Southern Business Review

Category: Company News

  • It turns out the World Record Egg was created by a 29-year-old advertising creative

    The creators of the World Record Egg, which some marketers have estimated opened a multi-million dollar advertising opportunity, was created by advertisers after all.

    The account, which cracked Kylie Jenner’s record for the most ever Instagram likes on a photo, was developed by 29-year-old advertising creative Chris Godfrey, with help from friends Alissa Khan-Whelan and C.J. Brown, The New York Times reported Sunday. Before The Times revealed the identity of the people behind the account, many tried to take credit for its invention. Marketers told The Atlantic the opportunity to crack out of the famed egg could be worth as much as $10 million to a brand.

    The egg’s creators said those claims of the opportunity’s value were “greatly exaggerated,” according to The Times. But the revelation that the egg was created by an advertising creative suggests the inventor understood the buzz it could create. Godfrey, who works for The & Partnership in London, told The Times he chose an egg for the universality of the object and said he was inspired by Jenner’s record-setting photo. The original egg photo had over 52 million likes as of Monday.

    Now, the egg has its own commercial, produced and aired with streaming service Hulu. The commercial appears to be an extension of the account’s mental health initiatives, which include donating a cut of merchandise proceeds to mental health charities. In the commercial, the words, “The pressure of social media is getting to me” appear above an image of a cracked egg. The ad directs viewers to the website of Mental Health America, a nonprofit dedicated to helping people with mental illnesses. An MHA spokesperson told CNBC the World Record Egg reached for permission to list the organization’s site in the video, but MHA was not involved in the production of the commercial.

    The egg’s creators told The Times that mental health is one of several initiatives the account will tackle. The egg’s creators, Hulu and Mental Health America did not immediately return requests for comment.

    Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.

    Subscribe to CNBC on YouTube.

    Watch: Why Facebook is integrating WhatsApp, Instagram and Messenger

  • Papa John's Starboard deal hopes to end feud with founder, but Schnatter says he had rival plan

    Embattled pizza chain Papa John’s has struck a deal with activist hedge fund Starboard Value in what it hopes may bring an end to a rocky few months that included a public battle with its founder, John Schnatter.

    As part of the deal, Starboard will invest $200 million, which will bring Schnatter’s stake in Papa John’s down from roughly 30 percent to around 26 percent, according to a person familiar with the situation. It will also install Starboard Chief Executive Jeff Smith, known for his turnaround of Darden Restaurants, on the pizza chain’s board as chairman, giving it a powerful defense should Schnatter wish to launch a proxy battle or seek to overturn members of the Papa John’s board.

    But when Schnatter heard about the proposed deal Saturday, he sent the board his own proposal with similar terms, according to an SEC filing. In addition to a $200 million investment with the option to invest another $50 million in the future, Schnatter offered a lower dividend rate and limited voting rights for the new shares. The special committee rejected the offer.

    Schnatter voted against the Starboard deal, according to a company spokesman. Other directors were unanimously in favor of Starboard’s proposal.

    The founder had previously reached out to third parties, either directly or through an intermediary, to explore his own deal for Papa John’s, according to SEC filings.

    Last year, Papa John’s hired Bank of America Merrill Lynch and Lazard to run a sale process for the chain. However, the process was complicated by Schnatter’s stake and Papa John’s uneven earnings performance. The Starboard stake does not rule out a sale in the future, according to a person familiar with the matter. The deal also gives Starboard the option to invest an additional $50 million in Papa John’s through March 29.

    The chain’s founder has been locked in a feud with the company ever since he gave up his role as chairman in July. Prior to leaving the company, Schnatter became embroiled in number of public scandals, including his use of the N-word on a conference call that led to calls for boycotts. A poison pill plan put in place by the board after his ouster prohibits him from purchasing more stock until July 2019.

    Also Monday, the company lowered its outlook for 2018 earnings to the lower end of the prior range of $1.30 to $1.60. In 2017, it earned $2.55 per share. The public relations crisis primarily hit North American sales, with same-store sales in the region dropping by 8.1 percent in the fourth quarter. In January, they declined even more, falling by 10.5 percent.

