US department store chain Macy’s is cutting 2,350 jobs and closing five stores, as it aims to streamline its operations, a company spokesperson told Reuters on Thursday.

The layoffs make up 3.5 percent of the overall workforce across Macy’s. The company operated 722 store locations as of January 2023 and employed 94,570 full- and part-time employees, excluding seasonal hires.

The job cuts come as an investor group consisting of Arkhouse Management and Brigade Capital put pressure to take Macy’s private in a $5.8 billion offer.

Macy’s incoming CEO Tony Spring is also focussed on cutting expenses on promotions to boost margins as the company recovers from an inventory glut in 2022.

Macy’s spokesperson said the layoffs were part of its plan “to deploy a new strategy to meet the needs of an everchanging consumer and marketplace.”

As the company evaluates the “right mix of on- and off-mall locations,” it intends to close five of its full-line locations this year, the spokesperson added.

The job cuts were first reported by the Wall Street Journal, which, citing a memo sent to employees, said the layoffs would occur on Jan. 26.

In November, the retailer beat analysts’ estimates for quarterly profit on lower inventories and strong demand for beauty products.

By Savyata Mishra; Editing by Maju Samuel

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Last week, the US and UK began air and naval strikes in Yemen against Houthi militant targets — an escalation of a regional conflict with no resolution in sight, with significant potential consequences for the global economy.

Since November, Iran-backed Houthis — a militant group that has controlled parts of Yemen since 2014 — have staged mounting attacks on cargo ships in the region ostensibly in protest of the Israel-Hamas war in Gaza. Earlier this week, a Houthi missile struck a US-owned cargo ship carrying steel off the coast of Yemen as well as a Greek-owned vessel sailing from Vietnam to Israel.

In both instances, there were no injuries or casualties to crew members, and the ships sustained minor damage. However, the Houthis’ intensifying aggression, spurred by Western intervention, poses not only a diplomatic dilemma and a potential new flashpoint in the Middle East war, but also profound disruption to one of the world’s most vital trade routes.

Why is the Red Sea so vital to international trade?

All vessels passing through Egypt’s Suez Canal must traverse the Red Sea in order to make journeys between Asia and Europe. The canal is a crucial passage for international trade, through which roughly 15 percent of global shipping trade, including as much as 30 percent of container traffic, passes each year.

“This is a vital 119-mile shortcut between Asia and Europe that saves ships travelling an extra 5,500 miles around [South Africa’s] Cape of Good Hope,” said David Jinks, head of consumer research at UK-based logistics company Parcel Hero. “Each of those containers will likely be carrying thousands of products made in Asia … typically including everything from Barbie dolls to iPhones to fast fashion.”

Ships unable to use the Suez Canal likely opt for the longer route around Africa, which adds on average 10 to 15 days to the trip, resulting in shipment delays as well as increased costs of fuel and insurance. There are also higher risks of pirate attacks and adverse weather conditions associated with the so-called Cape Route, Jinks said. Some retailers are even reportedly exploring air and rail alternatives. These are expensive obstacles for which ultimately consumers will have to pay.

A new report released by the World Bank last week highlighted the heightened importance of Suez in light of existential threats to another of the world’s key trade routes, the Panama Canal. Drought in the region has left the canal’s water levels lower than ever, forcing Panama to almost halve the number of ships allowed through per day, significantly increasing shipping costs for freight operators using the waterway, which is a shortcut between Asia and the east coast of North America.

What has happened so far in the Red Sea?

Since Nov. 19, when Houthi militants started their recent campaign hijacking commercial vessels in the Red Sea, the rebel group has launched drone and missile attacks on over two dozen ships.

With an estimated 20,000 fighters, according to The Guardian, the Houthis occupy most of the west of Yemen and control its Red Sea coastline. The group claims to only be targeting ships which are Israeli-owned, or those headed for Israeli ports but many ships targeted have no known connections to Israel.

On Jan. 12, the US and UK began a joint military campaign in the region, launching airstrikes on over 10 sites they claim to be used by Houthi militants in Yemen. In the weeks prior to that, the US Navy had deployed several ships to defend ships passing through the region.

