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BFD Expert Voices - Retail Deals

BFD Expert Voices

Rover (Nasdaq: ROVR), the pet care company that rose to prominence during the pandemic, is profitable, Kimberly writes.

Driving the news: Rover shares have climbed ~20% this week after it raised its revenue and adjusted its profit forecast for the year after reporting a 30% revenue increase and that it swung to a profit.

How it works: The company offers dog boarding, housesitting, drop-in visits, doggy day care and dog walking.

"We still view ourselves as somewhat early in the development of the category," CEO Aaron Easterly says.

Zoom in: Many of its users, even first-time ones, will often become customers of its other services, Easterly says.

"If you can find a sweet spot where it's an opportunity to go and acquire new customers with the new offering, as well as better serve our existing customers, it's definitely a win," Easterly says.

What's next: Rover is interested in adding services to its platform, such as grooming, training, and different kinds of pet adoption, Easterly says.

Health and wellness is another area it's interested in.

Yes, but: Easterly says it won't shy away from M&A to get there, but the company hasn't participated in the market because of price.

There's a valuation dynamic taking shape, particularly for companies funded at high valuations, that's stalling M&A overall, he says.

"The price that they were hoping or thinking their business is worth is maybe not that way anymore," he says.

State of play: The pet industry is projected to grow to about $500 billion in 2030 from $320 billion today, according to Bloomberg Intelligence.

The growth, largely due to an increasing pet population and stronger demand for premium services because pet owners view their pets as children, has driven a wave of investment.

Earlier this year, the company invested in Seattle-based vet care service Felix&Fido's $4 million seed round.

In 2022, it acquired Good Pup, an early-stage company that provides video-based training services for dogs.

DogBuddy, Dog Vacay and Zingy Pet was also brought under its fold over the past few years.

 it raised its revenue and adjusted its profit forecast

1 big thing: Rover fetches strong earnings

Illustration of hundred dollar bills in the shape of a dog's head and two floppy ears.

Vesta, which recently acquired two furniture rental startups, is seeking up to $50 million in growth equity, CEO Julian Buckner tells Richard exclusively.

Why it's the BFD: Direct-to-consumer consolidation is expected to accelerate in the face of a collapsing investment landscape.

By the numbers: At its peak in 2021, U.S. VCs plowed some $5 billion into DTC, but that has shrunk 97% so far this year to a little more than $130 million, per Crunchbase.

Driving the news: Under its parent company, Showroom, Vesta acquired Fernish and Feather this summer to create a DTC home furnishings group.

Per PitchBook, Fernish had raised just over $70 million while Feather had raised just over $71 million, and Buckner says some investors in Fernish and Feather were invited in.

The company declined to comment on the deals' valuations, which were not disclosed.

Details: By plugging Feather and Fernish into its existing distribution network, Vesta quickly made those businesses profitable, Buckner says.

What's next: Aiming to expand the business 5x in three years versus eight years, Buckner says the company would need between $30 million and $50 million in growth equity.

The right capital partner would need to "help us see us around corners we can't see around," Showroom's vice chairman, Michael Barlow, says.

Buckner says he has shied away from raising equity capital but put some debt on the balance sheet and has reinvested "every dollar" of free cash flow to maintain 30% growth per year.

Zoom in: Showroom already has a letter of intent to buy another company, with M&A currently a huge opportunity, says Barlow, Fernish's co-founder.

And it is "keeping warm" a couple of investors if acquisition opportunities that the company can't finance off of its balance sheet come up, he says.

The big picture: "We are changing how the retail experience for home goods is done (with) a branded type of distribution channel," Buckner says.

Via the acquisitions, the integrations of which are 85% complete, Showroom is building a circular infrastructure for home furnishings, Buckner says.

It's something the big box retailers aren't set up to do, he says, adding the new company has the potential to provide recycling services to other companies.

While saying exit options are open, Buckner says they are building a future public company.

2. The BFD: Vesta seeking growth equity for furniture DTC rollup

Illustration of a bed with the duvet as a hundred dollar bill. 

Peter Boneparth will retire as chairman of Kohl's at the end of May next year and will be succeeded by Michael Bender.

In addition, the board also appointed Adolfo Villagomez, CEO of Progress Residential, as a new independent director.

Boneparth stepping down is possibly a positive for activists given his opposition to a sale, a source familiar with the situation says.

3. Retail therapy

Illustration of a retail building covered in sale stickers

Want more retail deals? Search the Axios Pro Deals Tracker beta.

