Last week brought some important changes to the retail landscape. Those changes were numerous enough that I’ll do a synopsis, rather than a post on each area. Johnson & Johnson led the pack by announcing their plans to buy medical technology firm, Auris Health, Inc., the surgical robotics maker.
Auris is the developer of the Monarch Platform, a medical device that assists physicians’ access to nodules in patients’ lungs to diagnose and target treatments. The Auris technology is expected to help J&J develop a digital solution to address patients’ lung-cancer treatment. Large medical device makers are continuing to enter the robotics market, in part, because the equipment can command high prices. Robotics assistance in surgery has also been expanding dramatically over the past two decades, as surgeons have embraced the systems’ abilities to mitigate human error and improve techniques and patient outcomes.
Levi-Strauss & Company, the company that invented blue jeans and maintained dominance in the industry for more than a century, completed paperwork last week for an initial public offering, hoping to raise $600 million. The family-controlled business anticipates that the offering will return Levi to the markets, three decades after it went private in a leveraged buyout. The move is also expected to provide a war chest for potential new deals and acquisitions. In the offering, the company said that it was “looking to make acquisitions that would drive further brand and category diversification.” A spokesman for the company added, “Levi has recognized that they need financial flexibility to figure out the next chapter for the brand.” Hunh – that doesn’t sound very promising – usually when companies are starting to plan for “further brand and category diversification” they wind up ruining the brand that they have. Sears is one of those.
Which brings us to our third topic for the week’s review: Sears. The hedge-fund manager who maneuvered Sears into their own formula for “brand diversification” and wound up with Sears’ declaring bankruptcy, after stripping it of its most valuable assets, has now declared that he will have the company become a “lean” fighting machine. Hmmm. What Edward Lampert actually plans to do is “sell or sublease some of the 425 remaining Sears stores” – in other words, his work is not finished with the dismantling of Sears. And Lampert declares that he will “devote more retail space to tools and appliances.” Intriguing, since he sold off the lucrative tools segment of Sears and was in talks with Walmart (which apparently has gone nowhere, to date) to purchase the Sears appliances division. And he also says that he wants to open additional, smaller stores similar to the one now in existence in Oak Brook, IL. “Our goal is to continue to shrink the size of our stores,” he say. Lampert’s goal is to continue to SHRINK SEARS out of existence, certainly. Until he can pull off the “Toys ‘R’ Us” equivalent for the company, he will continue to chip away.
And, speaking of Toys ‘R’ Us – Hasbro reported a 13% decline in sales during the holiday season – see what Toys ‘R’ Us were doing for them – ! And, Mattel also reported a 5% drop in the fourth quarter. It’s said that the mid-year Toys ‘R’ Us liquidation – thanks to another hedge fund owner – allowed retailers and on-line merchants to scoop up toys at deep discounts that were then sold at prices that competed with Hasbro and Mattel during the holiday season. Hasbro was particularly hard hit because their brands were most strongly supported and carried by Toys ‘R’ Us; therefore, there was a large selection of Hasbro brands among the highly-discounted items at the TRU liquidation – the gift that just keeps on giving in the marketplace. Hasbro and Mattel have both indicated that they have become wiser and more proactive after this experience. And they indicate that they are beginning to learn to live without the strong support that they received from Toys ‘R’ Us.
ALL THE MOVING PARTS – it will be interesting to see which of these changes actually bring accommodation and success to the companies that are implementing them.