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The Italian luxury fashion firm reported a 6.7 drop in sales, due in part to negative currency impact and lackluster shoe sales.

MILAN — In what could be Tod’s Group last earnings report for the financial community before the company goes private, the Italian luxury goods maker reported a 6.7 percent year-over-year drop in sales.

Sales were pulled down by declines in the shoe category, a drop in revenue from Greater China and a negative foreign exchange impact in the first quarter of 2024. For the quarter, the company posted 252.3 million euros in sales, down from 270.5 million euros in the prior-year period.

Earlier this month, the Italian luxury group reported that the offer of Tod’s shares promoted by Crown Bidco Srl, an L Catterton affiliate, had reached an aggregate stake greater than 90 percent of the share capital, the threshold necessary for the company’s delisting.

“The impact of currencies was negative; at constant exchange rates, i.e. using the same average exchange rates as in the first three months of 2023, including the effects of hedging, the group’s revenues would amount to 257.9 million euros, down 4.7 percent from the first quarter of 2023,” the company said in a statement Wednesday.

Sales of the Roger Vivier brand led losses, dragged down by the weakness of the Chinese market, falling 23.2 percent to 52.7 million euros. Tod’s followed, down 6.6 percent to 121.7 million euros, while sales of Hogan and Fay rose 8.2 percent to 61.5 million euros and 12.7 percent to 16 million euros respectively.

By category, shoes slid 8.3 percent, leather goods and accessories fell 3.7 percent and apparel outperformed, rising 4 percent.

Management expressed confidence in the upcoming fall season.

“We are pleased with the reception customers have shown for the collections now in store and the excellent response to the new shoes, leather goods and accessories projects presented for the upcoming fall season,” the company said.

Geographically, Greater China was impacted by a sharp drop of store traffic and weak consumption, plummeting 24 percent, followed by the Rest of the World category, down 5.8 percent, despite good results form Japan and the Middle East. The America’s category bucked the trend up 19.6 percent, while the rest of Europe was up 5.1 percent, helped by solid tourist purchases and local demand. Tod’s retail sales plunged 8.9 percent, while wholesale was down 1.4 percent in the first quarter due in part to the “cautious attitude adopted by the group in the current industry environment,” the company said, noting positive performance of its e-commerce business in the period.

Tod’s distribution network, as of March 31, consists of 349 directly operated stores and 104 franchised stores, up from 333 directly operated stores and 89 franchised stores at that time last year.

Diego Della Valle, chairman and chief executive officer of the group, said the delisting came at the right time. “We made this choice to develop the full potential of our individual brands, making all the necessary investments in a timeline we deem most suitable. We have a great growth opportunity and we will try to seize it, operating with a long-term horizon. We have also decided to share this strategic decision with two global partners, who have a great experience in our sector: L Catterton and LVMH, with whom we shared our entry on the stock exchange over 20 years ago, both of whom will certainly be precious travel companions,” he said in the press statement.

There are too many flaws that can be exploited by managements with bad intentions

A US company is spurring a profound change in the way Deutschland AG works. For decades, a common path for German top managers was to move from chief executive to chair at the same company.

The progression underlined the consensual approach to management among German companies, prioritising continuity over fresh thinking in corporate culture.

Current examples to go down the path include Norbert Reithofer at BMW, Michael Diekmann at Allianz, Kurt Bock at BASF and Nikolaus von Bomhard at Munich Re. And Volkswagen chair Hans Dieter Pötsch and Karl-Ludwig Kley at Lufthansa also previously were their respective company’s chief financial officer.

But things are changing. Since 2009, German law has stipulated there must a two-year cooling-off period between such jobs. Then in December 2021, Institutional Shareholder Services — one of the leading global firms that advise investors how to vote on corporate governance issues — announced that it would not back any former chief executive who aspired to become or remain chair of the same company.

While in effect since early 2022, the new ISS policy started to cause a stir this year as the proxy adviser recommended voting against the re-election of BASF’s Bock and Munich Re’s von Bomhard. Both won re-election despite protest votes at annual meetings, as voting out a sitting chair seemed too much for most shareholders who feared that the lack of any obvious successor could do more harm than good.

But the re-elections signalled it is becoming harder to make the step from chief executive to chair. Few managers will be willing to see through the two-year cooling-off period to then face significant uncertainty over winning enough shareholder votes.

This has the potential to change German boardrooms. Critics have long argued that moving chief executives to the chair role contributed to groupthink and a general dislike of corporate change that has undermined German companies’ ability to adjust to new trends. Chairs often need to sort out managements’ past strategic mistakes. If they have personally been responsible for the decisions as chief executive, they may be keen to defend their personal legacy.

The new ISS policy aims to make German supervisory boards more independent and effective. To achieve that, more than market pressure might be needed, though, to fix long-standing flaws in German corporate governance. Some shortcomings require the intervention of lawmakers and changes to German corporate and securities laws.

Take the fundamental competencies of supervisory boards. Under the country’s two-tier boardroom structure, their role is to oversee the executive board which is solely in charge of the day-to-day business. But apart from hiring and firing top management, and setting their pay, the power of supervisory boards is limited. They cannot give orders to executives, and usually do not directly liaise with employees who are working below the management board.

Just as important as independent and powerful boards are effective checks and balances by external shareholders. And here, some shareholders complain German law falls well short of international best practice. It is very difficult for outside investors to sue over potential violations of fiduciary duties by executives and supervisory boards.