    Despite its public relations challenges, the restaurant remains a desirable target, should questions around its ownership be resolved, sources say. Pizza is one of the few food items that, like hamburgers, scales well internationally. With sufficient investments in technology, there may be opportunity to revive the brand to echo the resurgence enjoyed by Domino’s after its own technology investments.

  • Senate Democrats call for restricting corporate share buybacks

    Senate Democrats are proposing legislation that would prevent companies from buying back their own shares unless they first pay workers $15 an hour and offer paid time off and health benefits.

    Senate Democratic leader Charles Schumer of New York and Sen. Bernie Sanders of Vermont outlined their plan on Monday in an opinion column submitted to The New York Times. The proposed law would slap “preconditions” on a company’s ability to buy its own shares. “The goal is to curtail the overreliance on buybacks while also incentivizing the productive investment of corporate capital,” they wrote.

    Last year, more than $1 trillion in buybacks were announced by large companies after a corporate tax cut pushed through Washington in late 2017 left companies with a lot of extra cash to spend. But instead of significantly raising worker pay or investing in equipment, companies mostly used the cash to buy their stock. And some large companies are buying back billions of dollars of shares while announcing layoffs and closings, the Senators wrote.

    For example, Walmart announced a $20 billion share buyback while at the same time laying off hundreds and closing Sams Club stores. The column cites a Roosevelt Institute analysis that the retailer could have used the money instead to raise hourly wages to $15.

    Harley Davidson is buying back 15 million shares while closing a plant in Kansas City, Mo., Wells Fargo spent billions of dollars on buybacks while “openly plotting” to cut 10 percent of its workforce, the Senators said.

    “At a time of huge income and wealth inequality, Americans should be outraged that these profitable corporations are laying off workers while spending billions of dollars to boost their stock’s value to further enrich the wealthy few,” the column said.

    It isn’t the first time a ban on corporate stock buybacks has been floated. Last year, Wisconsin Democrat Sen. Tammy Baldwin sought to ban stock buybacks as open market purchases, using the same argument that they have contributed to economic inequality and divert resources away from workers.

    Last June, more than a dozen lawmakers, including Schumer and Baldwin, wrote to Securities and Exchange Commission Chairman Jay Clayton urging him to open public comments on the rules for stock buybacks, which they said hadn’t been updated in over a decade. They cited a Brookings Institute study that found from 2004 to 2014, the largest U.S. companies spent 51 percent of profit on buybacks.

    Read the opinion column here.

  • Chuck Schumer and Bernie Sanders call for restricting corporate share buybacks

    Senate liberals are proposing legislation that would prevent companies from buying back their own shares unless they first pay workers at least $15 an hour and offer paid time off and health benefits.

    Senate Democratic leader Charles Schumer of New York and Sen. Bernie Sanders of Vermont outlined their plan in a New York Times op-ed published Sunday. The proposal would slap “preconditions” on a company’s ability to buy its own shares.

    “Our legislation would set minimum requirements for corporate investment in workers and the long-term strength of the company as a precondition for a corporation entering into a share buyback plan. The goal is to curtail the overreliance on buybacks while also incentivizing the productive investment of corporate capital,” they wrote.

    Last year, more than $1 trillion in buybacks were announced by large companies after a corporate tax cut pushed through Washington in late 2017 left companies with a lot of extra cash to spend. But instead of significantly raising worker pay or investing in equipment, companies mostly used the cash to buy their stock. And some large companies are buying back billions of dollars of shares while announcing layoffs and factory and story closings, the senators wrote.

    For example, Walmart announced a $20 billion share buyback while it was laying off hundreds and closing Sams Club stores. The column cites a Roosevelt Institute analysis that the retailer could have used the money instead to raise hourly wages to $15.

    Harley-Davidson is buying back 15 million shares while closing a plant in Kansas City, Mo., Wells Fargo spent billions of dollars on buybacks while “openly plotting” to cut 10 percent of its workforce, the senators said.

