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MARKETS

• Trade: The U.S. is reportedly requesting that China keep the value of the yuan stable as part of ongoing trade negotiations, per Bloomberg. The Trump administration hasn’t gone so far as to label China a “currency manipulator,” but it’s keeping tabs.
• Trade (cont.): President Trump said those talks are going well and that the March 1 deadline isn’t a “magical date.” Markets loved to hear that.

FASHION

RIP, Karl Lagerfeld

Today, we pop our highest collars, don our most extravagant black sunglasses, and slick back our shiniest ponytails in memory of Karl Lagerfeld. The creative force behind Chanel died yesterday at 85.

In addition to serving as a creative director at Fendi since the 1960s, Lagerfeld helmed closely held Chanel starting in 1983—breathing life into a brand struggling to find its footing 12 years after the death of its namesake, Gabrielle “Coco” Chanel.

In accepting one of fashion’s most coveted jobs, Lagerfeld played a pivotal role in taking the Chanel brand from haute couture to household name.

But with great power…

Comes the responsibility of updating silhouettes not revamped in decades. Plus, managing a brand with serious financial muscle. Let’s check Chanel’s books...

• In 2017, it boasted an operating profit of $2.7 billion on nearly $10 billion in sales (which climbed 11% annually).
• And BNP Paribas valued Chanel’s brand north of $50 billion, making the Wertheimer brothers who own it among France’s wealthiest people.

So who takes the reins? Lagerfeld’s longtime second-in-command, Virginie Viard. But as Bloomberg writes, “Now that [Lagerfeld’s] gone, Chanel will have to find its identity once more.”

That could be tough, given that the global luxury market is undergoing massive change—not only on the creative side, but also on the consumer side. The Chinese market, which has for years represented luxury’s biggest growth area, looks less certain as the trade war rages on and its own economy sputters.

Still, Chanel is Chanel. And even if you weren’t glued to the pages of Harper’s Bazaar or Vogue every Fashion Week, you likely knew Lagerfeld for his ability to...stir the pot. Remember these quotes?

• “Sweatpants are a sign of defeat. You lost control of your life so you bought some sweatpants.”
• “I’m very much down to earth. Just not this earth.”

+ We’re giving you some homework: Slip “haute couture” into a regular conversation at least once today. Here’s how to pronounce it.

RETAIL

Who Needs Melatonin When You’ve Got Walmart

Having trouble sleeping lately? Yeah...us too, until Walmart (+2.21%) reported 4.2% comparable sales growth in the U.S. this holiday quarter, solidly beating expectations.

What had been keeping us up: Parker, our new puppy, and concerns about the retail sector. The Commerce Department’s report that U.S. retail sales crashed 1.2% in December was so startling that it left some analysts wondering whether the data was fully accurate.

But Walmart’s strong quarter is calming those fears. So what’s working?

• Toys: With Toys “R” Us out of the picture, Walmart capitalized by rolling out the red blankie for kids with greater assortment and special in-store events. “There was extra share in the toy market and we went after it,” CFO Brett Biggs told Bloomberg.
• Grocery: Did you know that grocery sales account for 56% of Walmart’s total revenue? It’s hoping to lean into that strength by doubling grocery delivery offerings to 1,600 stores by year-end.

MEDIA

What Amazon Studios Isn't

Netflix. But it also isn’t New Line or MGM or Lionsgate. It’s in a league of its own—or so Amazon Studios chief Jennifer Salke wants you to think.

After a rough year-and-a-half stretch at Amazon Studios (complete with six flops in a row), Salke went on a press push this month to make her recentering efforts known.

1) Quality over quantity. Salke said Amazon’s (+1.22%) planning to roll out about 30 original movies per year, with budgets ranging from a couple million bucks to $50 million or more.

• In a not-so-subtle jab, Salke told the NYT, “It’s not about volume and endless scroll.” (Lest we forget Netflix launches some 90 original movies/year.)

2) Pick your lane. Salke said Amazon was “putting too much focus on a narrow prestige lane,” forgoing potentially wallet-fattening crowd pleasers in the process. The future for Amazon Studios now includes awards season favorites—plus “sexy date-night movies,” young adult films, and more.

3) And finally, spend and spend some more. We’ll let this Sundance chart do the talking.

MARKETS

Testing the Waters Is the New Polar Bear Plunge

Because no one wants to get frostbite—not on your daredevil, mid-winter beach escape and definitely not when you go public.

The SEC got the memo. It released a proposal yesterday that would allow companies exploring IPOs more leeway in discussing their plans with investors before going public about...their plans to go public.

The ability to “test the waters” before cannonballing into public markets has so far been limited to small/emerging companies hoping to gauge interest before wiring all their money to a PR firm.

Now, the SEC’s hoping to entice more (and bigger) firms to consider IPOs without much risk.

• SEC Chairman Jay Clayton has focused on getting more companies to go public since taking over at the SEC in 2017.
• Already, Clayton has moved to allow all companies to file IPO paperwork confidentially.

After all, the number of public firms has dropped nearly 50% since the late 1990s. With enough venture capital to crown 32 new Silicon Valley unicorns last year alone, ringing the bell on the NYSE floor just doesn’t have the same appeal.

SPORTS

You Stay Classy, Manny Machado

After what felt like a longer search than the one for Amazon’s HQ2, MLB superstar Manny Machado is headed to San Diego. And we’re not expecting him to reverse this decision.

Why? The new Sultan of San Diego's 10-year, $300 million deal with the Padres is the largest ever for a free agent in North American sports history (topping Alex Rodriguez’s $275 million deal with the Yankees in 2008).

So what should a business-savvy person like yourself know about the deal? Per ESPN...

• The Padres’ World Series odds jumped from 80-1 to 50-1 at the Westgate Las Vegas SuperBook after the news broke.
• The Padres have spent more on two players in the past two offseasons (Manny Machado and Eric Hosmer) than they did in the previous 25 offseasons combined.

Zoom out: The deal came as many baseball fans wondered how two stars like Machado and still-a-free-agent Bryce Harper could remain unsigned for so long. MLB gross revenues came out to $10.3 billion in 2018, but player compensation as a share of revenue had the biggest YoY drop since 2012, reports Forbes.

+ Okay, San Diego readers, we’re putting you on the spot. Let’s make an official Brew guide for Machado (or really anyone) visiting your lovely city. Share your best to do here.

WHAT ELSE IS BREWING

• Ford (+3.52%) will stop selling heavy trucks in South America.
• McKinsey has agreed to fork over $15 million to end a probe into whether the consulting firm violated disclosure rules for corporate bankruptcies.
• Tesla (-0.73%) will have all of its self-driving car tech ready to roll by the end of the year, Elon Musk said. He added that’s “not a question
• Vox Media is expanding its tie-in with podcast company Stitcher to launch a new tech news podcast as part of a multimillion-dollar deal.

BREAKROOM

Final Jeopardy
Category: Business & Industry

Cue the music...

Breakroom Answers