Executive Summary

On October 30, Kroger hosted its 2018 Investor Conference in Cincinnati, Ohio. The presentations focused on the company’s commitment to its Restock Kroger plan and highlighted the potential of alternative revenue streams. The four main themes of the conference were:

• Maintaining the Restock Kroger plan to grow the company’s operating profit to $400 million by 2020, mainly by focusing on the growth of alternative revenue streams.
• Meeting customer expectations by fostering the development of associates, implementing new technologies and following major trends.
• Continuing to grow private-label brands and strategic partnerships.
• Living the moral and ethical purpose of the company and furthering its sustainability and social efforts, including its “Zero Hunger, Zero Waste” plan.

The day featured management presentations by Rodney McMullen, Chairman and CEO; Mike Schlotman, EVP and CFO; Mike Donnelly, EVP and COO; Yael Cosset, Group VP and Chief Digital Officer; Mary Ellen Adcock, Group VP, Retail Operations; Tim Massa, Group VP, Human Resources and Labor Relations; Jessica Adelman, Group VP, Corporate Affairs; and Stuart Aitken, Group VP.

Executive Summary

• Consumer demand for transparency in beauty product ingredients has spurred many companies to create “clean” formulations that are free of potentially toxic and/or synthetic ingredients such as parabens, sulfates, silicones, phthalates and fragrances.
• Global sales of natural and organic beauty products are expected to nearly double between 2016 and 2024, growing from $11 billion to $21.8 billion, according to Persistence Market Research.
• Developing markets present a particularly lucrative opportunity for brands and retailers selling beauty products that are “free from” unwanted ingredients.
• The clean-living trend is extending into beauty as consumers become increasingly conscious of what they eat and better educated about how certain ingredients may make them look and feel.
• Beauty brands and retailers of all sizes are jumping on the clean and transparent trends. In June 2018, Sephora launched its “Clean at Sephora” offering, which features more than 50 brands and 2,000 clean and natural products.

Executive Summary

• British fashion retailer Next reported an increase of 1.3% in total full-price sales in the 12 weeks ended October 27.
• Next Online sales increased by 12.7% while sales in Retail declined 8.0%.
• The company maintained its earlier guidance for FY19 and expects total full-price sales to grow at 3.0% year over year.

Executive Summary

The Coresight Research team is in Las Vegas this week to participate in Groceryshop 2018, being held October 28–31. The event will cover the transformation of consumer packaged goods (CPG), grocery and related industries, and is being attended by more than 2,200 industry professionals and features over 150 speakers.

In this report, we share our key takeaways from the second day of the conference, which include:

• Yael Cosset, Chief Digital Officer of Kroger,predicts that the future of retail will be more digitalized, collaborative and experimental.
• Curbside is digitizing brick-and-mortar grocery order fulfillment by connecting store operations and mobile commerce.
• Walmart and Microsoft believe that blockchain can provide a solution for food safety.
• Several presenters, including Instacart, say that online grocery retail is alive and thriving amidst changing consumer demands.
• Direct-to-consumer (DTC) men’s grooming brand Harry’s discusses the launch of its new shaving brand for women, its success at Walmart and Target, and sees opportunity for introducing new CPGbrands.

Executive Summary

On October 4, Coresight Research CEO and Founder Deborah Weinswig and InReality Director of Product Marketing David Adams cohosted a webinar called “How the In-Store Experience Affects Buyer Behavior.” Weinswig and Adams presented their views on the current state of the in-store experience, what is changing in brick-and-mortar retail and how to succeed in the new retail environment. Key takeaways from the webinar include:

• Strong macro indicators show a healthy retail environment, with consumer spending rising year over year.
• Physical retail is not dead, but bad retail is. Retailers must learn to engage their customers in-store with friction-free and interesting shopping experiences.
• With in-store sales still accounting for the majority of all retail sales, retailers and brands need to find a way to understand their unknown in-store shoppers.
• Technologies are available to help retailers understand their in-store shoppers, but companies have been slow to implement them fully.

Executive Summary

The Coresight Research team is in Las Vegas this week to participate in Groceryshop 2018, being held October 28–31. The event will cover the transformation of consumer packaged goods (CPG), grocery and related industries, and is being attended by some 2,200 industry professionals and features over 150 speakers.

Deborah Weinswig, Coresight Research CEO and Founder, kicked off the event by emceeing the Groceryshop Startup Pitch Competition.

• The competition featured 12 innovative, early-stage technology companies that have developed e-commerce and in-store solutions for grocery, food and CPG companies. Of the two winners, one was chosen by a three-judge panel and the other by the audience.
• Weinswig categorized the 12 participating companies into four buckets of retail disruption, which were: Sourcing, Merchandising and Cataloging; Grocery E-Commerce Enablers; Improved Shopping Experiences; and,Tracking Measurement and Insights.
• The judges’ panel declared Simplista the winner, for its cloud-based platform which simplifies the product listing process for retailers and suppliers. And the winner chosen by the audience was Tastry, for its a machine-learning-based platform that recommends personalized beer, wine and spirits selections and pairings to shoppers
• Weinswig concluded the competition with her presentation on retail trends and insight, in which she presented her thoughts on what the retail industry can learn from China with emphasis on New Retail trends in China.

Executive Summary

As China prepares for the 10th annual Singles’ Day shopping festival, we take note of the following recent developments in the Chinese economy:

• Comps have been weakening at large food and beverage merchants.
• Consumers are registering lower intention to spend on big purchases.
• Consumer confidence has been declining.
• China’s GDP growth slowed slightly quarter over quarter in the third quarter, while retail sales in September grew strongly year over year.

Executive Summary

• Carter’s reported fiscal 3Q18 revenues of $923.9 million, down 2.5% year over year and lower than the $944.4 million consensus estimate. Adjusted earnings per share (EPS) was $1.61, lower than the consensus estimate of $1.73 and lower than the EPS of $1.70 in the year-ago quarter.
• Total comparable sales were up 0.5%; the company had planned comps to grow by over 3% but saw a decline in traffic during its Labor Day sale.
• For the full year, the company lowered its revenue guidance to1.5% growth from prior guidance of 3.0% growth, compared to the consensus estimate of 2.3% growth. Carter’s lowered its EPS growth forecast for the full year to 5%, $6.05, from 12%, $6.45, which was also the consensus estimate.

Executive Summary

• JCPenney announced that CFO and EVP Jeffrey Davis has resigned effective October 1, 2018 to pursue another opportunity.
• Jerry Murray, SVP-Finance at JCPenney, will assume the position of interim CFO, reporting directly to the Office of the CEO.
• Davis is the third C-suite executive to leave JCPenney this year. Marvin Ellison, CEO, had left in May 2018 and Joe McFarland, CCO, had left in August, 2018, both going to Lowe’s home department store.