Shoppers may ultimately get the shaft in the form of higher prices, but many companies in the consumer space could be about to move forward with big deals to maximize shareholder value amid the disruptive shift to digital buying.
Handbag and accessories maker Coach (COH) reportedly made a bid for rival Kate Spade (KATE) a week ago. The latter party is now considering the offer. On the surface, this would be a horrible deal for Coach to make. For starters, each company sells the same product (handbags and accessories) at the same struggling department stores and within retail stores in the same top malls. But, with top line growth increasingly hard to come by in categories such as handbags due to the fundamental shift in how people shop, Coach could be resigned to this type of deal for several reasons.
First, Coach is good at taking brands overseas, and this is an untapped opportunity for Kate Spade. Secondarily, Coach could drive a good chunk of supply chain savings, anywhere from shipping products to stores to sourcing raw materials. To be sure, this is the type of deal being done to boost profit margins over time, not necessarily because these could be two companies which, when combined, see cross-selling opportunities and an explosive top line.
In many respects, it's why North Face and Timberland owner VF Corp (VFC - Get Report) should loosen its financial discipline a touch and make its next splashy deal (Adidas (ADDYY) -owned Reebok would be a good fit, VF needs a sneaker brand). VF Corp's CFO told me on Friday that valuations on companies have become more "attractive" (Under Armour's (UA - Get Report) sure has...), although conceding no deals were imminent.
Meantime, scale deals in retail could very well occur alongside those in the restaurant space. The restaurant industry is "ripe for consolidation," KeyBanc Capital Markets analysts Chris O'Cull and David Carlson said in a research note Monday. As TheStreet reported, there would be three reasons for some blockbuster restaurant deals: (1) rising costs cause a need for greater scale; (2) certain companies are itching for a deal as a means to expand quicker overseas -- top acquirers could be McDonald's (MCD - Get Report) , Starbucks (SBUX - Get Report) , Restaurant Brands International (QSR - Get Report) , Yum! Brands (YUM - Get Report) , Domino's Pizza (DPZ - Get Report) and Dunkin Brands Group (DNKN - Get Report) ; and (3) federal tax reform could boost cash flows, and joining forces could open the door to even stronger returns for investors over time.
Having gotten to know Panera Bread founder Ron Shaich through the years, it would be hard to imagine he signs off on a deal that puts his baby in the hands of McDonald's or other fast-food entities. A Panera Bread could be a better fit for JAB Holdings, the growing food conglomerate that owns Krispy Kreme, Keurig, Peet's Coffee, among other assets. Joining forces with JAB could bring the Panera Brand overseas.
In a badly beaten-up consumer space, finally some news not related to Sears (SHLD) dying. Cheers to that.
Read This or You Lose Out
Papa John's cooks up a test of organic ingredients: At some point, we will be able to eat an all-organic pizza from Papa John's (PZZA - Get Report) . The company took a first step towards that on Tuesday, as TheStreet reports, launching a test of using some organic vegetables. It is also launching gluten-free dough. It will be interesting to see if Domino's Pizza and Pizza Hut, who haven't focused on ingredient quality per se, like Papa John's, look at this test and decide to respond this year.
Some un-Disney-like comments: One Marvel executive could very well get reprimanded for his off-color comments in what is a heavily buttoned-up Disney (DIS - Get Report) corporate climate. David Gabriel, who is vicepresident of sales at Marvel, claims comic book readers are "turning their noses up" at diversity and don't "want female characters out there", reports the BBC. Twitter has already started to rake this fella over the coals.
Hey @Marvel diversity isn't the problem. Event fatigue and too much editorial interference, too many titles and 3.99 price tag.— Ryan Young (@theyoungryan) April 4, 2017
@Marvel, If you want diversity, create new characters that represent us minorities. Don't replace the ones we already love. JUST STOP IT!— Eddy G. Acuna (@Stuffedbigfoot) April 4, 2017
Mercedes-Benz, the king of autonomous cars: Daimler, Mercedes-Benz's parent company, plans to launch a customer-serving, driver-free taxi service in as little as three years, reports Wired. Step aside, Uber. The automaker is not new to the self-driving car scene, having unveiled a self-driving truck (below) in 2015.
Sheryl Sandberg speaks on equal pay for women: A real great op-ed in the USA Today by Facebook's (FB - Get Report) Sheryl Sandberg. "It's just plain wrong that so many women are working hard every day for less money," Sandberg writes.
Ford is winning the muscle car wars, at least in March: The Ford (F - Get Report) Mustang racked up 9,120 in sales in the U.S. last month, outperforming Chevrolet's (General Motors (GM - Get Report) ) Camaro which sold 7,052 units. Dodge (Fiat Chrysler (FCAU - Get Report) ) was in last place, see sales of 6,225 for its Challenger, reports CarBuzz.
Who loves it who hates it? #ford #fordmustang #fordmustanggt #2018mustang #s550 #sadface #mustangs #fordperformance #fordracing #v8 #mustangsofinstagram #fordsofinstagram #cara #car #ride #drive #saturday #weekend #fun #vancouver #muscle #musclecar #sportscar #horsepower #canon #photography #ridiculoose #instagram #speedhunting
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The Prince pleads to the EU: Speaking at a gala dinner (below), where he was given an award for being the "Renaissance Man of the Year", Prince Charles said: "Although our relationship is deeply rooted in our shared history, today, I am delighted to say, it is more firmly embedded than ever before." The Prince was urging the EU not to turn its back on Britain in light of Brexit, reports the Daily Mail.
#New Prince Charles and Camilla attend a gala dinner in Florence in Palazzo Vecchio, where Charles will be presented with the Renaissance Man of the Year Award�������� The couple were welcomed by the Mayor of Florence, Dario Nardella, and his wife Chiara Landi❤️�� #statevisit #day4 #galadinner #palazzovecchio #firenze #florence #loveart #loveitaly #italy #italia #princecharles #princeofwales #duchessofcornwall #camillaparkerbowles #royalnews #instaroyals #royalcouple
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