Three of the world’s largest shipping lines — MSC, Maersk and CMA CGM — have paused all Suez Canal transits indefinitely. DHL advised its customers to consider alternative shipping options as operators switch away from the Red Sea; Oil giant BP said it had paused all transits through the Red Sea; and French food conglomerate Danone warned of increased shipping times due to diverted cargo. Freight container volumes through the Red Sea have fallen 65 percent from expected levels since November, according to Reuters.

What’s at stake for fashion retailers?

For now, some retailers are playing down concerns.

“As of now we don’t foresee any significant disruptions in the shipments. However, we are following the situation closely,” a spokesperson for Swedish retail giant H&M told BoF on Wednesday. Japanese retailer Uniqlo told BoF on Friday: “While there are minor changes of operations, they have no significant impact for now on our business. We are continuing to monitor the situation closely.”

Earlier in the month, British retailer Next said that disruption caused by attacks on vessels in the Red Sea could impact deliveries and sales if it was to continue through 2024.

“The extra sailing time eats into capacity in the network and we could begin to get constraints. At the moment it is an inconvenience not a crisis,” said chief executive Simon Wolfson. He added that the British retailer does not expect to raise selling prices for consumers for the Spring/Summer season.

But logistics experts say the potential long-term threat could be serious. US retail giant Target said it has already experienced delays on shipments from India and Pakistan due to the re-routing of vessels.

And at some point retailers will feel the pain of heightened shipping expenses. CMA CGM, the world’s third-largest shipping company, already announced an increased $150 per container surcharge. For a regular-sized container ship carrying 5,000 containers, this results in an additional cost of $750,000 per sail, Jinks explained.

Eventually, the burden will be passed to consumers. “Expect store prices on products to rise in the coming months,” Jinks said.

There is unlikely to be any short-term resolution of the threat to ships in the region, despite the US-UK military intervention. This means retailers will inevitably be forced to hike prices to account for soaring freight costs, analysts expect.

“It does look as if retailers will have to pass on costs to customers at some point, and the longer the crisis continues, in our view, the sooner and steeper those rises will have to be,” said Jinks.

For fashion’s supply chains, disruption appears to be the new normal. First came the pandemic which saw government-imposed lockdowns and port and factory closures lead to supply chain bottlenecks across the world. Since then, the escalation of geopolitical tensions from Ukraine to the South China Sea and most recently the Middle East have also served to spook markets and disrupt global trade.

What are the potential consequences for the global economy?

Beyond the immediate impact on retailers, it is feared a prolonged Red Sea crisis, coupled with escalating conflict across the Middle East, could have a knock-on effect on the global economy.

“This would have significant spillovers to other commodity prices and heighten geopolitical and economic uncertainty, which in turn could dampen investment and lead to a further weakening of growth,” the World Bank predicted. The knock-on inflation risk could encompass everything from oil and gas to foodstuffs and clothing.

Meanwhile, dampened hopes of a global economic recovery could spark uncertainty in capital markets — where several fashion companies are set to debut early this year — and affect M&A activity which has picked up across the fashion and beauty industries in recent months.

It also warned of supply chain bottlenecks — exacerbated by the Panama Canal’s capacity crisis — along with the risk of rising energy prices brought on by the continuation and potential escalation of conflicts from the Middle East to Ukraine.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Hugo Boss shares sink as profit disappoints. Quarterly earnings before interest and tax came in at €121 million ($132 million), missing analysts’ average estimate of €129 million. Shares were down 11 percent at €59 at 14:25 GMT, set for their worst day since March 2020.

Birkenstock slumps as forecast disappoints some investors. The stock slid 12 percent in trading before US exchanges opened. If the drop extends into trading hours, it could erase the gains made since the company’s initial public offering in October. Birkenstock said revenue this year could grow by as much as 18 percent to €1.76 billion ($1.92 billion).

Richemont shares climb as demand for Cartier and Van Cleef boosts holiday sales. Sales rose 8 percent year-on-year at constant exchange rates for the three months ending Dec. 31, reaching €5.6 billion ($6.1 billion) and beating analyst expectations. Shares surged 10 percent in early trading.

Watches of Switzerland dives as watch shoppers retreat. Shares of Watches of Switzerland Group Plc slumped nearly 30 percent after the top seller of Rolex watches in the UK cut its sales and growth forecasts. The company, also a major luxury watch and jewellery dealer in the US, said holiday sales were volatile amid challenging macroeconomic conditions that it expects to persist.

