February 26th, 2024: Walmart’s Q4 earnings release, Bed Bath and Beyond and Overstock name new CEOs, Macy’s in a battle with investors, and what are UPS and FedEx telling us about the economy?
Today’s episode of the Watson Weekly podcast is sponsored by Commercetools.
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It’s February 26, 2023 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Walmart’s Q4 Earnings Release
Bed Bath and Beyond and Overstock Name New CEOs
Macy’s In a Battle With Investors
What are UPS and FedEx Telling Us About the Economy?
- and finally, The Investor Minute which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.
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To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
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Just a reminder to stay tuned until the end for my Final Word for the week.
BUT FIRST in our shopping cart full of news….
Walmart Q4 FY24 Earnings Shows Improved Outlook Year Over Year
Walmart continues to execute well across a number of fronts, and seems cautiously optimistic on calendar 2024, relative to how we began calendar 2023. What is driving Walmart results?
Really there are three things that we’ll talk about today.
1 - Growth in Higher Margin Businesses. Improved contribution from Ads, Marketplace, Fulfillment, and Membership.
* Ads business grew 28% y/y to $3.4B globally, WMT Connect US grew 22%
(Amazon at $47B, almost 14x larger than WMT ads business)
* 50% of WMT Connect US ads growth from marketplace sellers.
* WMT+ same-day leading share-gains among upper-income households
* Global membership income grew by 20%
* Operating cash flow up 4% y/y to $35B
2 - Reducing Supply Chain Costs. This involves more leverage upstream due to automation in their regional distribution centers and downstream closer to the consumer. This second part involves improving route density and increasing adoption of same-day fulfill from store.
A few stats for you:
* Store-fulfilled delivery up 50% y/y
* WMT US inventory down 4.5% y//y due to better sell-throughs
* Walmart lowered last-mile delivery costs by 20% y/y, 90% of stores can deliver same-day now.
* While there eCommerce business is still not profitable, Walmart reduced their eCommerce losses by 40% y/y due to these changes.
3 - eCommerce is a continued growth area for the company
* Weekly active customer file grew 17% y/y, primarily due to marketplace growth.
* WMT US marketplace revenue grew 45%, with. more than 35% of those marketplace orders fulfilled by Walmart.
* Overall, it seems like Walmart’s marketplace is key to expanding their general merchandise assortment online.
Oh and did I mention? Walmart eCommerce is now a 100 billion dollar business. That little fact was released during the earnings call as well.
In terms of the broader outlook:
* Did not seem to be concerned about a 2024 recession.
* general merchandise should still see some amount of weakness this year.
* Walmart expects net sales growth 3-4% on a constant currency basis, with operating income growth of 5%
I don’t know about you, but this earnings report gives me a little bit of rosy optimism for 2024.
[References:]
Our Second Story
Bed Bath & Beyond, Overstock name new CEOs
If it seems like it’s been hard to follow the Bed Bath and Beyond and Overstock saga, you can’t be blamed. It’s difficult. This is just one month after Overstock acquired the assets of Bed Bath, said everything was rebranding to Beyond, and then changed its mind.
Talk about confusing!
Now, the company is circling back to appoint CEOs for the two different companies. Chandra Holt has been named the new CEO of Bed Bath & Beyond.
Dave Nielsen, the long-time Overstock executive, is the new CEO of Overstock.com.
If you think that’s confusing, have you checked out the Beyond.com website lately? It looks like the parent company of Bed Bath is getting into home mortgages, shipping insurance, lending, and all sorts of things that are more profitable than retail. Is it wrong to wonder if the whole thing isn’t some kind of Tai Lopez-like ponzi scheme at this point?
[References:]
Our Third Story
Macy’s In A Battle With Investors
There are a lot of dramatic news headlines swirling around Macy’s and I thought it would be a good time to catch everyone up.
In December this year, Macy’s rejected a $5.8 billion takeover offer from activist investors Arkhouse Management. The company claims that these investors have failed to disclose their financing and so cannot be considered an offer.
Since then, Arkhouse is increasing the pressure and has nominated a slate of 9 new Directors to Macy’s Board of Directors. Right now, there seems to be a public battle playing out.
For it’s part, Macy’s is listening but not entering into any serious negotiations. Macy’s claims not only that Arkhouse doesn’t seem to have the money to back its offer, but that the offer doesn’t have any significant value behind it.