    “At a time of huge income and wealth inequality, Americans should be outraged that these profitable corporations are laying off workers while spending billions of dollars to boost their stock’s value to further enrich the wealthy few,” the senators said.

    Kevin Hassett, chairman of President Donald Trump’s Council of Economic Advisors, lambasted the proposal.

    “I wish some economist would go and talk to these guys on how buybacks work,” Hassett said Monday on CNBC’s “Squawk Box.” “It’s very disappointing that over and over again I see the Democrats pursue really economically illiterate proposals just because they think they sound good politically.”

    It isn’t the first time a ban on corporate stock buybacks has been floated. Last year, Sen. Tammy Baldwin, D-Wis., sought to ban stock buybacks as open market purchases, using the same argument that they have contributed to economic inequality and divert resources away from workers.

    Last June, more than a dozen lawmakers, including Schumer and Baldwin, wrote to Securities and Exchange Commission Chairman Jay Clayton urging him to open public comments on the rules for stock buybacks, which they said hadn’t been updated in over a decade. They cited a Brookings Institute study that found from 2004 to 2014, the largest U.S. companies spent 51 percent of profit on buybacks.

    Sanders, I-Vt., is exploring another bid for the Democratic presidential nomination.

    Read the full opinion column here.

  • Apple could pay a reward to the 14-year-old boy who found the FaceTime snooping bug

    Grant Thompson, the 14-year-old who found Apple‘s FaceTime flaw, may get a bug bounty for his discovery. Bug bounties are the monetary rewards tech companies give people who find glitches in their products.

    “I kind of found this one on accident, which is pretty surprising to me that like Apple didn’t get this and a 14-year-old kid found it by accident,” Thompson told CNBC in a Monday interview while sitting next to his mother. “A few of my friends know it and think it’s pretty cool.”

    Grant’s mother, Michele Thompson, said she repeatedly and unsuccessfully tried to contact Apple to report what her son found on Jan. 19 while putting together a group FaceTime with friends playing Fornite. She said such attempts included emails, tweets and Facebook posts.

    “I didn’t hear from [Apple] until after the media broke the story one week ago today,” said Michele Thompson, referring to the report about the bug on tech site 9to5Mac last Monday that went viral.

    “A high-level executive with Apple” flew to them in Tucson, Arizona Friday afternoon to meet with Grant, she said. The executive, whom she declined to name, “thanked us in person and also asked for our feedback, asked us how they could improve their reporting process.”

    “They also indicated that Grant would be eligible for the bug bounty program. And we would hear from their security team the following week in terms of what that meant,” said Michele Thompson. “If he got some kind of bug bounty for what he found we’d certainly put it to good use for his college because I think he’s going to go far, hopefully. This is actually a field he was interested in before and even more so now.”

    Despite this experience, Grant Thompson said on “Squawk Box” that he will still use Apple products. “Every now and then something like this just falls through the cracks and can be found.” He added he believes Apple is trying to protect user privacy.

    On Friday, Apple apologized for the group FaceTime flaw that lets users hear through someone else’s iPhone, even if they have not actually answered the phone call. The statement from the company thanked “the Thompson family for reporting the bug.” Apple has disabled group FaceTime as a temporary fix, and promised a more permanent solution would roll out in a software update this week.

    According to NBC News, the journalist who wrote last Monday’s 9to5Mac story about the FaceTime bug said he saw Michele Thompson’s tweet after his article was published, but she did not contribute to his reporting.

    The FaceTime bug comes at a time when more and more questions are being asked about online privacy and Apple CEO Tim Cook has positioned the company as a champion of data protection. A day after the 9to5Mac report, Apple last Tuesday reported fiscal first quarter earnings and revenue that slightly beat estimates, but with a 15 percent drop in iPhone sales from the same period last year.

  • FBI reportedly raided a Huawei lab, set up a sting at CES in third investigation into the company

    The FBI raided a Huawei lab in San Diego and set up a sting operation at CES in Las Vegas in January as part of a third investigation into the smartphone maker, according to a new report by Bloomberg Businessweek.

