TheChek News Flow

Despite its small base, the market could grow at an annual rate of 15 to 25 percent for the next seven years and reach around 23 billion euros to 38 billion euros by 2030, according to a recent report from Barclays.

India, the world’s most populous country, is on track to become luxury‘s next frontier, according to a recent report from Barclays.

Despite its small base — India only accounts for around 2 percent of global luxury sales — Barclays estimates the market will quickly grow at an annual rate of 15 to 25 percent for the next seven years to reach between 23 billion euros and 38 billion euros, driven by a rising middle class.

Due to the country’s solid manufacturing and service sector growth, India’s gross domestic product is expected to expand by 7.5 percent in 2024, according to the World Bank.

However, various challenges still exist, such as income disparity, limited retail space, and a relatively lower appetite for luxury goods.

“Could India be the next China? Luxury brands, outside cosmetics, don’t seem to think so for now,” wrote the Barclays report. “Comments from brands have been very bearish so far, with LVMH CEO [Bernard Arnault] stating in 2023 that India is not a country where they can have a network of luxury shops due to too high a level of income disparity and too low a level of GDP per capita,” the report noted.

Despite a bearish outlook on China’s luxury growth momentum, Barclays said that country’s domestic luxury market is expected to expand from zero to 5 percent after a February market visit.

After a site visit to India in late November, Barclays noted that Indian shoppers tend to hold a more conservative view on luxury buys. “As a result, they may have a clear preference for watches and jewelry over soft luxury goods, as handbags are rarely seen as a long-term purchase,” the report said.

According to Barclays, Mumbai, New Delhi and Bengaluru are home to around half of India’s affluent population and boast 90 percent of the country’s luxury retail infrastructure.

New Delhi, India’s capital, is where the country’s old money lives and is home to Louis Vuitton‘s first store in the nation, which opened in 2003.

Mumbai is home to Jio World Plaza, India’s largest luxury shopping mall. Officially opened in November, the mall spans 750,000 square feet and is already home to key brands like Louis Vuitton, Dior, Gucci and Cartier.

The project was conceived by Isha Ambani, the daughter of Mukesh Ambani, India’s richest man. The operator of the mall is Reliance Industries Ltd., which is said to be on board to help fund a potentially $3 billion buyout of Neiman Marcus Group.

The tech and IT hub of Bengaluru, in the south of India, is quickly becoming a rising luxury hub. Its most prominent retail project is called Mall of Asia, which opened in October.

Looking ahead, French department store Galeries Lafayette plans to work with developer Aditya Birla to open in Mumbai and New Delhi later this and next year. In December, Christian Louboutin also forged a joint venture with Aditya Birla to enter the market.

In the hard luxury category, luxury watches will continue to enjoy outstanding performance, which has become a value-retaining status symbol for the newly minted tech millionaires. According to data from Ethos, a leading Indian watch retailer, the premium and luxury watch segment is growing at a 12.5 percent annual rate and is expected to reach 1.4 billion euros by 2025.

The fine jewelry segment will remain dominated by local players, with more than 50 percent of the market focused on traditional jewelry purchased for wedding occasions. However, Barclays believes that branded jewelry still has a chance. “We think that products with a strong differentiating factor and that could be seen as a clear social status indicator — including Cartier‘s Love and Just Un Clou products, Van Cleef Arpels‘ Alhambra line, the Bulgari B.zero1 collection — could have more chance to succeed in India,” said the report.

Based on feedback from mall operators, Barclays said Gucci is a brand name with high growth momentum in the Indian market.

“Beyond Gucci, we also hear positive feedback around Saint Laurent and Balenciaga. Outside of Kering, brands like Louis Vuitton, Chanel and Dior were also flagged as popular during our discussions,” said the report.

As for beauty, the premium category is expected to grow faster than mass on the back of the increased spending power of the middle class. In late 2023, Sephora forged a partnership with Reliance to run its 26 doors and further expand in India. Major local beauty retailers, such as Nykaa and Shoppers Stop, as well as Tira and Tata Clique, are expected to quickly increase their combined specialty retail footprint to over 500 stores over the next two to three years, compared to around 100 today, according to Barclays.

