants to revive Applebee's growth, following closures in 2023. The exploration is driven by the potential for doubled revenue compared to standalone locations, utilizing both brands' menus throughout the day and addressing the high cost of building standalone Applebee's locations. More: - Focus Brands, the owner of several fast-food franchises, has found success with combo restaurants; currently, it has 175 of these establishments in its portfolio and plans to open 65 more.
- Focus Brands' portfolio includes Auntie Anne's, Carvel, Cinnabon, Jamba, Moe's Southwest Grill, McAlister's Deli, and Schlotzsky's.
- Focus Brands envisioned combining locations as the future for fast-food joints, presenting growth opportunities beyond malls and expanding into streetside venues.
- Yum Brands began opening co-branded locations, such as Taco Bell and Pizza Hut, three decades ago, but began moving away from the strategy in the 2010s.
- Together, IHOP and Applebee's have already established eight co-branded restaurants worldwide, with a shared back-of-house system and combined front-of-house layouts. These restaurants are located in Mexico.
- Before considering further development of the concept in the U.S., Dine Brands will assess the effectiveness of the prototypes in other countries.
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| 6 | | Stellantis ($STLA) plans a $6.1B investment in Brazil, joining other global carmakers committing $14B to upgrade production in Latin America's largest economy. The focus is on electrifying flexible-fuel models, with the introduction of Stellantis' first flex-hybrid vehicle later this year and a goal of releasing 40 new models by 2030. More: - Aiming to have 20% of its sales in Brazil be electric by 2030, Stellantis' investment reflects its commitment to decarbonizing mobility.
- Significant investments of $13.97B have also been announced by other automakers, such as Volkswagen, Toyota, Hyundai, and General Motors, in Brazil.
- To encourage the automotive industry's transition to cleaner technology, Brazil's left-wing government provides tax exemptions and incentives to businesses that produce cars with lower emissions.
- Stellantis plans to manufacture electric cars in South America, with cost reductions in place by 2026.
Zoom Out: - With a $610M investment, China's BYD, the world's largest manufacturer of electric cars, selected Brazil for its first plant outside of Asia last year.
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 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Aaron Crutchfield | |
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