• Trax, a Boston-based provider of image recognition software for brick-and-mortar retail, secured $50m in venture debt from Deutsche Bank Private Credit & Infrastructure. www.traxretail.com

• Chicken Salad Chick is acquiring the dessert chain Piece of Cake. https://axios.link/3FSfhgE

• Core Industrial Partners acquired General Converting, a Bolingbrook, Ill.-based maker of folding cartons for food, confectionery, and consumer brands. www.generalconverting.com

• Society Brands, a tech-enabled CPG company, has acquired Club EarlyBird, a morning energy drink company. https://www.societybrands.com/

• PAI Partners-backed Marcolin SpA, an eyewear maker for brands, has taken full control of Ic! Berlin GmbH. https://axios.link/3sv32nd

• Premier Kings, a Burger King franchisee operating 172 units, has declared bankruptcy. https://axios.link/3MYYKM7

• Denn-Ohio, a Denny's franchisee, filed for bankruptcy on Oct. 31. https://axios.link/3sqpLkq

Editor's note: This item has been corrected to note the name of the company Society Brands acquired is Club EarlyBird, not EarlyBird.

4. Retail transactions

• Ilene Eskenazi was named chief human resources officer of Chipotle and Lois Alexis-Collins was named chief people officer, field operations. https://axios.link/46bCaX8

• Susie Mulder, global brand president at Timberland, plans to depart the company. Nina Flood, VP and general manager of Timberland EMEA, will lead the brand on an interim basis. https://axios.link/3FXYhpb

• René Benko, founder of Signa Holding, which co-owns Selfridges, left as chairman of the company. https://axios.link/3MCowFH

• Jörg Gerold Bucherer, chairman and third generation of the now Rolex-owned watch and jewelry retailer Bucherer, died on Monday at age 87. https://axios.link/47qhc7X

• Lea Rytz Goldman has been named by parent company PVH Corp. as global brand president of apparel brand Tommy Hilfiger and will join the company by spring 2024. https://axios.link/3FUYucZ

• Laurance Roberts is leaving his role as CEO of chicken chain El Pollo Loco. Maria Hollandsworth will serve as interim until a replacement is found.  https://axios.link/3tZGco3

• Joe Thornton has been named Omaha-based Scooter's Coffee's next CEO, effective Jan. 1, replacing Todd Graeve. https://axios.link/477tFxw

• Weldon Spangler was named CEO of TGI Fridays, replacing Brandon Coleman, who resigned for personal reasons after only a couple of months on the job. https://axios.link/3QQqvIL

• Andre Persaud was appointed CEO of United Natural Foods' retail division, which includes banners Cub and Shoppers Food Warehouse. https://axios.link/3sv5Oc7

• Curtis Valentine, a senior vice president of finance, will be promoted to CFO of Sprouts Farmers Market on Jan. 1. https://bit.ly/3QRa7a3

• Rob Vitale, the CEO of food group Post Holdings, is taking a medical leave of absence. Jeff Zadoks will serve as interim during his leave.https://axios.link/466Cvuf

• Pedro Navio was promoted by Kraft Heinz as president of North America replacing Carlos Abrams-Rivera, who as previously announced will serve as CEO of the food group.  https://axios.link/3swEM40

• Andrew Arthurs, the CIO of Aimbridge Hospitality, was named to restaurant tech company Craftable's board of directors. https://axios.link/3FSi2i0

• Tom Lopez was named CEO of condiments maker West Madison Foods. Most recently he was president of Swift Prepared Foods. https://axios.link/3SuKo9J

5. It's Personnel

Nov. 6 — Compass Diversified (NYSE: CODI), a holding company for niche middle-market businesses, wants to position itself for acquisitions next year.

Why it matters: "We just brought about half a billion dollars back onto our balance sheet … and put ourselves in a position to be able to act swiftly against a great opportunity coming in 2024," CEO Elias Sabo told Kimberly.

Nov. 7 — Retail tech startup Particl launched AI Copilot, a new product that helps customers identify both new and mispriced products, CEO Josh Wilson told Richard.

Why it matters: Retailers need sophisticated software to help them manage supply chains efficiently.

Nov. 8 — Consumers may receive a reprieve in housing costs in the coming months, possibly offsetting a restart in student loan payments and buoying consumer spending, analysts say.

Why it matters: The health of retailers and brands hinges on the willingness and ability of the consumer to spend, Richard wrote.

6. 🗞️ Catch up quick

🇺🇸 Situational awareness: We will be dark tomorrow in observance of Veterans Day. See you on Monday.

✏️ Big thanks to editor George Moriarty and copy editor Mickey Meece for today's edits.

🙏 Thank you for reading Retail Deals. Enjoy the long weekend, and we will see you Monday. 

November 09, 2023

1 big thing: Rover fetches strong earnings