Discussions between the Czech billionaire’s EP Group and IDS have deepened after rejection of his initial £4.5bn offer

Czech billionaire Daniel Křetínský’s EP Group has intensified talks with the owner of the UK’s Royal Mail about an improved takeover bid, after his initial £4.5bn offer was rejected last month.

Discussions between EP and the board of International Distributions Services, owner of the former British postal monopoly, have deepened in the past couple of weeks, said people familiar with the matter.

It remains unclear if EP and IDS can strike a deal, the people cautioned. EP has until May 15 to make a firm offer for IDS under UK rules governing takeover bids for public companies.

Křetínský, a lawyer-turned-energy tycoon, is the largest shareholder in IDS, with a 27.5 per cent stake.

He has been a prominent dealmaker in the UK, making investments in supermarket chain J Sainsbury and London football club West Ham United.

EP said it had “submitted a non-binding indicative proposal” to IDS on April 9, after his interest in acquiring the business was first reported by the Financial Times.

However, IDS rejected the indicative offer of 320p a share, calling the timing of the bid “opportunistic” and saying it undervalued the business. Other IDS shareholders criticised the proposal.

IDS’s shares have been sliding over the past three years, and the stock last traded at the value of EP’s proposal in May 2022. The shares closed down almost 1 per cent at 280.2p on Friday.

Royal Mail faces challenges relating to the high cost of its comprehensive, UK-wide delivery service while it adjusts to a steep drop in the volume of letters it handles.

EP is contending with scrutiny from UK government officials and a heavily unionised IDS workforce.

The Communication Workers Union has said handing over ownership of “one of the UK’s most prestigious institutions” to a foreign equity investor “cannot be right”.

Křetínský had made clear his intention not to break up IDS by separating the lossmaking Royal Mail from the group’s profitable European logistics business GLS, or touch the group’s pension scheme surplus, some of the people briefed on the situation said.

Křetínský has also said he will maintain IDS’s investment-grade credit rating and will avoid compulsory redundancies.

Representatives for Křetínský and IDS declined to comment.

Officials warned of potential blackouts or interference with navigation and communication systems this weekend, as well as northern lights as far south as Northern California or Alabama.

Dramatic blasts of particles from the surface of the sun have prompted the National Oceanic and Atmospheric Administration to issue a severe geomagnetic storm warning.

As nuclear reactions occur on the sun, it routinely expels material from its surface. This type of space weather is what creates auroras, also known as the northern and southern lights, depending on the hemisphere in which you live. During the current geomagnetic storm, the aurora or northern lights may extend as far south as Northern California or Alabama.

But when the sun’s activity increases, the emissions it sends through the solar system can affect satellites orbiting close to Earth as well as infrastructure on the ground, leading to disruptions in navigation systems, radio communications and even the power grid.

The latest eruptions were first observed early on Wednesday morning, with at least five heading in the direction of Earth. The ejected material is anticipated to reach the planet’s atmosphere by Friday afternoon or evening. Effects could continue through the weekend.

“What we’re expecting over the next couple of days should be more significant than what we’ve seen, certainly so far,” Mike Bettwy, the operations chief at NOAA’s Space Weather Prediction Center, said at a news conference on Friday morning.

How strong is the current geomagnetic storm?

Giant explosions on the surface of the sun, known as coronal mass ejections, send streams of energetic particles into space. But the sun is large, and such outbursts may not cross our planet as it travels around the star. But when these particles create a disturbance in Earth’s magnetic field, it is known as a geomagnetic storm.

NOAA classifies these storms on a “G” scale of 1 to 5, with G1 being minor and G5 being extreme. The most extreme storms can cause widespread blackouts and damage to infrastructure on Earth. Satellites may also have trouble orienting themselves or sending or receiving information during these events.

The current storm is classified as G4, or “severe.” It is caused by a cluster of sunspots — dark, cool regions on the solar surface — that is about 16 times the diameter of Earth. The cluster is flaring and ejecting material every six to 12 hours, with the most recent activity occurring around 3 a.m. Eastern time on Friday.