“Shareholders in Germany have no reasonable way to stop decisions that blatantly violate their interests,” says Thomas Schweppe, who runs Frankfurt-based boutique shareholder advisory firm 7 Square.

The built-in flaws and gaps in governance can easily be exploited by managements with bad intentions, as the Wirecard scandal shows. But for now, there seems little political interest in beefing up the rights of supervisory boards or shareholders. Quite on the contrary, the German parliament is actually discussing making it harder for shareholders to challenge potentially flawed decisions taken at annual meetings in court — a move some shareholders believe could undermine their rights even more.

Given much of Deutschland AG — particularly in the industrial sector — is facing deep challenges ranging from competition from China to navigating the green transition, it is not hard to make a case that boosting shareholder confidence in companies through better corporate governance should be higher on Berlin’s agenda.

The Hang Seng Mainland Properties Index, which tracks Chinese property developers listed in Hong Kong, was up 5.6% in afternoon trading Thursday

Shares of Chinese property developers surged on rising expectations that government entities in China are moving to help buy up excess housing in a bid to revive the struggling real-estate sector.

The Hang Seng Mainland Properties Index, which tracks Chinese property developers listed in Hong Kong, was up 5.6% in afternoon trading Thursday. Sino-Ocean and CIFI rose 46% and 29%, respectively, while Longfor, China Vanke 000002 5.95%increase; green up pointing triangle, Agile and Sunac China 1918 12.03%increase; green up pointing triangle were each more than 10% higher.

Gains were fueled in part by news Wednesday that officials in Hangzhou, a large city near Shanghai, said they would begin buying private residential units in a district with a surplus of homes, using them for public housing. Similar plans announced Thursday in the far western city of Dali also helped.

Those moves come days after the city of Nanjing said it would assist in renovating or purchasing homes to create public housing, while Foshan, a midsize city near Hong Kong and Macau, said it would encourage state-owned enterprises to participate in a housing trade-in program.

Analysts said that altogether the plans, while limited to a handful of cities, are significant. They come weeks after top officials in Beijing signaled a major shift in policy to focus on absorbing excess housing supply in China and creating more public housing.

Analysts at the time said Beijing appeared to be setting the stage for rescue efforts that could range from unprecedented easing of home-buying restrictions to billions in state spending to buy up existing housing inventory. If the government can acquire a meaningful volume of unsold homes from developers, especially privately owned ones, that would resolve the issue of excess inventory and channel funds to cash-strapped developers, they said.

Morningstar analyst Jeff Zhang said Hangzhou may be wanting to pilot test the trade-in scheme in a district with a more imminent need for inventory clearance. With Dali following suit, “we expect more cities to ramp up government purchases of existing homes, particularly lower-tier ones that saw more significant home sales decline,” he said.

“Policy has clearly turned more encouraging,” Nomura analysts Jizhou Dong and Riley Jin said in a note, pointing in particular to a relaxation in home buying restrictions in top-tier cities in recent weeks. They added that they believe local governments now have limited further room to support the property sector, and that “it now comes to the central government to introduce meaningful measures,” such as the acquisition of unsold homes.

China’s property sector has been in a yearslong slump. A slowing economy and weak consumer sentiment have dragged sales of many property developers into sharp decline, pushing them into a liquidity crisis. Unable to tap debt markets, many developers have defaulted on loans and bond payments, with some going bankrupt.

Beijing has previously tried to revive the real-estate sector by providing citizens with cheaper home loans and by relaxing home-buying restrictions. However, these efforts have fallen short, prompting authorities to mention in last month’s Politburo meeting the shift to focusing on absorbing excess apartment supply as a way to resolve the property crisis.

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Aflac Is Buying a Stake in a Direct Lender, Getting a Piece of the Private Credit Boom

The insurance giant is acquiring 40% of Tree Line Capital Partners

Aflac AFL 1.37%increase; green up pointing triangle is acquiring a 40% stake in Tree Line Capital Partners, a private-credit shop focused on lending to small and medium-size companies, according to people familiar with the matter.

The details

The insurance giant is paying about $100 million for the stake, the people said. Aflac is buying existing shares in the company from Tree Line management as well as its private-equity backer, Stone Point Capital.

As part of the deal, Aflac is also making a multiyear commitment to help fund Tree Line with some of the investible cash the company collects in the form of insurance premiums from its customers, the people said.

Evercore and Berkshire Global Advisors advised on the transaction.

The rationale

Aflac was drawn to the high returns that private-credit firms have been racking up by lending to midsize businesses, people familiar with the company’s thinking said.

Tree Line’s loans are mostly made to private-equity-backed companies and come with collateral protection for the lenders in case things go wrong, the people added. By owning 40% of the firm, Aflac will also be able to earn income from dividends and benefit if the company grows in value, they said.

The context

The deal highlights the growing proximity between alternative asset managers, such as Apollo Global Management and KKR, and big insurance companies. Asset managers are looking for capital that they can deploy into new deals, while insurance companies need consistent returns so that they can pay their policyholders.

Alternative asset managers have acquired insurance companies, including Apollo’s purchase of Athene and KKR’s purchase of Global Atlantic. Insurance companies, meanwhile, are clamoring for ways to put their cash holdings to work in private credit.