Issue #68: Happy Halloween!

Sprit Halloween Deep Dive

Chances are that in your local strip mall, come August or September, a plastic canvas banner will be hung up loosely on a retail location reading: Spirit Halloween. All this retailer sells are Halloween items, and it is only open for that brief window of time, from early-mid August until a couple of days after Halloween. A mere 60-90 days, peddling exclusively Halloween-related items. Most likely, the space they occupy was left vacant by a bygone retailer of the past - Joann’s Fabric, Toy-R-Us, JCPenney, etc. This year, there will be over 1,600 Spirit Halloween locations across the US and Canada, plus a brand extension into Christmas. Before we dive further into the strategy, let’s dive into some key moments in the history of Spirit Halloween to understand how they got here:

• 1983 - first location opens in its founder’s dress shop as a test

• 1999 - Up to 60 seasonal locations, acquired by Spencer’s, a fashion mall retailer with over 600 locations

• 2005 - eCommerce website launches, offering the ability to purchase Halloween items year-round

• 2006 - Up to 434 stores in 46 states

• 2020 - over 1,400 locations open

• 2024 - brand extension into Spirit Christmas with 8 stores across the US, opening in mid-October and November, some being locations that were Spirit Halloween too

• 2025 - 30 Spirit Christmas locations planned

Throughout that time, the Halloween business has exploded. According to the National Retail Federation (NRF), which tracks consumer spend among other things, they are expecting $13.1B in 2025 Halloween spending. This spend is up from $11.6B last year and the previous record set in 2023 of $12.2B by almost $1B. Even with all the concerns about value and discretionary spend, people are expecting to spend more, even factoring in higher prices. Part of the reason for more spending is the expansion of the holiday; more people plan to carve a pumpkin (46%), throw or attend a party (32%), visit a haunted house (24%), or dress up their pets (23%). In terms of where the purchasing happens, discount stores and specialty Halloween stores (aka Spirit Halloween), vastly surpass eCommerce for the purchase destination. While Halloween spending is growing (that Spirit Halloween mostly owns), it pales in comparison to the $890 per person consumer plan to spend on the Winter Holidays (versus $114 for Halloween). You can see why they are getting into the Christmas business.

To summarize, Spirit Halloween’s model has been capitalizing on the growing surplus of vacant large box store real estate to get leases for a couple of months long and fill them with the right amount of on-trend products (would love to meet their category management and supply chain team). What was previously super expensive for a months-long retail location is now coming down as landlords see the value of having something rather than nothing. With the recent bankruptcy of Joann Fabric, I wonder how many of those locations they will take over. Additionally, in a super risky strategy, Spirit Halloween doesn’t sign the leases until mid-summer, so they get the best deal possible. Talk about playing with fire!

From my perspective, the most fascinating part of this whole operation is the logistics of operating a super asset-light retailer. First, I assume most of this product is produced overseas, which means longer lead times. How do they get the right amount? I assume then also they have some sort of distribution center or centers across the country to store the products when they come over (either outright owned by them or a third party). They repurpose costumes every year, so they have to store those too. Then, the lease part actually seems like the easiest part. Once they have the location, they have to set up the entire store. Do they buy the fixtures new every year, or do they store them somewhere? Then, once they have the fixtures, according to this article I found in the Cincinnati Enquirer, the seasonal employees set up the stores. Talk about some excellent merchandising plans and training plans.

I have many questions, but I am very impressed with the business. What are your thoughts?

Dunkin’ Tests Re-Branded Menu With Gen Z Focus

A couple of weeks ago, Dunkin’ celebrated its 10,000th location in the United States, opening up in Darien, Illinois. However, the chain is not resting on its laurels. Since dropping the “Donuts” portion of the name in early 2018, it has been on a re-invention journey. Recently, Dunkin’ has been on a rapid menu redevelopment to cater to the younger palettes, launching products like Avocado toasts, energy drinks, and more. Now, it is trying to lean into that ethos even further. According to Restaurant Business Online, Dunkin is launching “Project Chill,” a 250-store test of a new menu. Leveraging mostly existing products, the menu will be re-branded to focus on cold beverages and food to cater towards a more afternoon customer. Dunkin’ feels like it is great in the morning, but needs improvement in the afternoon. With Dutch Bros and 7 Brew (featured in Issue #67), rapidly expanding by winning the afternoon, Dunkin’ needs to compete in the afternoon. I like the idea of Project Chill, and agree that afternoon Dunkin’ could use a boost, but I am unsure if just rebranding the menu will be enough. I think some additions and tweaks will be needed to really see the impact.

Target Cuts 1,800 Employees

2025 has been a rough year for Target. Sales have been declining, and alongside it, profitability too. Target is on track for its third straight year of flat or negative year-over-year comps. Recently, Target has been winning on its fun Private Label, but other retailers, like Amazon and Walmart, have caught up. In order to stem these issues of sales declines, Target recently announced that it would be elevating its COO, Michael Fiddelke, to CEO. Fiddelke has notably worked his way up from being an intern to now being the CEO. In his first major move, seemingly to appease Wall Street investors based on the majority of comments from analysts after the move, he announced the cuts. Representing about 8% of the workforce, 1,000 roles will be cut, and 800 open roles will not be rehired. These cuts will not touch the supply chain and store role. To me, this lack of cuts in those departments is a clear acknowledgement of Target’s flaws: ops and, in particular, supply chain. Anecdotally, from talking to people in the industry and from just walking Target aisles, they seem to have much higher out-of-stock rates than their peers. You can’t sell something you don’t have, and until that is fixed, I don’t see much improvement happening.

• Summary: Scooter’s Coffee is a coffee chain that sells indulgent cold beverages and food. It was founded in Nebraska in 1998 and now has operations in 29 states. The strategy is franchise-based, with many locations being small format, drive-through only, with no seats.

• My Take: Similar to 7 Brew last week, and many discussions of Dutch Bros, small-format, indulgent coffee chains focused on cold beverages and food are skyrocketing in popularity. It is hard for me to pick a specific winner yet, but I am super bullish on the space.

• Founder(s): Don and Linda Eckles

• Funding: Unknown

• Number of Locations: 800 locations

• Social Media Following: 402k Insta, 195k TikTok

Additional Links:

1. AI-driven traffic to Consumer Goods sites has changed recently as ChatGPT started to prefer Etsy and Walmart with their new partnership (read more here)

2. Walmart is using new RFID technology to better identify potential food waste with the ultimate goal of reducing it (read more here)

3. Happy Croctober! (read more here)

4. Walmart partners with Stadium Goods to address the collectibles gap in its marketplace (read more here)

5. Amazon is launching AI tool to help people decide what to buy between several similar items (read more here)

6. Startup brands are partnering with the regional department Von Maur (read more here)

7. A deep dive into Publix’s success (read more here)

8. Ahold Delhaize is building $860M distribution center in North Carolina to mostly support its Food Lion stores (read more here)

9. Shoppers, which is owned by distributor UNFI, is closing four locations (read more here)

10. A new Midwestern grocery chain has formed, the 1939 Group (read more here)

Was this forwarded to you? Sign up here.

Have an idea or want to chat? Respond to this email.

Is the email not reaching your inbox? Try this trick.