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Retail Deals Thought Bubble

The 25th annual ICR Conference is on next week, and it will be IRL for the first time in three years, Richard writes.

Why it matters: The shindig is one of the most important investor retail conferences of the year, setting the tone on corporate outlooks and M&A for at least the next six months.

Details: More than 200 companies including Macy's, Sysco and Neiman Marcus will present.

Startups in the food space will include Mid-Day Squares and Kevin's Natural Foods, and there will be a plethora of restaurant brands, namely Cracker Barrel and Denny’s, among many others.

Last but not least, the technology providers to consumer-facing businesses, such as Presto and Yumpingo, will be pitching their businesses.

Between the lines: There will be plenty of opportunities for one-on-ones, interviews, elbow-bumping, and, yes, dealmaking.

The bottom line: The event will give the industry clarity on the direction of the consumer given the frequently conflicting market data.

1 big thing: ICR Conference returns IRL

Illustration of two open briefcases facing each other with speech bubbles over them as if they're having a conversation. 

Beauty brand Morphe plans to close all of its U.S. stores, casting a shadow over the company that was once valued at $2 billion and powered by social media celebs, Kimberly writes.

Why it's the BFD: Celebrity-backed brands are vulnerable to reputation risks, industry insiders say, and it can certainly cloud the prospects of the market in the future. 

What happened: The company said it made the difficult decision to close its U.S. stores in a tweet yesterday. 

“We are forever grateful to our store teams for their passion, talent and dedication over the years,” it said.

Customers will still be able to shop online or at select retailers. Stores outside the U.S. will remain open.

Flashback: In October, trade pub Women’s Wear Daily said Forma, Morphe's parent company, was considering bankruptcy.

The company took on $650 million in debt when it was bought out by private equity firm General Atlantic in 2019.

Details: Per Bloomberg, the company was said to have generated $400 million in 2019 from internet celebrities. 

“In the first 10 months of that year, revenue tied to [James] Charles, [Jeffree] Star and Jaclyn Hill — another social media star — fell by 66% to $32 million,” Bloomberg reported.

Yet internet celebs Star and Charles were the subject of scandals. The company ended both relationships.

Context: Reputational risk is certainly a factor when investing in any celebrity-backed brand, Ryan Nelson, partner at Jobi, an early-stage VC, told Axios about the space in general.

“You wouldn't want a celebrity to invest in your brand who is getting in scandals or things like that,” he says. “That could have a harmful impact on your brand reputation.”

State of play: The beauty sector is crowded with celebrity and influencer-led brands, Nelson says, adding not all are going to succeed.

“There may be some brands that are sort of moving along, but maybe not growing at the rate at which they would need to, and things like that are good candidates for M&A,” he adds.

The bottom line: The ultimate test of a celebrity-backed brand’s business model is how well they do over time.

“We want to rely a lot on the celebrity in the early days to help get the early awareness, you know, accelerate the growth, but like, by year 3, 4, 5, we would ideally not be as reliant upon the celebrity,” he says.

Morphe's parent Forma Brands didn’t immediately respond to a request for additional comment.

2. The BFD: Morphe to shut down U.S. stores

🌎 Sustainable clothing brand Everlane is the latest direct-to-consumer company to announce layoffs.

The company said in an internal memo that about 17% of its 175-strong workforce would be affected, and would likely center around customer service and creative roles, The Information reported.

3. Retail therapy

Illustration of a silhouette of head with a brain made out of price stickers.

• Vesta, a global transaction guarantee platform for online purchases, secured a $25m senior term loan from Runway Growth Capital, for additional working capital to support its growth. https://axios.link/3GI2gaH 

• Churchill Asset Management raised $737m for its second junior capital opportunities fund. https://axios.link/3ZhYBb6

• Golden Gate Capital is considering a traditional private equity fundraise, which would mark a break from its evergreen fund structure, per Buyouts. https://axios.link/3IqrLhZ

4. Retail transactions

• TA Associates promoted Mike Libert to managing director, Stefan Dandl to director, Ben Bold and Rafael Telahun to SVPs, and Ali Abdel-Halim, Yash Baheti, Laurent Indekeu, Enzo Loreti and Kaelan Ong to VPs. www.ta.com

5. It's Personnel

Here is your recap of the top news from this week's Retail Deals:

Jan. 3 — Checkout tech is easing retailer burdens and gauging the ROI on retail tech. Read the newsletter

Jan. 4 — 2022's M&A slump and Kurly scraps its IPO plans. Read the newsletter

Jan. 5 — Ant Group's go sign; PE-backed bankruptcies; and news from Amazon, Bed Bath & Beyond and Stitch Fix. Read the newsletter

6. 🗞 Catch up quick

Illustration of a origami boat made out of a newspaper.

🎁 Programming note: Since we had a long wind down over the holidays, we're going to give you the gift of a full newsletter today. 

Situational awareness: The labor market is still chugging along despite recession fears, Axios' Courtenay Brown writes. Go deeper

🙏 Many thanks to editor George Moriarty and copy editor Mickey Meece for today's edits.

Thank you for reading Retail Deals! Please ask your friends, colleagues and fellow consumers to sign up here. Have a great weekend! 

January 06, 2023

1 big thing: ICR Conference returns IRL