McMillanDoolittle logo


illustration of several groups of people collaborating at work

Finding Opportunity, Assessing Risk, and Outlining Growth

Our Investor Services Practice Builds long term relationships with investment firms and their portfolio companies.

For nearly four years, consumer confidence has hovered in the mid-to-high 90’s.  With an unemployment rate of 3.6% in early 2019, the job market has rarely been as good.  And total retail spending has been growing annually by at least 3.25% since 2014.

Yet the “health” of retailers is radically divergent.  The bankruptcies and store closings of both private and publicly held companies are highly publicized.  And looking beyond the horizon, generational shifts, concentration of wealth, and rapid technological disruptions all contribute to a highly volatile marketplace.  Investors increasingly navigate both risk and opportunity.close-up of antique cash registerMcMillanDoolittle’s investment services practice helps uncover the mid-to-long term potential for growth and profitability of retailers and brands.  Our unique strategic focus on retail, access to proprietary data and research, in-house consumer insights services, and unique team of consultants and executives has proven to benefit equity investors, their portfolio companies, and hedge funds.  From retail intelligence, buy and sell side due diligence, operations and performance, and through ongoing relationships with portfolio companies, we provide a full suite of services to investors.   Our efforts have resulted in ongoing and multi-engagement relationships with both large and small firms.

If you are interested in learning more about our investment services practice, our capabilities, and our deep expertise in the evaluation of risk, opportunity, customer insight, and growth, read more here or contact us.



Toys R Us Prepares for Its Final Curtain

The news swirling around Toys R Us these past few weeks is grim. The likelihood of all U.S. stores closing is nearing inevitability as the chain faces liquidation in the U.S. and other global markets, seeking buyers for its more sustainable operations in Canada, Asia and Central Europe.

I worked as a consultant for Toys R Us for a little over two years in 2014 and 2015. This work included strategy for the two U.S. brands (Toys R Us and Babies R Us) and culminated in the development of prototype Toy & Baby Lab stores which brought the fun back into Toys R Us and the emotion back into Babies R Us.  While the business as a whole was hardly thriving at the time, EBITDA was restored to very comfortable levels and comps were positive in these stores.  The problems of the company as a whole were not solved but there was some momentum to build upon.

Fast forward a few years later and the chain is teetering on the brink. Huge debt levels have always hampered the company’s ability to fund significant change. The new Toy Lab stores including a new Toys R Us/Babies R Us  Co-Branded store in Concord CA, while extremely effective, required capital that the company simply did not have. And, the competition in the form of Walmart, Target and increasingly Amazon remained relentless in using the category as a traffic driver with constrained margins.
Yet, there is room in the market for a great toy store, one that allows customers the sense of discovery and excitement, allows vendors to showcase a much fuller range of their assortments and offers customers prices that are “close” to an on-line proposition.

Like many retailers who are now facing an imminent Chapter 11, the story of Toys R Us’ demise was written long ago. Too many stores, boxes that are too big (or just right for only six weeks of the year), deferred capital expenditures, private equity ownership that brought about significant debt and some costly missteps (an early 2000 deal to partner with rather than compete against Amazon!) make the moment in 2018 seem almost inevitable.

A potential Hail Mary revolves around trying to salvage 200 or so of the best locations and tie the business to a more stable Canadian operation. Like many of us who grew up as a “Toys R Us kid”, there is only sadness associated with the demise of an industry pioneer. And, there are many thousands of associates who will no longer have a job—the human costs and ripple effects of a bankruptcy of this size cannot be underestimated. While its issues were many, it will be a less fun retail world without Toys R Us.

Neil Stern for Forbes


Walmart Raises Wages and Cuts Jobs – Two Sides of the Story?

Walmart recently announced it would be using some of the benefits from the recent tax reform to increase worker wages and benefits. While no doubt welcomed by Walmart workers, and many in the administration as a sign that tax reform is working, is there more to it than just being a good corporate citizen?

Attracting and retaining a good brick and mortar workforce is increasingly important in today’s omni-channel world so some would say Walmart is only catching up to other large retailers. Yet, given its scale and reach, Walmart has potentially raised the wage structure and cost of doing business for scores of retail firms across the country. Obviously, Walmart felt that with its deep pockets, fueled in part by tax savings, this increased cost of business could easily be absorbed (and get them good press). But is there another side? For the many struggling brick and mortar retail locations across the country, further increases in costs may accelerate store closings, and potentially bring more business to Walmart.

