A brick and mortar juggernaut in the Amazon economy - Axios
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A brick and mortar juggernaut in the Amazon economy

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The economic recovery is in its 7th year, and unemployment has sunk to levels rarely seen in a generation. Retail sales are picking up, too, growing at their fastest pace in seven months. But you won't see these trends reflected in the performance of most well-known retailers, as department stores like Macy's close stores, and household names like Sports Authority go bankrupt altogether.

This raises a question: Where exactly are consumers spending their money if not at the shopping mall? One answer is Amazon, but it's not alone in avoiding the retail apocalypse: LVMH, the French conglomerate and owner of brands Louis Vuitton and Sephora, had a 15% rise in first-half 2017 revenue, and that did not come by running fire sales — profit was up 23%. Investors have responded enthusiastically, sending up its share price by 20% this year, outperforming retail and and luxury sector indexes.

Why it matters: LVMH's success is a reason for traditional retailers to despair as much as hope. The secret behind LVMH's success is near total control of products from conception through manufacturing and sales, the opposite strategy of traditional mass-market retailers that largely act as middlemen and little more.

It's all about exclusivity: In world where consumers can buy nearly anything they want from anywhere in the world with a tap on a screen, the most desirable product a retailer can offer is one that not everyone can have. Enter Louis Vuitton, the 163-year-old luxury retailer that is LVMH's flagship brand, which accounts for fully half its profits, and gooses customer demand by strategically restricting the supply of certain products. "Vuitton redefined the luxury business model a long time ago," says Oliver Chen, a senior analyst with Cowen. "They own their own factories, they source their own leather, and they own their own stores. When you have that, it's the ultimate leverage."

  • Vuitton has total control over distribution and pricing of its product, protecting its exclusivity and the company's profit margins.
  • This factor in its success was on display in Vuitton's recent partnership with the hyper-trendy lifestyle brand Supreme, where the pair agreed to sell limited editions of streetwear items like jackets, jerseys, and hats.

Make shopping fun: Next to Louis Vuitton, LVMH's most important brand is Sephora, the beauty retailer that has been gobbling up market share in the $22-billion cosmetic retail industry. Customers interviewed by Axios raved foremost about the in-store experience, with freely accessible samples of any product absent any interaction with a salesperson. If shoppers want help, these customers say, Sephora's staff is knowledgable and eager to find them the right look.

Go global: a perkier European economy and stable growth in China are two macroeconomic drivers of LVMH's stock price. According to Jelena Sokolova, a Morningstar analyst, Louis Vuitton's presence in key cities of the emerging world, like Rio and Shanghai, has set the firm up for its current success. LVMH is reaping the benefits as a cache brand in the world's second largest economy, which is still growing at more than twice the U.S. rate.

What goes up, must come down: Sokolova points out that Louis Vuitton's vertically integrated approach is risky. If customer tastes change, for instance, and the company is unable to charge premium prices, its high-priced leases for retail space in the world's most expensive markets could quickly become a millstone around its neck.

What about e-commerce? Cowen's Chen worries that Louis Vuitton isn't doing enough to cater to customers who want quick and convenient electronic shopping. LVMH's answer is Severes24, a multibrand luxury website that it hopes will marry its curatorial talents with the ease of online shopping. It launched in June, though the jury is still out on how the company's high-end customers will embrace it. Tristan d'Aboville, analyst with William O'Neil and Co. points out, however, that this is not LVMH's first on-line foray: it previously pushed products through a site called eLuxury, which it was forced to fold in 2009.

The bottom line: LVMH is demonstrating one formula for making a success of brick-and-mortar retail. That does not mean it can rest: Even high-flying luxury retailers like Louis Vuitton must constantly innovate as e-commerce matures and offers more products and more ways to buy them.

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Puerto Rico in crisis

A man looks at the horizon early in the morning after the passing of Hurricane Maria, in Yabucoa, Puerto Rico. Photo: Carlos Giusti / AP

Puerto Rico remains without power and short on supplies after being slammed by Hurricanes Irma and Maria. Officials are having difficulty even communicating with outlying towns that were devastated by the storm, and the humanitarian crisis is growing.

After focusing for days, at least publicly, on NFL protests and other matters, President Trump tweeted about the crisis in Puerto Rico on Monday night — and seemed to blame Puerto Rico in part for its own misfortune.