“We anticipate that we’re going to get one shock after another through the weekend,” said Brent Gordon, chief of the space weather services branch at NOAA’s Space Weather Prediction Center.

How will the G4 storm affect people on Earth?

Unlike tornado watches and warnings, the target audience for NOAA’s announcements is not the public.

“For most people here on planet Earth, they won’t have to do anything,” said Rob Steenburgh, a space scientist at NOAA’s Space Weather Prediction Center.

Instead, a geomagnetic storm watch or warning indicates that space weather may affect critical infrastructure on or orbiting near Earth. It may introduce additional current into systems, which could damage pipelines, railroad tracks and power lines.

The goal of the announcements is to give agencies and companies that operate this infrastructure time to put protection measures in place to mitigate any effects.

“If everything is working like it should, the grid will be stable and they’ll be able to go about their daily lives,” Mr. Steenburgh said.

Will I be able to see an aurora?

It is possible that the northern lights may grace the skies over places that don’t usually see them this weekend. Your best bet to see them is in a place outside the bright lights of cities.

But Friday night could pose weather struggles in some places. The Northeast is likely to be blanketed in clouds.

There is a chance the skies may cooperate in the Midwest, but the hour would be closer to sunrise on Saturday. A storm system will be moving through the region, and if it swings through, there will be clear skies behind the storms. Your ability to catch a view will depend on your location and the exact timing of the storm system.

If the aurora reaches as far south as Alabama, which can happen with a G4 storm, night skies will be relatively clear in northern Alabama and Georgia. Areas in the southern Plains and Rockies might have relatively poor viewing conditions.

Farther west, the coastal states will remain relatively cloud-free, which could provide good viewing conditions. There may be high-level clouds in the mountains of Washington, but there is still a chance of clear skies.

If you are in a clear area, even well south of where the aurora is forecast to take place, snap a picture or record a video with your cellphone. The sensor on the camera is more sensitive to the wavelengths produced by the aurora and may produce an image you can't see with the naked eye.

Another opportunity could be viewing sunspots during the daytime, if your skies are clear. As always, do not look directly at the sun without protection. But if you still have your eclipse glasses lying around from the April 8 event, you may try to use them to try to spot the cluster of sunspots causing the activity.

Why is this happening now?

The sun’s activity ebbs and flows on an 11-year cycle, and right now, it is approaching a solar maximum. Three other severe geomagnetic storms have been observed so far in the current activity cycle, which began in December 2019, but none were predicted to cause effects strong enough on Earth to warrant a watch or warning announcement.

The cluster of sunspots generating the current storm is the largest seen in this solar cycle, NOAA officials said. They added that the activity in this cycle has outperformed initial predictions.

More flares and expulsions from this cluster are expected, but because of the sun’s rotation the cluster will be oriented in a position less likely to affect Earth. In the coming weeks, the sunspots may appear again on the left side of the sun, but it is difficult for scientists to predict whether this will cause another bout of activity.

“Usually, these don’t come around packing as much of a punch as they did originally,” said Shawn Dahl, a forecaster at NOAA’s Space Weather Prediction Center. “But time will tell on that.”

The company has also expressed interest in buying Net-a-porter, sources said, which could allow it bolster its distribution strategy.

Mytheresa is working with investment bankers on two fronts, sources told WWD — pitching investors on a buyout that would take the company private, and looking at acquiring Net-a-porter.

A buyout would let the Munich-based Mytheresa rev up its operations away from the glare of Wall Street. And acquiring Net-a-porter, a possibility first reported by The Financial Times, would bolster the company’s operations significantly as it currently ships out of Germany, while Net-a-porter has a complementary distribution system in the U.S. and Asia.

Mytheresa, which is said to be working with bankers at Morgan Stanley and B. Riley as it explores its options, isn’t the only player interested in Net-a-porter.