But what does this mean for the retail labor force. According to the BLS, the retail trade lost 67,000 jobs in 2017. Notable highlights are a 90,000 drop in department and general merchandise retailers, offset by a 28,000 increase in the building materials and garden supply sectors. Store closings are driving part of this, but so is increasing automation (think Amazon GO). Retails will need to increase skill levels in order to provide increase value to customers, while facing mismatches between where traditional lower skilled labor is available versus where the jobs are and a potential shrinking labor pool as immigration becomes harder for entry level workers.

Notably, Walmart also made two other announcements immediately following the pay raise. The first was to close 63 Sam’s Club locations and shift about a dozen to focus on e-commerce fulfillment. This will ultimately result in thousands of jobs lost. Them, they followed that up with the elimination of a salaried co-manager position in many stores, which will result in 3500 positions being eliminated. Walmart’s moves are certainly a mixed blessing for the work force. While we might see wages raised, they could well be accompanied by a trend towards productivity, automation and less retail jobs.

Doug McMillon, Walmart CEO, addressed the NRF 2018 Big Show on Sunday. He was upbeat, as he should be, on Walmart’s momentum and direction and he couched the pay increases (and extended benefits for maternity and paternity leave) as both the right thing to do and a way to motivate the work force. More critically, he made a few comments that stuck with us…

  • The first is that the customer is ultimately going to decide which retailers survive. Nothing could be more true. As we have always said with Walmart, customers vote with their wallets. If customers don’t like Walmart’s pricing, value, service or the way they treat employees, they will shop somewhere else. I believe Walmart is recognizing that it is critical that they become a better employer if they want to continue to be a successful retailer.
  • McMillon said that Walmart’s purpose is their purpose (Save Money, Live Better in some form or another), their values are their values and that everything else is up for grabs. Their internal mantra, repeated at all meetings, is that the only constant is change

Tough to pull off at the world’s largest retailer but they seem to be pulling it off. Expect more changes, soon


Albertsons Acquires Plated As The Meal Market Recalibrates

Plated was just acquired by Albertsons, marking the first purchase of a prepared meals company by a supermarket chain.

The meal kit market is going through a rapid and fascinating period of growth, retrenchment and repositioning.

The latest development: Albertsons is buying Plated for an undisclosed price, marking the first purchase of a prepared meals company by a supermarket chain.

As the lukewarm reception of Blue Apron shows, this is a market that is filled with both great promise (breathtaking growth) combined with a shaky business model (high acquisition costs and low customer retention).

The key players in the meal kit market include Blue ApronHello Fresh, Home Chef and Plated, but there are also a variety of more niche players focused on regions or a focus on food types. That’s a lot of people competing for the same space. Amazon’s acquisition of Whole Foods also puts an omnichannel focus on this category and Amazon has a tie-in with Martha Stewart and Marley Spoon.

There are a number of adjacent players in the space that offer a different approach rather than meal kits. There are dietary driven programs like Diet To Go and Fresh Diet. Freshly just received backing from Nestle as the major food manufacturers are starting to take note. Another one to watch in this space is Fresh by Transform, which focuses on refrigerated, all-natural meals with a tie-in to high profile trainers Chris and Heidi Powell. In this category, the focus is on fully prepared meals, which offers a bigger dose of convenience than meal kitting, likely reaching a different customer looking for tighter portion control and specific health requirements.

Not to be outdone, Kraft has partnered with Oprah on a meal program that will target more traditional brick and mortar retail distribution.

In my follow up to the poorly received Blue Apron IPO, I suggested “that these models must adapt, from creating a more efficient way for customer attraction towards having a more convenient way to access their meals. Clearly, developing a retail or brick and mortar partnership, seems to make a lot of sense as well as potentially partnering with other grocery e-commerce providers.”

Well, I’m either prophetic or lucky in predicting the Plated and Albertsons deal. There are clearly benefits and challenges associated with the deal. Plated gains access to roughly 2,300 physical stores and over 35 million customers per week. Simple cross promotions and awareness should help bring down customer acquisition costs. More promising but trickier to pull off will be providing Plated branded meal kits in stores. This makes complete sense from a customer convenience point of view but also has significant supply challenges (Plated has a D2C driven model today) as well as the practicalities of demand forecasting and shrink. One of the benefits of the current model is making meals on demand, which minimizes waste.