Trump's tweets: "Texas & Florida are doing great but Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble....It's old electrical grid, which was in terrible shape, was devastated. Much of the Island was destroyed, with billions of dollars....owed to Wall Street and the banks which, sadly, must be dealt with. Food, water and medical are top priorities - and doing well. #FEMA"

What Puerto Rican officials have said

From Governor Ricardo Rosselló: "We are U.S. citizens that just a few weeks ago went to the aid of other U.S. citizens even as we're going through our fiscal downturn and as we were hit by another storm…Now, we've been essentially devastated. Complete destruction of the power infrastructure, severe destruction of the housing infrastructure, food and water are needed. My petition is that we were there once for our brothers and sisters, our other U.S. citizens, now it's time that U.S. citizens in Puerto Rico are taken care of adequately, properly."

From Manati mayor Jose Sanchez Gonzalez: "Hysteria is starting to spread. The hospital is about to collapse. It's at capacity," he said, crying. "We need someone to help us immediately."

The scale of the crisis

  • Government officials said Sunday a dam on the Western part of the island "will collapse at any time." Eastern areas, which were hit by the eye of the storm, could take years to recover.
  • Officials estimate it could take up to 6 months to restore power to the whole island.
  • Federal agencies have cleared the Port of San Juan for daytime operations, but accessing Puerto Rico is pretty difficult right now — airports and harbors are severely damaged and the whole island remains out of power. 11 ships have delivered 1.6 million gallons of water, 23,000 cots, dozens of generators and food, per the AP. Many hospital patients are being flown to the U.S. mainland for treatment.
  • The death toll is at least 10 in Puerto Rico, and 31 if you include other Caribbean islands, per the AP.
  • 1,360 of the island's 1,600 cell towers are down. 85% of phone and internet cables were knocked out.

Personal experiences

  • When locals see outsiders, the first thing they ask is "Are you FEMA?" per The Washington Post.
  • "Nothing's working, we don't hear from anyone…We feel abandoned," Toa Baja resident Johanna Ortega told USAToday.
  • Food at local grocery stores is "VERY LIMITED," San Juan resident Claudia Batista messaged Axios. Batista described the situation in San Juan as "desperate times," saying because of "all the material loss, people are losing control and patience and are stealing in other homes and assaulting people on the streets."
  • Some local responders in Juncos cleared streets with machetes since the town doesn't have enough chain saws. People are riding bikes and walking for miles to get to gas stations

What FEMA is doing

  • FEMA teams were in Puerto Rico earlier this month following Hurricane Irma, and as soon as Hurricane Maria's winds died down they launched search-and-rescue missions, per USAToday.
  • All of the 28 task force teams around the U.S. have been recruited to help, which is rare, per Karl Lee, a FEMA Incident Support Team member.
  • FEMA responders are using a San Juan hotel as a command center.
  • 4,000 U.S. Army Reserve members have also been deployed to the island. The Army Corps of Engineers dispatched the 249th Engineer Battalion, per CNN.

What Trump has said

Trump declared a major disaster in Puerto Rico and said all of the U.S. government is behind the relief efforts. White House adviser Tom Bossert and FEMA's chief are heading to Puerto Rico Monday, although a trip from Trump isn't expected for a while, per CNN.

  • Rosselló thanked Trump on Monday for having federal emergency assistance provided, per the AP, noting FEMA has done a "phenomenal job."

Trump's most recent tweets about Puerto Rico, from last week:

Take a look

How to help

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Trump goes after McCain over health care vote

President Trump tweeted at Senator John McCain, who is currently in treatment for brain cancer, over his decision to oppose the latest Republican health care plan:

The back-and-forth: McCain was more subtle in critiquing Trump during a 60 Minutes interview Sunday. He said the two had very different upbringings, after noting that Trump had not apologized for saying he was not a war hero.

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Entire Cowboys team takes a knee

Photo: Matt York / AP

Prior to the national anthem at their Monday Night Football matchup with the Arizona Cardinals, the entire Dallas Cowboys team, including owner Jerry Jones, took a knee. They then stood for the anthem.

Go deeper: How NFL teams have reacted to Trump's comments.

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Report: Bannon, Priebus, Ivanka used private email in White House

From L-R, Stephen Miller, Reince Priebus, Steve Bannon. Photo: Carolyn Kaster / AP

Several current and former senior Trump administration officials occasionally used private email to conduct government business, the NY Times reports. The officials named: Steve Bannon, Reince Priebus, Ivanka Trump, Gary Cohn, Stephen Miller and Jared Kushner (Politico had previously reported Kushner sent or received about 100 emails about White House matters using his private address).