    Last week, the U.S. Department of Justice charged Huawei and its chief financial officer, Meng Wanzhou, with an alleged violation of sanctions against Iran. It also charged Huawei for allegedly stealing trade secrets from T-Mobile. The newly reported third investigation similarly deals with trade secrets, but carries the added weight of federal regulations around technologies with the potential for use in defense.

    It also sheds light on how far Huawei is willing to go for a competitive edge, and on the extent of FBI fact-finding operations involved in these investigations.

    The Businessweek report says executives for an electronics components company, Akhan Semiconductor, aided an FBI investigation into whether Huawei attempted to steal Akhan’s smartphone glass technology that it says is resistant to scratches and is practically unbreakable. The Akahn glass, called Miraj, features a layer of artificial diamond that could also hold implications for defense technology.

    The executives were briefed on the lab raid, which took place last week, and wore wires to a meeting with Huawei executives during the annual CES convention last month, according to the Businessweek report. A Businessweek reporter witnessed the sting in a hamburger restaurant in a Las Vegas casino.

    Representatives for Huawei, the FBI and Akhan did not immediately return request for comment.

    Read the full report at Bloomberg Businessweek.

    WATCH: DOJ charges Huawei with fraud, seeks extradition of CFO

  • Bristol-Myers Squibb shares pop on report Starboard Value has taken a stake in drugmaker

    Bristol-Myers Squibb shares popped 2 percent early Monday after a Bloomberg report said activist hedge fund Starboard Value has taken a stake in the New York-based pharmaceutical giant.

    The size of the stake and plans that the activist hedge fund might have for its investment couldn’t be immediately learned, according to Bloomberg. CNBC has reached out to Starboard Value and Bristol for comment on the report.

    Last month, Bristol announced plans to acquire cancer drug maker Celgene in a cash and stock deal valued at $74 billion. Buying Celgene is seen as giving Bristol more cancer drugs at a time when its immuno-oncology portfolio struggles to keep up with rival Merck‘s.

    The initial news sent the cost to insure Bristol’s bonds to their highest point since May 2010. As the price of long-term Bristol bonds fell, the associated credit default swap jumped 66 percent, bringing the cost to insure $1 million of the company’s debt against default to $23,000, according to Reuters.

    Shares of Bristol are down about 4 percent since the beginning of the year. The stock is down more than 20 percent over the past 12 months.

  • Got a small business? See if you can grab this 20 percent tax break

    Small-business owners filing their 2018 taxes may be able to take advantage of a brand-new 20 percent tax break.

    One of the new features of the Tax Cuts and Jobs Act is the introduction of the qualified business income deduction, which went into effect last year.

    This tax break allows owners of “pass-through” entities, including sole proprietorships, S-corporations and partnerships, to deduct up to 20 percent of their qualified business income.

    Don’t get too excited just yet. Business owners and their accountants have been grappling with the deduction for most of 2018, trying to figure out who qualifies.

    Adding to the uncertainty, the IRS also spent most of last year and part of January 2019 fine-tuning the regulation and more closely defining which industries could nab the deduction.

    “I think overall, the IRS did a great job of clarifying things, but there are still open and unanswered questions that I think need to be addressed further through other guidance,” said Jeffrey Levine, CPA and CEO of Blueprint Wealth Alliance in Garden City, New York.

    “I think this is something we’ll be dealing with for years and years,” he said.

    Here’s what you should know.

    The IRS has built in some limits in order to keep the qualified business income deduction from being a free-for-all.

    First, entrepreneurs, regardless of industry, may take the 20 percent deduction if they have taxable income that’s under $157,500 if single or $315,000 if they’re married.

    Over that income threshold, the IRS places limits on who may take the break.

    For instance, “specified service trades or businesses,” including doctors, lawyers and accountants, aren’t able to take the deduction at all if their taxable income exceeds $207,500 if single or $415,000 if married.

    The rules are different for businesses that aren’t “specified service trades or businesses.”

    Those business owners get a reduced deduction if their taxable income exceeds the $157,500/$315,000 threshold and is still under the $207,500/$415,000 threshold.