I suspect that like many deals, this is one of many dominos to fall. It would not be a surprise to see other e-commerce and brick and mortar mash-ups occur as well as big manufacturers get into the act.

Neil Stern for Forbes


Walmart And Tie The Knot

Last week, I weighed in on the potential deal between Walmart and

Today, the companies officially announced the $3 billion deal with Walmart CEO Doug McMillon weighing in as follows:

“We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” said Doug McMillon, president and CEO of Walmart. “We believe the acquisition of Jet accelerates our progress across these priorities. will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time. Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart.”

[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”]

Walmart seeks to even the playing field against a dominant through the acquisition of Photo: Daniel Acker/Bloomberg News

While there may be eyebrows raised concerning the price Walmart is paying for a company that barely has $1 billion in revenue and no profitability, I applaud this deal as the kind of bold step that existing brick and mortar companies can and should take to try and even the playing field against a dominant

Not only is Walmart buying an innovative e-commerce platform that attempts to lower prices to the consumer by focusing on crowdsourced deal participation and a new way to think about fulfillment, they are also acquiring the services of a visionary entrepreneur in Marc Lore, who thinks about e-commerce models differently. The synergies between Walmart’s merchandising, sourcing and financial muscle combined with Jet’s innovation could help further redefine e-commerce over the next decade.

While Walmart is paying a steep price, a healthy balance sheet, deep pockets and access to capital is one of their main strengths. It makes sense to leverage this in an effort to jump-start their e-commerce efforts. This infrastructure is already in place with Walmart Labs, which has made multiple acquisitions in the technology space. This puts that idea on steroids.

Acquisitions, by themselves, are almost never the answer. And certainly, at’s current size, it barely makes a dent in Amazon’s lead. It will be up to Walmart to truly mine the synergies in the deal to show a demonstrable ROI.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]


Will Walmart Turn On The Jet? That Is…

On the heels of’s first birthday comes news that Walmart is reportedly in negotiations to acquire the online discount retailer. Sources close to the deal say it could be worth as much as $3 billion.

Walmart technology

While Walmart has struggled to translate its winning brick-and-mortar formula to the web, Amazon captured $82.8 billion in e-commerce sales over the last year, compared to Walmart’s $13.6 billion during the same period.  I have been critical in the past of Walmart’s e-commerce efforts. While $13.6 billion makes them the second largest retailer, the business needs to be much much bigger to be meaningful to Walmart’s overall business and to be a significant competitor to Amazon. Additionally, Walmart’s e-commerce sales growth has actually decelerated. A deal with Jet could be a game changer.

The deal could help Walmart follow in Amazon’s footsteps and be the No. 2 online retailer, providing a threat to Amazon’s e-commerce dominance. Late last month, Jet’s CEO and founder of, Marc Lore, announced that Jet sold $90 million in merchandise in May, versus just $33 million back in December. And although only offers around 11 million products, versus Amazon’s 260 million, they recently announced plans to add 1 million products per month, primarily through third-party vendors selling via

In addition to adding 1 million products to its selection, Walmart has also recently integrated several technological innovations, including e-commerce, mobile payments, premium fulfillment memberships, drones and robotics, providing a boost to its business model. A partnership with Jet would give Walmart insight into Jet’s sophisticated e-commerce pricing, as Jet is known to use factors like basket size, shipping options and product proximity to customers to offer lower prices.  Walmart would also gain customer data and additional warehouses in the acquisition.

On the flipside, has taken on the daunting task of taking on as a direct competitor. They raised an enormous amount of private equity funding (around $450 million) but this has always been an all or nothing proposition. They need to scale, and scale fast, to be viable. While the revenue run rate is improving, it seems fairly clear that having a big pocketed big brother like Walmart would come in handy in this battle.

Catching up to Amazon will be challenging, given the size and momentum of their business; last week Amazon reported second quarter net sales up by 31%, with $30.4 billion in sales.  This was the fifth consecutive quarter that the e-commerce leader has been profitable, and third straight quarter of record breaking profit.

While a combination of Walmart and Jet doesn’t immediately change the playing field, it does make the race a lot more interesting!