China launches data review into Shein ahead of US IPO. The Cyberspace Administration of China is looking into whether Shein can protect data on its China-based staff, suppliers and partners effectively and prevent the information from leaking overseas. The agency is also trying to learn what data Shein needs to provide to US regulators.

Ex-Abercrombie & Fitch CEO reportedly under FBI inquiry for alleged sex crimes. Mike Jeffries and his partner Matthew Smith are being investigated by federal agencies following allegations that they sexually exploited and abused young men at parties they hosted, reported BBC News. The FBI and the US attorney’s office are reportedly interviewing witnesses and issuing subpoenas as part of their investigation.

De Beers cuts diamond prices to revive sales. De Beers cut prices by about 10 percent across the board at its first sale of this year. The one-time monopoly made bigger cuts for some larger stones, with one category being lowered about 25 percent.

Italy court seeks to stop the sale of La Perla lingerie in the UK. The news follows the liquidation of the holding company to recoup unpaid tax debts. The Bologna court ruled the seizure of all the assets in London-based unit La Perla Global Management Ltd., including its valuable brand, according to local unions.

Uniqlo sues Shein for allegedly copying viral shoulder bag. The entities that operate the Shein brand must immediately cease sales of “imitation products” and compensate for damages, Uniqlo parent Fast Retailing said. Uniqlo filed the lawsuit on Dec. 28 at the Tokyo District Court.

London police say covert operation has halved luxury watch thefts. The operation helped to reduce annual watch robberies from 113 to 55 in the year to July 2023 in three central London boroughs: Westminster; Kensington and Chelsea; and Hammersmith and Fulham. In two operations over several months in 2022 and 2023, 27 people were arrested.

EU bans ‘misleading’ environmental claims that rely on offsetting. Members of the European parliament voted to outlaw the use of terms such as “environmentally friendly”, “climate neutral” or “eco” without evidence, while introducing a total ban on using carbon offsetting schemes to substantiate the claims. Under the new directive, only sustainability labels using approved certification schemes will be allowed by the bloc.

Struggling fashion house Trussardi nears brand and asset sale. The house is nearing a deal that will see it transferred to a new owner and have assets sold off as part of a debt restructuring. After an extended marketing process that saw little demand, the brand, together with some of the group’s branches, is set to be sold to Miroglio Group.

THE BUSINESS OF BEAUTY

Kim Kardashian teases the return of makeup and fragrance. In a video posted on Jan. 16 to Kardashian’s Instagram, she reads out comments from fans lamenting the closure of her previous brands. The celebrity influencer and entrepreneur closed her cosmetics and fragrances lines KKW Beauty and KKW Fragrance in August 2021 and April 2022 respectively.

German beauty retailer Douglas sees sales grow to $1.7 billion in the first quarter. E-commerce sales for the period, which covered October to December 2023, increased 10.7 percent, while in-store sales rose 7.1 percent. The company said it is on-track to hit $5.5 billion in net sales in 2026 despite the tough economic climate in Europe.

Saudi online cosmetics retailer Nice One plans local IPO. The firm has asked banks to pitch for a role on the potential deal, according to people familiar with the matter. Deliberations are ongoing and details such as the size and timing of the IPO are still undecided.

Compass Diversified announced majority stake in The Honey Pot. The deal is worth $380 million and will close in February. Compass reported that the brand has a 4.5 percent household penetration; Nielsen ranks The Honey Pot as the fifth-largest feminine care brand at retail.

L’Oréal bets on longevity biotech company Timeline. The $66 million Series D round was led by BOLD, L’Oréal Groupe’s venture capital arm, with participation from Nestlé. The company will use its latest funding round for expansion across food, beauty and health sectors.

E.l.f cosmetics returns to the Super Bowl. On Feb. 11, it will air a 30-second spot directed by Zach Woods, the actor and director best known for his roles as Jared on “Silicon Valley” and Gabe on “The Office.” The ad will feature the brand’s $14 Halo Glow Liquid Filter, E.l.f.’s top-selling product of 2023.

PEOPLE

Michael Burke to succeed Toledano at LVMH’s Fashion Group. The former Louis Vuitton CEO will become chief executive and chairman of the unit that houses Celine, Loewe, Givenchy, Marc Jacobs, Pucci and Kenzo, effective Feb. 1. Burke will add oversight of Fendi to his responsibilities, and could eventually add Loro Piana to his portfolio, too.