    If your company is not a “specified service trade or business” and your taxable income is over the $207,500/$415,000 threshold, your deduction is generally capped as a percentage of W-2 wages paid to your employess.

    In January 2019, the IRS proposed additional guidance for rental real estate owners, a safe harbor they can follow in order to be certain they qualify for the 20 percent deduction.

    Those guidelines include maintaining separate books and records for each rental enterprise, as well as performing and documenting at least 250 hours of rental services in a year.

    Those servicesmay include time spent collecting rent, maintaining the property and supervising employees and independent contractors.

    However, other activities are excluded, including traveling to the property and studying financial statements.

    Accountants say that the 250-hour hurdle is onerous.

    “When you hire someone to cut the grass, you do just that,” said Troy Lewis, CPA, associate teaching professor at Brigham Young University and chairman of the qualified business income task force at the American Institute of CPAs.

    “You don’t say, ‘Cut the grass and tell me how many hours it takes you to do it,’” he said.

    If you’re a landlord who’s hoping to nab the 20 percent deduction under the safe harbor, be sure you have all of your invoices from 2018 to back up the number of hours spent servicing your property, Lewis said.

    A rental property that you also use personally isn’t eligible for the safe harbor, which could make things uncertain for people who lease out basements or vacation homes.

    “If you live there part of the time in the same space, then it’s a challenge,” said Lewis at Brigham Young University.

    Even renting out your beach cottage to summer visitors won’t guarantee that you qualify for the safe harbor.

    “Let’s say I rent out a condo in Boca Raton, but I never go there,” said Lewis. “That’s OK, but the problem is I won’t meet the 250 hours of rental service.”

    Triple net leases — arrangements in which the tenant agrees to foot the bill for real estate taxes, insurance and maintenance — are also excluded from the safe harbor.

    Failing to qualify doesn’t preclude you from trying to claim the deduction on your 2018 tax return, but it does mean you have to be ready for the IRS to push back.

    “Remember that just because you don’t meet the definition, doesn’t mean you won’t be considered a business for the purpose of the deduction,” said Levine of Blueprint Wealth Alliance. “But the onus is on you.”

    As tempting as the 20 percent deduction is for small businesses, entrepreneurs should proceed with caution and be ready for the possibility that the IRS could challenge your deduction. Here’s how to proceed:

    • Keep well-documented books and records. Be sure to closely review the receipts and statements that pertain to your business, and prepare to turn these in to your accountant.

    If you’re hoping to claim the deduction for a property you rent out and do so under the safe harbor, the IRS will want to know how much time you spent on maintenance, management and more.

    • Think before making dramatic changes to your business. Last summer, the IRS put the kibosh on aggressive strategies accountants pitched to help entrepreneurs qualify for the break.

    The qualified business income deduction is still a work in progress — and it’s only around until the end of 2025 — so slow down before doing anything too drastic.

    “The well-advised client will view this as another data point to reevaluate their structure and business,” said Jonah Gruda, CPA and partner at Mazars USA. “But I always tell them that while tax is an important aspect of business decisions, it’s only an aspect.”

    • Talk to your accountant. Do a gut check of your appetite for the deduction, and prepare for the possibility that you may have to make your case to the IRS.

    “There are gray areas where it’s a matter of your tax risk tolerance,” said Levine of Blueprint Wealth Alliance. “Are you a fighter, or are you going to say, ‘I have bigger things to worry about’?

    “I have clients in both camps,” he said.

    More from Personal Finance
    Taking a loan from your 401(k) does come with risks
    Ready, set, file: What you need to file your 2018 taxes
    These red flags on your 2018 tax return could spark interest from the IRS

    Subscribe to CNBC on YouTube.

  • Small-business owners look to grab this 20 percent tax break

    Small-business owners filing their 2018 taxes may be able to take advantage of a brand-new 20 percent tax break.

    One of the new features of the Tax Cuts and Jobs Act is the introduction of the qualified business income deduction, which went into effect last year.

    This tax break allows owners of “pass-through” entities, including sole proprietorships, S-corporations and partnerships, to deduct up to 20 percent of their qualified business income.