Why it matters: Trump railed against Hillary Clinton incessantly during the campaign for her use of private email as Secretary of State. Government officials are supposed to use their government accounts so their communications will be stored, and failing to do so can cause security risks.
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Trump denies split with Kelly over NFL comments

Trump lashed out at CNN for reporting that John Kelly opposed his NFL remarks. Photo: Evan Vucci / AP

President Trump lashed out at CNN on Twitter Monday evening, calling them "Fake News" for reporting that John Kelly was opposed to his comments at Friday's rally calling for NFL players who protest during the national anthem to be "fired." CNN reported that Kelly "was not pleased" with Trump's remarks, later updating the story to reflect Kelly's conversation with CNN reporter Jeff Zeleny, during which Kelly said he was "appalled" by the lack of respect for the flag.

"I believe every American, when the national anthem is played, should cover their hearts and think about all the men and women who have been maimed and killed," Kelly told Zeleny. "Every American should stand up and think for three lousy minutes." However, Zeleny noted that Kelly declined to say whether he felt Trump should have weighed in.

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Russian Facebook ads aimed to spark divisions over Black Lives Matter, other groups

Russian hackers used Facebook ads to pit different social, racial and political groups against one another. Photo: Joerg Koch / AP

Last week, Facebook said it was planning to turn more than 3,000 ads bought by Russian operatives during the 2016 campaign over to congressional investigators. On Monday, the Washington Post reported on details of some of the ads, which pitted different social groups against one another. For example, some of the Russian ads promoted groups like Black Lives Matter, while others warned that those groups pose a dangerous threat to society.

Between the lines: Russian hackers, who worked off of evolving lists of racial, religious, political and economic themes, were able to take advantage of the ability to send targeted messages to different Facebook users based on their political and demographic affiliations. The aim appears to have been to inflate tension between already feuding groups.

Facebook declined to comment, but referred Axios to its earlier update, which noted that "the ads and accounts appeared to focus on amplifying divisive social and political messages across the ideological spectrum."

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Collins will oppose Senate health care bill

Sen. Susan Collins said she opposes the Senate's health care plan. (AP Photo/Robert F. Bukaty, File)

Sen. Susan Collins officially said she will oppose the Senate's latest bill to repeal parts of the Affordable Care Act — yet another nail in the coffin for a bill that's moving further away from the 50 votes it would need to pass.

Why it matters: It would only take three "no" votes to kill the bill. And Collins' opposition makes it a total of four Republicans who say they won't vote for the bill — two moderates (Collins and Sen. John McCain) and two conservatives (Sens. Rand Paul and Ted Cruz).

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Report: 'Iranian missile test' Trump tweeted about never happened

Missiles are on display in Tehran on Sunday during the country's annual Defense Week. Photo: Vahid Salemi / AP

On Friday, Iran claimed to have tested a new medium-range ballistic missile capable of striking Israel with multiple warheads — but, according to Fox News, that missile launch never actually took place. Video footage purporting to show the launch was actually from a failed test back in January.

Why it matters: The world is waiting to hear President Trump's decision — he claimed to have made up his mind last week — on whether or not to stay in the Iran nuclear deal. It's significant that Trump used the "launch" to again decry the deal, tweeting on Saturday: "Not much of an agreement we have!"

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Irma captured America's attention more than other storms

It's been a busy hurricane season, with three powerful hurricanes hitting and one just missing U.S. territories. Here's when and how often Americans' searched Google each of them.

Data: Google Trends; Chart: Lazaro Gamio / Axios

Why it matters: Irma received the most attention, according to Google, likely due to reports it'd be the most powerful hurricane ever to hit the U.S. Meanwhile, Puerto Rico has been devastated by Hurricane Maria, but interest from the U.S. is substantially less than during both Harvey and Irma.

Note: This search data does not include Puerto Rico. Puerto Ricans were highly interested in both Hurricane Irma and Hurricane Maria, with the least interest in Harvey.

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Target to raise minimum wage to $11 per hour, $15 by 2020

Elise Amendola / AP

Target has announced it will raise its minimum wage from $10 per hour to $11 across all U.S. stores, CNBC reports. The changes will begin in October and are part of Target's $7 billion re-investment in the company. Target has promised an hourly minimum wage of $15 by 2020.

The context: Target has been in a wage war with Wal-mart, which raised base hourly pay to $10 in 2016. The federal minimum wage is $7.25 per hour, and it has not increased since 2009.