Eighth Day names new CEO. The prestige skincare line has tapped former Tula and Birchbox executive Savannah Sachs to helm the company. The new appointment comes after the line received minority investment from private equity firm L Catterton in September.

Susan Yara joins influencer marketing agency The Digital Dept. to form a new beauty division. The newly formed division will focus on skincare expertise and bring 16 creators to the fold, including Yara. Yara will also work as a consultant to advise on potential product development and investment ventures.

Allbirds announced new executive leadership appointments. The brand announced this week that Kelly Olmstead, formerly senior vice president of brand and marketing, has been promoted to chief marketing officer and footwear industry veteran Adrian Nyman was appointed to the new position of chief design officer. Both were effective December 2023.

MEDIA AND TECHNOLOGY

Reddit seeks to IPO in March. The company, which filed confidentially for its IPO in December 2021, is planning to make its public filing in late February and launch in early March. It would be the first IPO of a major social media company since Pinterest’s debut in 2019.

The Independents acquired Atelier Athem. The Paris-based firm that focuses on set design for brands’ experiences and stores, including lighting, projections, scenery, interactive elements and sound marks The Independents’ tenth acquisition. In July 2023, The Independents announced that it had raised $400 million with ambitions to double in size by 2025.

Compiled by Yola Mzizi.

Social media platform Reddit has drawn up detailed plans to launch its initial public offering in March, moving forward with a listing it has been eyeing for more than three years, according to people familiar with the matter.

It would be the first IPO of a major social media company since Pinterest’s debut in 2019, and would come as Reddit and its peers face stiff competition for advertising dollars from the likes of TikTok and Facebook.

The offering would also test the willingness of some Reddit users to back the company’s stock market debut. Many investors posting on the platform have helped fuel dozens of “meme” stock rallies in the last three years, from retailer GameStop to movie operator AMC Entertainment Holdings.

Reddit, which filed confidentially for its IPO in December 2021, is planning to make its public filing in late February, launch its roadshow in early March, and complete the IPO by the end of March, two of the sources said.

The San Francisco-based company, which was valued at about $10 billion in a funding round in 2021, is seeking to sell about 10 percent of its shares in the IPO, the sources added. It will decide on what IPO valuation it will pursue closer to the time of the listing, according to the sources.

The sources cautioned that Reddit’s IPO plans could be pushed back, as has happened in the past, and asked not to be identified discussing confidential deliberations.

A Reddit spokesperson declined to comment.

Founded in 2005 by web developer Steve Huffman and entrepreneur Alexis Ohanian, Reddit became best known for its niche discussion groups and its users voting “up” or “down” on the content posted by other members.

The company, which generates its revenue primarily through advertising and also offers premium access for $5.99 per month, has yet to turn a profit, Huffman said in a Reddit post last June.

In the past, the company has attributed its losses to investing in the platform and its users engaging less with advertising on its site than other social media.

The company held back from pulling the IPO trigger until it came closer to profitability. Bouts of market volatility that shut down the IPO market for much of the last two years also contributed to it delaying its plans.

Reddit expected to generate slightly over $800 million in advertising revenue in 2023, up more than 20 percent from a year earlier, The Information reported last month.

Reddit said last year it would charge companies for access to its application programming interface, which is used by technology companies to train large-language models used in artificial intelligence. The move upset some users who rely on third-party apps to access Reddit.

Large social media stocks have rebounded over the past year, driven mainly by a rally in technology stocks as interest rates peaked. Shares of Meta Platforms, which operates Facebook, have more than trebled in value over the past 12 months, while Snap’s shares rose 60 percent over the same period.

By Anirban Sen and Echo Wang

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Reddit Users Fuel Fresh Gains for Swimwear Stocks

The share price of swimwear manufacturer Naked Brand Group more than doubled in premarket trading this week.

Birkenstock Holding Plc fell after its growth targets failed to satisfy traders who were hoping for more from the German sandal maker.

The stock slid 12 percent in trading before US exchanges opened. If the drop extends into trading hours, it could erase the gains made since the company’s initial public offering in October.

Birkenstock said revenue this year could grow by as much as 18 percent to €1.76 billion ($1.92 billion). While that’s higher than analysts were anticipating, it disappointed investors who’ve become increasingly bullish on the brand.