    Don’t get too excited just yet. Business owners and their accountants have been grappling with the deduction for most of 2018, trying to figure out who qualifies.

    Adding to the uncertainty, the IRS also spent most of last year and part of January 2019 fine-tuning the regulation and more closely defining which industries could nab the deduction.

    “I think overall, the IRS did a great job of clarifying things, but there are still open and unanswered questions that I think need to be addressed further through other guidance,” said Jeffrey Levine, CPA and CEO of Blueprint Wealth Alliance in Garden City, New York.

    “I think this is something we’ll be dealing with for years and years,” he said.

    Here’s what you should know.

    The IRS has built in some limits in order to keep the qualified business income deduction from being a free-for-all.

    First, entrepreneurs, regardless of industry, may take the 20 percent deduction if they have taxable income that’s under $157,500 if single or $315,000 if they’re married.

    Over that income threshold, the IRS places limits on who may take the break.

    For instance, “specified service trades or businesses,” including doctors, lawyers and accountants, aren’t able to take the deduction at all if their taxable income exceeds $207,500 if single or $415,000 if married.

    The rules are different for businesses that aren’t “specified service trades or businesses.”

    Those business owners get a reduced deduction if their taxable income exceeds the $157,500/$315,000 threshold and is still under the $207,500/$415,000 threshold.

    If your company is not a “specified service trade or business” and your taxable income is over the $207,500/$415,000 threshold, your deduction is generally capped as a percentage of W-2 wages paid to your employess.

    In January 2019, the IRS proposed additional guidance for rental real estate owners, a safe harbor they can follow in order to be certain they qualify for the 20 percent deduction.

    Those guidelines include maintaining separate books and records for each rental enterprise, as well as performing and documenting at least 250 hours of rental services in a year.

    Those servicesmay include time spent collecting rent, maintaining the property and supervising employees and independent contractors.

    However, other activities are excluded, including traveling to the property and studying financial statements.

    Accountants say that the 250-hour hurdle is onerous.

    “When you hire someone to cut the grass, you do just that,” said Troy Lewis, CPA, associate teaching professor at Brigham Young University and chairman of the qualified business income task force at the American Institute of CPAs.

    “You don’t say, ‘Cut the grass and tell me how many hours it takes you to do it,’” he said.

    If you’re a landlord who’s hoping to nab the 20 percent deduction under the safe harbor, be sure you have all of your invoices from 2018 to back up the number of hours spent servicing your property, Lewis said.

    A rental property that you also use personally isn’t eligible for the safe harbor, which could make things uncertain for people who lease out basements or vacation homes.

    “If you live there part of the time in the same space, then it’s a challenge,” said Lewis at Brigham Young University.

    Even renting out your beach cottage to summer visitors won’t guarantee that you qualify for the safe harbor.

    “Let’s say I rent out a condo in Boca Raton, but I never go there,” said Lewis. “That’s OK, but the problem is I won’t meet the 250 hours of rental service.”

    Triple net leases — arrangements in which the tenant agrees to foot the bill for real estate taxes, insurance and maintenance — are also excluded from the safe harbor.

    Failing to qualify doesn’t preclude you from trying to claim the deduction on your 2018 tax return, but it does mean you have to be ready for the IRS to push back.

    “Remember that just because you don’t meet the definition, doesn’t mean you won’t be considered a business for the purpose of the deduction,” said Levine of Blueprint Wealth Alliance. “But the onus is on you.”

    As tempting as the 20 percent deduction is for small businesses, entrepreneurs should proceed with caution and be ready for the possibility that the IRS could challenge your deduction. Here’s how to proceed:

    • Keep well-documented books and records. Be sure to closely review the receipts and statements that pertain to your business, and prepare to turn these in to your accountant.

    If you’re hoping to claim the deduction for a property you rent out and do so under the safe harbor, the IRS will want to know how much time you spent on maintenance, management and more.

    • Think before making dramatic changes to your business. Last summer, the IRS put the kibosh on aggressive strategies accountants pitched to help entrepreneurs qualify for the break.

