Daily Insight:

Arts and crafts retailer Michaels is taken private by Apollo Global Management at a 47% premium to its last Friday closing price. (click to tweet)

Target reported revenue of $28.34B in the last quarter with a 20.5% YoY increase. The company’s profit increased by 66% to $1.38B.

More:

• Target’s digital sales increased by 118% in Q4 and 145% overall last year. The company noted that the Q4 digital sales growth accounted for about two-thirds of overall company growth.
• Its same-day delivery service increased by 235% in the last year. Curbside pick-up service increased by 500% in Q4. 
• Target’s $15B YoY revenue growth in 2020 is more than its combined growth over the previous 11 years. 
• During the earnings call, the company also noted plans to spend $4B annually over the next few years on expenses such as opening 30-40 stores, remodeling 150-200 stores, and improving online order fulfillment.
• Target didn’t offer guidance for the upcoming quarter and fiscal year.
• Despite strong earnings, its share prices fell by 7% on the earnings announcement.  

Payments platform Square launched its banking division Square Financial Services yesterday, headquartered in Utah. The company received conditional approval from the FDIC in March 2020, including the proviso that the bank would be established within a year. 

Square's existing credit service:

Square said the new division will begin by offering loans through its already existing Square Capital product, which provides credit services for businesses using Square payment service. Square Capital currently offers loans through Celtic Bank. Since 2014, Square Capital has offered 1.2 million advances amounting to $8.1B, including $857M through the Payroll Protection Program.

Zoom out:

Platform companies recently started offering credit lines to their network of sellers to capitalize on their reach and the availability of merchant transaction data. In September last year, Walmart announced that it would offer credit lines for its third-party marketplace sellers by partnering with Goldman Sachs' Marcus division. Shopify, Amazon, and Alibaba also offer similar services.

As fintech begins to offer banking products, JPMorgan launched its free QuickAccept service last October, which will enable businesses to take card payments within minutes through a mobile app or a contactless card reader. The service is pitted against companies like Square, which primarily offers Point-Of-Sale service.

Square currently has a market cap of $116B, more than Goldman Sachs' $114B; PayPal's $319B market cap is higher than almost all U.S. banks, only behind JPMorgan Chase. 

A version of this story first appeared in Inside Business. You can read the full issue here.

Arts and crafts retail chain Michaels has entered an agreement to be taken private by Apollo Global Management in a $3.3B deal. Michaels has around 1,200 stores in the U.S. 

More:

• Michaels was taken private by Bain Capital and Blackstone Group in a $6B deal in 2006. It went public again in 2014 and was valued at $3.45B in its IPO.
• The company’s e-commerce sales doubled in Q3 leading to an overall revenue of $1.41B — up 15% YoY. Despite a 26% decline in Q1 2020, when many of its stores were temporarily closed, Michaels posted 10-15% growth in the subsequent quarters as people started buying more crafting and knitting items due to the lockdowns.
• The $22 per share paid by Apollo Global Management is at a 47% premium to its closing price last Friday.

On-demand grocery delivery platform Instacart raised $265M at a $39B valuation, up from $17.8B last year. Instacart has benefitted from lockdown conditions after many physical retailers restricted walk-in access to stores. 

More:

• E-commerce grocery sales' growth is estimated to reach 21.5% of total U.S. grocery sales by 2025. It was about 10% in 2020, up from 3.4% in 2019.
• The company delivers goods from 600 retailers across 45,000 stores in the U.S. and Canada.
• Instacart has expanded beyond groceries to include office supplies, sporting goods, prescription drugs, and pet supplies.
• Backed by Andreessen Horowitz and Sequoia Capital, the eight-year-old startup has been named as a candidate to go public.

On its competitors' side:

• Walmart is moving towards a local fulfillment and pickup model for its grocery business. 
• Uber has been developing its own grocery delivery system as well as increasing its capacity to handle deliveries.
• Amazon has added fast, free grocery delivery or pickup through most of its Whole Foods Market stores. 

This story first appeared in Inside Business. You can read the full issue here.

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