Arkhouse has approximately a 4.4% stake in Macy’s which means the company has to listen, also. It’s entirely possible that Arkhouse will keep increasing its share in Macy’s and wait for it to falter in this post Jeff Gennette era.
The most contentious issue at the heart of the matter is the value of Macy’s real estate. Essentially, Arkhouse believes that Macy’s is not maximizing it. Given that retail is a tough business with limited operating income, it’s actually hard to argue with this logic.
In order to continue negotiations, Arkhouse is proposing that Macy’s open up it books to give the investors more financials, which Macy’s has so far rejected. I expect this to keep escalating until there is some kind of settlement — why? Macy’s management cannot afford such a public distraction — the end result will probably end with Macy’s accepting at least some of the new Board of Director nominees from Arkhouse.
[References:]
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And Our Last Story
What are UPS and FedEx telling us about the economy?
It seems like there are two main economic narratives going on out there right now. One is the Alfred E. Neumann, “what me worry?” Narrative that this year seems to look better than last year, inflation is coming down, and companies are raising their forecasts.
Unfortunately, there are still clouds out there as the shipping industry says hello. If eCommerce is up and to the right for everyone, wouldn’t FedEx and UPS be adding routes rather than trimming them? Listen to a few of these datapoints.
* At the end of last year, FedEx lowered its 2024 full year forecast citing weak demand. This is after almost a full year of shuttering facilities and grounding planes.
* UPS continues some of the same trends, cutting about 12,000 jobs just 5 months after negotiating its Teamsters contract and trying to claw back the demand it lost ahead of the strike deadline.
FedEx is attributing the cuts to lower volume, lower fuel surcharges and the rise in deferred shipments.
The big question is, are these just share losses to USPS and regional carriers, or is there something broader happening here? We know the big companies like Walmart, Amazon, and even the average Shopify merchant is growing. If you peel the onion it seems like there are a lot of struggle in there as well. And with the UK and Japan just entering a recession, one wonders if there is still more bad news ahead mixed with the good news.
Still, the story overall is likely tied to cost savings initiatives from shippers. One of the biggest line items in any retailers profit and loss statement is transportation, as Jason Murray from Shipium told us on a recent Watson Weekend broadcast. Logistics leaders have always cared the most about reducing costs, and I think retailers are not done optimizing their routes for the new supply chain capabilities that have been built over the last few years
[References:]
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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Guess? And WHP Global to Acquire rag & bone
Guess? and WHP Global are set to form a joint venture to acquire Rag & Bone's intellectual property, allowing Guess? to use the IP for licensed product manufacturing. Rag & Bone has pretty strong direct-to-consumer component and so is likely looking to expand its product line into other categories as part of WHP Global, while I’m assuming Guess? Will be doing the operating.
Second
Yellow Wood Partners to Acquire Elida Beauty From Unilever
Yellow Wood Partners acquired Unilever's Elida Beauty division for an undisclosed sum to enhance and optimize its personal care portfolio to power brand growth. Conglomerates such as Unilever are realizing that less is more regarding brand ownership.
Link: https://www.reuters.com/markets/deals/unilever-sell-elida-beauty-yellow-wood-2023-12-18/
Third
Threecolts To Acquire Walmart Marketplace Tool DataSpark
E-commerce software roll-up aggregator Threecolts has acquired Walmart product research tool, Dataspark for an undisclosed amount. What is the end game here or have we not seen this movie before? Most of the times, these aggregator companies acquire companies and aren’t able to realize synergies between them.
Fourth
Online Grocery Discount Store Martie Raises $7M
Online grocery discount store Martie has raised $7 million. Martie aims to lessen food waste by offering surplus supplies at deeply discounted prices and is also focusing on a different part of the grocery sector.
AND FINALLY …
Cart.com Raises Debt Investment
Cart.com received access to a revolving credit line and a mezzanine term loan from Silicon Valley Bank and co-lender Trinity Capital. What does 2024 have in store for Cart.com?
Today’s final word for the week of February 26th is “Rosy”:
Don’t look now, but more often than not both economists and retailers both are predicting a rosy 2024. Time to break out your shades for 2024 as companies seem to be putting worries of a 2023 recession far in the rear-view mirror.
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That’s all for this week! Till next time Watsonians.....
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Hi, I’m Rick Watson, CEO and Founder of RMW Commerce Consulting and host of the Watson Weekly podcast - your essential eCommerce Digest.
Our production partner for the series is CitizenRacecar. The show is produced by Jose Baez; Production Manager, Gabriela Montequin.
To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.