Good Morning! US economy adds 206,000 jobs but unemployment rises to 4.1% and the India-Tesla honeymoon might be over after Musk cancels visit. In this issue, we delve into...

• Abercrombie & Fitch's Unlikely Comeback

• Amazon’s Three way Duel with Temu and Shein

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Abercrombie & Fitch's Unlikely Comeback: From Mall Staple to Market Darling

Folks, I've seen my share of comebacks, but this one takes the cake. Abercrombie & Fitch, the once-mighty mall rat of the early 2000s, is back from the dead. And I don't mean just limping along – it's having a year on par with …dare I say Nvidia.

How Did They Do It?

New CEO Fran Horowitz has spearheaded a complete reinvention of the brand. Gone are the days of targeting only the "cool kids." Abercrombie now caters to a diverse range of millennial and Gen Z shoppers, offering stylish workwear, casual attire, and even wedding guest options.

More Than Just Trendy Clothes

Pivotal to Abercrombie's success is its inventory strategy. They’ve refocused on core wardrobe staples, no longer chasing popular styles. This has allowed the company to reduce its reliance on seasonal merchandise, which is more prone to price reductions.

The company's transformation includes a significant reduction in store sizes. Abercrombie reduced its store square footage by about 25% from 2017 to 2021. This reduction allowed the company to decrease rent costs significantly, saving approximately $230 million.

The Numbers Don't Lie

Abercrombie's 10% projected annual sales growth this year is a testament to its resilience, even in the face of softening consumer spending. Its gross profit margin of 66.4% in the first quarter dwarfs that of competitors like Aritzia and American Eagle.

What's Next?

After now conquering the US market, Abercrombie is setting its sights on global expansion, with teams in Shanghai and London working to localize its offerings. As CFO Scott Lipesky puts it, "The company is in a really good place to launch global growth. That's what is next for us."

The Takeaway

Abercrombie & Fitch's transformation is a case study in brand reinvention. By listening to its customers, adapting to changing trends, and prioritizing quality and inclusivity, the retailer has gone from a mall outcast to a market leader. It's a comeback story that even the most seasoned Wall Street veterans can appreciate.

Amazon Throws Down the Gauntlet: A Low-Price Duel with Temu and Shein

Alright folks, buckle up because this is a doozy. Amazon, the behemoth of e-commerce, is shaking things up. Newsflash: they're launching a discount store for apparel and home goods, shipped straight from China.

Now, you might be scratching your head. Isn't Amazon all about speedy delivery? The answer is yes...and no. See, they've built this empire on warehouses and fast shipping, but those Chinese rivals, Temu and Shein, they've been playing a different game.

Temu and Shein ship directly from factories to your doorstep, taking a little longer, but saving a bundle on costs. And guess what? Shoppers don't seem to mind waiting a bit if it means their wallets stay fatter.

Amazon's been watching, and they've learned a lesson. They've realized that speed isn't everything. Sometimes, price trumps convenience. And that's a big deal.

So, what does this mean? Well, Amazon's new store will feature a whole new section of low-priced goodies, shipped straight from the source. It's a direct challenge to Temu and Shein, a battle for the hearts and wallets of bargain-hunting consumers.

This isn't the first time Amazon's copied a competitor, but this time it feels different. They're not just chasing a trend, they're adapting to a fundamental shift in consumer behavior. And that's the kind of move that could shake up the entire industry.

So, get ready for a price war, folks. Amazon is stepping into the ring, and things are about to get interesting.

Headline Roundup

• Saks Fifth Avenue’s parent company HBC to to acquire rival Neiman Marcus in $2.65bn deal.

• Jeff Bezos to sell another $5bn of Amazon stock after his $8.5bn stock sell in February.

• Eli Lilly's Kisunla Enters Alzheimer's Market, 20% Pricier Than Rivals But Promises Fewer Treatments.

• China's Reserves Dip Amidst Yuan Pressure.

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DISCLAIMER: None of this is financial advice. This newsletter should be used for discussion, education, and illustrative purposes only and should not be construed as professional financial advice, solicitation, or recommendation.