| Here’s your daily business briefing. - 💰 Walmart, Amazon ad spending up, TV down
- 🔍 Deep Dive: U.S. retailers slash prices amid inflation
- 📈 Temu's U.S. success enriches owner
Thanks for reading! Shriram
p/Shriram | |
| 1 | | Advertisers increasingly favor retail media networks like Amazon ($AMZN) and Walmart ($WMT) over traditional TV advertising. According to eMarketer, global retail media ad spending is projected to more than double from $114.18B in 2023 to $233.89B in 2027, with retail media's share of digital advertising expenditure expected to rise from 18.9% in 2023 to 25.7% in 2027. More: - Walmart's ad business growth has been significant, recently augmented by its acquisition of Vizio, a TV manufacturer.
- Retail media networks enable advertisers to utilize first-party data for precise ad targeting and optimizing visibility.
- Amid tech privacy changes like Google's restrictions on third-party cookies, advertisers are turning to alternative targeting methods, driving the shift towards retail media.
- Amazon dominates retail media ad revenue in the U.S., capturing about 75% of the market share.
- GroupM forecasts retail media revenue to hit $42B in the U.S. this year, showcasing a major shift in advertising spending from traditional TV.
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What the numbers say: According to NIQ, in 2024, consumer packaged goods inflation returned to pre-pandemic levels, and consumer spending soared by a third compared to 2019, leading Target ($TGT) and Walmart ($WMT) to slash prices on thousands of items, including household essentials. Target's first-quarter same-store sales dropped by 3.7% consecutively, while Walmart's sales increased by 3.8%, driven by higher transactions rather than price hikes, with a 45% rise in grocery rollbacks observed in April. Relevance: Major retailers' price cuts signal a change in retail pricing dynamics following years of consistent inflation. This impacts consumer sentiment, as 71% of those surveyed view economic conditions negatively. Retailers are adapting pricing strategies to address consumers' financial constraints and evolving spending patterns. More data: Lowe's ($LOW) saw a 4.1% decline in first-quarter same-store sales, attributed to reduced spending on major renovations, while Macy's ($M) reported a 1.2% drop in comparable sales due to inflation. Despite stable U.S. retail sales in April and general merchandise store declines, analysts anticipate a nuanced price outlook, not uniformly rising as seen in previous years. | | | |
| 3 | | PDD Holdings ($PDD), which owns Temu and Pinduoduo, reported a staggering 246% increase in net profit to $3.9B for Q1 2024, exceeding analyst projections of $1.7B. Its revenue surged by 131% to $12B, surpassing expectations and propelling PDD's market capitalization to over $204B, solidifying its position as China's premier e-commerce entity. More: - Introduced in 2022, Temu secured almost 17% of the US online discount store market by November of the same year, while Pinduoduo's share in China surged to 19% by mid-2023.
- PDD's achievements are linked to changing consumer behaviors in China and the U.S., driven by a preference for budget-friendly items amidst economic downturns and rising inflation.
- Following robust financial results, investment banks like Morgan Stanley and Nomura have revised their price targets for PDD stock upward.
- PDD encounters heightened competition as competitors aggressively lure budget-conscious consumers with deeper discounts.
- The company is grappling with regulatory hurdles globally, including recent scrutiny from European consumer watchdogs and South Korean authorities.
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| 4 | | Burger King, under Restaurant Brands International ($QSR), responds to consumer demand and competition by introducing a $5 "Your Way Meal" deal, offering a choice of three sandwiches, nuggets, fries, and a drink. This initiative coincides with McDonald's preparing to roll out a comparable meal deal, reflecting the competitive dynamics in the fast-food sector. More: - Burger King's offer will run for several months, while McDonald's promotion will last about four weeks.
- In addition to its $5 meal deal, Burger King is testing two additional value platforms that will be released later this year.
- Wendy's recently announced a $3 breakfast meal deal, joining other fast-food chains in ramping up promotions.
- Restaurant Brands exceeded Wall Street expectations, driven by increased demand at Burger King, despite McDonald's missing profit estimates.
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| 5 | | VF Corp. ($VFC), which owns popular brands like Vans and Timberland, posted a loss in its recent fiscal quarter, with a loss per share of $0.32, far below analysts' forecast of a $0.01 profit. Revenue decreased for all major brands, notably Vans, which saw a 26% decline YoY, while adjusted gross margin failed to meet market expectations. More: - VF Corp. stocks plunged 11% in after-hours trading to $11, the largest decline since February and the lowest price since March 2009.
- As of Wednesday's close, the stock had already lost 34% of its value for the year.
- VF Corp. is prioritizing revitalizing its Americas division and Vans, appointing a new president for the streetwear label, cost-saving initiatives, and debt reduction efforts.
- Additionally, VF Corp. is selling off planes and a Colorado hangar to boost cash amid declining apparel sales.
- The Denver-based company downsized office space to raise funds for upcoming debt payments, including a $1B loan due by year-end and $750M in bonds due next April.
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| 6 | | Kiehl's launched its products on Amazon's Premium Beauty store, offering sunscreen, facial creams, masks, and men's grooming products. Some of Kiehl's products on Amazon have received the Climate Pledge badge for sustainability. More: - Kiehl's general manager, John Reed, emphasized the brand's legacy and excitement about offering a seamless shopping experience on Amazon.
- Clinique joined Amazon's Premium Beauty store in March, offering a range of products and a Skin Analysis Tool for personalized recommendations.
- Amazon promoted its beauty offerings, including skincare and men's grooming, during the May 13-19 Summer Beauty Haul event.
- Kiehl's expansion aligns with L'Oréal's growth strategy, which includes the $2.5B acquisition of Aesop, with $537M in 2022 sales.
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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 Shriram Jeevakumar | |
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