    The qualified business income deduction is still a work in progress — and it’s only around until the end of 2025 — so slow down before doing anything too drastic.

    “The well-advised client will view this as another data point to reevaluate their structure and business,” said Jonah Gruda, CPA and partner at Mazars USA. “But I always tell them that while tax is an important aspect of business decisions, it’s only an aspect.”

    • Talk to your accountant. Do a gut check of your appetite for the deduction, and prepare for the possibility that you may have to make your case to the IRS.

    “There are gray areas where it’s a matter of your tax risk tolerance,” said Levine of Blueprint Wealth Alliance. “Are you a fighter, or are you going to say, ‘I have bigger things to worry about’?

    “I have clients in both camps,” he said.

    More from Personal Finance
    Taking a loan from your 401(k) does come with risks
    Ready, set, file: What you need to file your 2018 taxes
    These red flags on your 2018 tax return could spark interest from the IRS

    Subscribe to CNBC on YouTube.

  • Target to sell Flamingo razors, adding to its roster of online brands like Casper and Harry's

    Target is stocking its shelves full of brands born on the internet in hopes of appealing to younger shoppers who don’t want the same Old Spice deodorant or Schick razor their parents use.

    The big-box retailer’s latest deal is with Flamingo, a women’s shaving brand launched late last year by men’s shaving start-up Harry’s, which is already being sold in Target stores. Starting Monday, Flamingo’s razors and shaving gel for women will be in all of Target’s 1,800 locations across the U.S., marking the brand’s bricks-and-mortar debut.

    For Target, selling goods from brands like Flamingo is helping the company increasingly become known as a “cool” place to shop. And for brands like Flamingo — which uses sleek packaging to promote women shouldn’t be embarrassed to shave their underarms — the deal offers huge exposure and reach to consumers en masse that would be hard to achieve alone.

    “We know Target is such a core part of [our core customer’s] weekly shopping experience,” Allie Melnick, general manager of Flamingo, told CNBC. She said the brand completed survey work before it determined this would be a “natural collaboration.” In many big-box stores, the heavily trafficked aisles that sell razors and other body care for women “haven’t been touched” by old-school brands in a really long time, presenting an opportunity for Flamingo to move into retail, Melnick added.

    Target has inked a handful of similar deals with so-called digitally native brands including Casper for mattresses, Native for deodorant, Harry’s for men’s shaving essentials, Quip for electronic toothbrushes and Bark for dog toys. The approach is somewhat different than that of one of Target’s biggest competitors, Walmart, which has gone the way of outright buying some of these digitally native brands, like Bonobos and Moosejaw. (Walmart did start selling Harry’s razors in its stores last year, after Target.)

    Another retailer going the same route as Target is Nordstrom. The department store chain has lined up a series of brands in recent months including sneaker maker Allbirds, luggage retailer Away and Casper to sell in its stores, often for a limited period of time. The news has helped generate buzz and pull shoppers in who want to test out those products offline. Unlike Flamingo and Harry’s, though, Allbirds, Away and Casper already have their own stores and are growing that network today.

    Tie-ups between traditional retailers and these up-and-comers make sense for a number of reasons, including the fact that the collaboration can help young brands decide if they should open their own standalone stores as a next step, according to Jake Mendel, of Silicon Valley Bank’s Early Stage Practice in New York. Many of these brands born on the internet bring with them cult-like followings — huge Instagram audiences — that legacy retailers like Target and Walmart can potentially piggyback on, Mendel added.

    “Big retailers are acutely aware that direct-to-consumer brands are building close and authentic relationships with their customers, which seems to be driving a willingness to be more flexible on terms than they have historically,” he said.

    It’s also worth noting a lot of these tie-ups thus far have been in the consumer-packaged-goods space — for things like razors, toothbrushes and deodorant.

    “If you’re selling a product with a low absolute dollar margin, even if your gross margins are insane, you still need to move a lot of volume to build a large scale business,” Mendel said. “With [the large majority] of consumer sales still happening through retail channels, these partnerships are a great way to reach large volumes very quickly.”