Brooks Brothers, Facebook, Allstate and Sunrun

Brooks Brothers files Chapter 11, Facebook hasn’t done enough and both Allstate and Sunrun announce mergers.
Brooks Brothers Store Front
"Grand Boulevard - Brooks Brothers" (CC BY 2.0) by grand_boulevard
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July 8, 2020 – Brooks Brothers files Chapter 11, Facebook hasn’t done enough and both Allstate and Sunrun announce mergers.

Today’s word count: 1,193 words (7 minutes)

Brooks Brothers, Hurt by Casual Fridays and Coronavirus, Files for Bankruptcy

Brooks Brothers has dressed customers for more than 200 years, but the company’s future is now uncertain after filing for bankruptcy Wednesday. With three U.S. factories and 250 North American stores, Brooks Brothers was one of the few remaining brands to produce clothes domestically.

Why It Matters

The pandemic has undoubtedly decimated retail stores, and Brooks Brothers was no exception. The outfitter now joins an increasingly lengthy list of retailers seeking Chapter 11 relief – Neiman Marcus, J. Crew and J.C. Penny.

But even before the health crisis, Brooks Brothers had to contend with a general trend toward more casual clothing in the workplace. Heavy competition from other brands mired its attempt to adapt and sell a new casual line in 2016. “Today, tailored clothes account for about a fifth of its sales, with casual sportswear making up the rest,” The Wall Street Journal reported.

The brand isn’t dead yet. It’s expected to draw interest from buyers such as Authentic Brands Group, a firm that owns Barney’s New York and Sports Illustrated names.

Numbers to Consider

  • 70 – The number of countries Brooks Brothers has a presence in.
  • $20 Million – The size of a loan Brooks Brothers received last year to explore liquidation.
  • 60 Percent – The sales drop Tailored Brands, a competitor of Brooks Brother, experienced during the quarter ending on May 2, demonstrating the struggles of the men’s work attire industry.


Facebook Is Doing Too Little on Civil-Rights Concerns, Auditors Say

Facebook isn’t doing enough, and now its auditors are saying so. A few years back, the tech giant hired a team of lawyers to conduct an independent review of how the company handles civil-rights issues. While the report praises Facebook for “undertaking a self-examination and making some meaningful changes,” it also concluded the company has been “too reactive and slow” in addressing hate speech, voter suppression and other problematic content on its platform.

Why It Matters

For years, Facebook has faced criticism, saying it does “too little to police abusive and misleading content on its platform.” Simultaneously, the company has dealt with disapproval on the other end of the spectrum, saying its “moderating practices are too aggressive and prone to bias.” The Covid-19 pandemic and nationwide protests sparked by the killing of George Floyd exacerbated these issues.

Facebook COO Sheryl Sandberg promised more changes after auditors released the initial findings of the report in 2018 and an interim version a year ago. Now, with a presidential election imminent, the situation couldn’t be more urgent, especially with the threat of voter suppression at hand.

“The Auditors do not believe that Facebook is sufficiently attuned to the depth of concern on the issue of polarization and the way that the algorithms used by Facebook inadvertently fuel extreme and polarizing content,” the report said, according to The Wall Street Journal.

Numbers to Consider

  • 223.2 Million – The U.S. number of Facebook users expects to hit this point by 2023, according to Statista.
  • $687 Billion – Facebook’s market cap, according to Google.


Allstate to Acquire Rival Insurer National General for $4 Billion

Allstate customers may be in even “better hands” now. The insurance company announced Wednesday it was acquiring National General Holdings Corp. for around $4 billion in cash. Under the agreement, National General shareholders will receive a generous financial package – a 69 percent premium on the stock’s last traded price. The deal is expected to close next year, subject to regulatory approvals.

Why It Matters

The deal immediately grows Allstate’s market share in the personal property-liability space, a vital part of the company’s strategy going forward, according to chairman and chief executive Tom Wilson. Allstate wrote roughly $35 billion in property/casualty direct premiums in 2019, good enough for fifth among its peers, according to III.org. Adding National General’s $5.6 billion in gross premiums from 2019 pushes Allstate up that list, possibly as high as third.

Numbers to Consider

  • $2.2 Billion – The amount of cash Allstate is funding the deal with, as well as $1.5 billion in new senior debt.
  • $319 Million – National General’s operating income for 2019.
  • $34.50 – The price shareholders of National General will receive per share.


Solar Deal Would Create a New Industry Giant

Here comes the sun. Sunrun, the U.S.’s largest residential solar company, is acquiring one of its key competitors, Vivint Solar, in a $3.2 billion all-stock deal. The union between the two companies would form one of the world’s largest providers of solar equipment.

Why It Matters

Sunrun has been on a crazy run since its founding in 2007. It grew to the nation’s leading residential solar company in just over a decade, surpassing Tesla in 2018. Sunrun gets roughly a 66 percent jump in market share with Vivint in the mix, further distancing itself from competitors.

Solar and renewable energy has fared better than oil and gas during the pandemic, but analysts still expect a 25 percent decline in residential solar installations compared to last year. The merger could lead to cost savings as much as $90 million a year, which could balance out a decrease in sales with more affordable solar system prices.

Numbers to Consider

  • 50,000 – The combined customer base of Sunrun and Vivint.
  • 15 Percent – Sunrun’s total market share after acquiring Vivint, up from 9 percent.


A Quick Look

Nearly 70,000 Tech Startup Employees Have Lost Their Jobs Since March

  1. Because of the economic fallout of Covid-19, nearly 70,000 tech-startup employees worldwide have lost jobs since March.
  2. In San Francisco, including Silicon Valley, startups have shed more than 25,500 jobs. Even high-profile companies such as Uber, Groupon and Airbnb have instituted layoffs.
  3. “Global private-market funding for startups dropped to $67 billion in the first quarter, down 22 percent from the same period a year earlier, according to CB Insights, a market intelligence company.”


Worth Your Time

Murky Waters: A U.S. TikTok ban may be inching closer to reality. Reports emerged that the U.S. Justice Department and the FTC met with child internet advocacy groups that allege TikTok is violating the terms of a 2019 agreement protecting child privacy. Losing access to the U.S. audience would be devastating for TikTok – the U.S. contributes 26.5 million active users per month. (REUTERS)

Enough is Not Enough: While Facebook conducts its review of its policies, it took another step to mend the damage of its perceived public failings by meetings with a collection of activist organizations. The feedback from the meeting, which lasted a little over an hour, was not good. The activist organizations called the chat an “unequivocal disappointment,” which raises concerns on Facebook’s commitment to quelling issues like hate and misinformation. (TECH CRUNCH)

A Couple Cents Content

Read part three of Justin Oh’s interview with trucking industry expert Jeffrey Whitcomb. (POST)

If you missed it last night, check out Monday’s live show where Justin Oh discusses artificial markets, BYD, HCA and more. (YOUTUBE)

Watch Justin Oh discuss the “five things that will solve the Covid economy.” (YOUTUBE)


Thanks for reading!

— Justin Birnbaum

Image:Grand Boulevard – Brooks Brothers” (CC BY 2.0) by grand_boulevard

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