Chief executive officer Oliver Reichert has argued that Birkenstock still has plenty of room for growth following the rapid expansion of the past decade. The company — whose roots date back to 1774 — is targeting previously untapped countries like China and India, sidestepping concerns about inflation and penny-pinching in more traditional markets.

Birkenstock’s peak revenue target 2024 is above the €1.69 billion average of analyst estimates. The company also reported revenue that beat estimates for its fiscal fourth quarter.

But with investors increasingly upbeat about its prospects — especially at a time when casual footwear makers like Nike Inc. are warning about demand — the German company needed to deliver a “meaningful” earnings beat and forecast to fuel a share increase, UBS analysts said in a note before the report.

The stock is also ripe for volatility as investors decide whether the initial negative reaction to the IPO was overdone. The fact that almost a third of Birkenstock’s available shares are sold short, according to data from S3 Partners, adds to the pressure.

Traditionally a maker of no-frills sandals, Birkenstock has built up its offering of higher-end footwear and its line of closed-toe products in recent years, including the Bend sneaker, the Highwood boots and more clogs with shearling.

While Birkenstock attracted attention from designers as far back as the 1980s, the company has come to really embrace the fashion world over the last decade or so, launching collaborations with luxury names such as Dior, Manolo Blahnik and Rick Owens.

Last summer, Birkenstock benefited from a cameo in the blockbuster Barbie movie, which stars Margot Robbie in the title role donning a pair of pink Birkenstocks in one scene. That’s added to the multi-generational appeal of the brand, which performs the vast majority of its production in Germany.

By Tim Loh

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Wall Street Starts Birkenstock With Top Rating, Flags Limited Upside

Birkenstock made its New York Stock Exchange debut last month at $41, below its initial public offering price.

Terms such as “climate neutral” or “climate positive” that rely on offsetting will be banned from the EU by 2026 as part of a crackdown on misleading environmental claims.

On Wednesday, members of the European parliament [MEPs] voted to outlaw the use of terms such as “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco” without evidence, while introducing a total ban on using carbon offsetting schemes to substantiate the claims.

Under the new directive, only sustainability labels using approved certification schemes will be allowed by the bloc. It comes amid widespread concern about the environmental impact of carbon offsetting schemes, which have often been used to justify labelling products “carbon neutral”, or imply that consumers can fly, buy new clothes or eat certain foods without making the climate crisis worse.

“This new legislation puts an end to misleading advertising for supposedly environmentally friendly products and thus enables consumers to make sustainable choices,” said Anna Cavazzini, the Green MEP and chair of the Committee of the Internal Market and Consumer Protection.

“I am particularly pleased that claims such as “climate-neutral” or “climate-positive”, which are based on CO2 offsetting, have been completely banned from the internal market. Investments by companies in climate protection projects are welcome and of course they can still be communicated,” she said. “However, it should no longer appear that planting trees in the rainforest makes the industrial production of a car, the organisation of a soccer World Cup or the production of cosmetics climate neutral. This deception is now a thing of the past. This is a great success for the environment, the climate and consumers.”

The directive comes after months of negotiations over how environmental claims will be regulated in the EU, with a deal reached in September that was approved by law makers on Wednesday. Member states now have two years to introduce the new rules.

In January, the Guardian published a joint investigation into forest carbon offsets approved by the world’s leading certifier that big corporations used for their sustainability commitments, finding more than 90 percent of offsets from a large sample of projects to be worthless.

Environmental NGOs have raised concerns about claims based on offsets, including the 2022 World Cup in Qatar which was advertised as a “carbon neutral” event.

“This agreement is a big step towards more honest commercial practices and more informed European consumers. The European Union is taking leadership in combating greenwashing,” said Lindsay Otis, a policy expert on global carbon markets at CMW. “Carbon neutrality claims have been shown to be unintelligible to consumers, and they must stop. Today marks the end of outlandish and baseless advertisements that tell European consumers that they can take carbon-neutral flights, wear carbon-neutral clothes, and eat carbon-neutral food.”

By Patrick Greenfield

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‘Carbon Neutral’ Claims That Rely on Offsets Face UK Ban

Advertising watchdog to begin stricter enforcement on use of terms such as ‘carbon neutral’ amid concerns over offsets.