Sources said private equity company Bain Capital made a bid to buy Net-a-porter in Geneva recently and that the members-only off-price fashion player BestSecret has expressed interest in Yoox side of the business. Compagnie Financière Richemont plans to sell its long troublesome Yoox Net-a-porter operation this year, after its previous deal to dispose of the business fell apart during Farfetch’s meltdown.

With Yoox Net-a-porter slated for sale, Matches stripped down to IP in administration, and Farfetch tucked into Coupang, Mytheresa is one of the few solid players left standing in the luxury e-commerce space.

And the competition looks to be bulking up, with Saks owner HBC in late-stage talks to buy Neiman Marcus and combine the two businesses.

Fashion loves e-commerce, but digital multibrand luxury has proven to be a particularly treacherous space lately, hampered by both the complexities of selling, shipping and accepting returns online, but also competing with the brands’ own websites.

But Mytheresa, which specializes in pinnacle luxury products, has been successfully navigating the market by sticking to that niche.

The company’s third-quarter results are due out Wednesday and during a sneak peek last month Mytheresa said net sales would increase by 15 to 18 percent to 230 million euros to 235 million euros. The company’s adjusted earnings before interest, taxes, depreciation and amortization margin is slated to rise to 3 to 4 percent, up from 1.6 percent a year earlier.

“We are extremely pleased with the strong performance in a rapidly consolidating marketplace,” said Michael Kliger, Mytheresa’s chief executive officer, in a statement at the time. “The results underscore that Mytheresa is not just a luxury e-commerce platform. We build a community for luxury enthusiasts and create desirability through digital and physical experiences. This makes us the winner in an otherwise still-tough market environment.”

But Mytheresa is still not connecting on Wall Street, which has developed something of an aversion to e-commerce since the company staged its IPO in January 2021. While Mytheresa’s market capitalization neared $3 billion shortly after its offering, that has fallen to about $369 million. The stock traded up 1 percent to $4.35 in midday trading on Friday.

That leaves the business ripe for some kind of a deal, to either pique the interest of traders or exit and and build away from the spotlight of Wall Street.

In a statement to WWD, the company said: “Mytheresa is constantly evaluating opportunities to grow our business, which may include M&A activities from time to time. It is our policy not to comment on potential M&A activities, including whether or not any potential M&A activities are under consideration at all.”

Morgan Stanley, B. Riley, Richemont, Bain and BestSecret all declined to comment.

Agreement worth up to $1.2bn includes plan for combined flu and Covid shots

Shares in Novavax doubled after Sanofi struck a licensing deal worth up to $1.2bn to commercialise the struggling Covid-19 vaccine maker’s coronavirus jab and use the technology to develop its own combined shot with flu.

Novavax shares were up about 100 per cent in Friday afternoon trading in New York at $8.86, moderating from a gain of as much as 146 per cent earlier in the session, following the announcement. The agreement also prompted the US biotech to remove a “going concern” notice that was issued a year ago and had put pressure on the stock.

The partnership strengthens Sanofi, one of the world’s largest vaccine makers by sales, in the post-pandemic Covid jab market, where pharmaceutical groups are increasingly focused on combined shots against two or more infectious diseases.

Under the agreement, Paris-based Sanofi would lead the sales push of Novavax’s Covid jab from next year in most countries and have the rights to combine the US biotech’s protein-based vaccine technology with its flu shots and other infectious disease jabs, the companies said on Friday.

Novavax will receive an upfront payment of $500mn in cash and an equity investment, and will stand to receive the remaining $700mn upon the completion of certain regulatory and development milestones.

Sanofi will take a roughly 5 per cent stake in Novavax. Novavax will also benefit from a double-digit percentage of royalties from the sales of its Covid jab as well as any combined shot using its technology, but Sanofi will take the majority of revenues.

“We’re excited by the prospect of combining Novavax’s adjuvanted Covid-19 vaccine that has shown high efficacy and favourable tolerability, with our rich portfolio of differentiated flu vaccines that have demonstrated superior protection against flu and its serious complications,” said Jean-François Toussaint, who heads Sanofi’s vaccine research and development.

Touissant said the combined shot would offer patients “enhanced convenience and protection against two serious respiratory viruses”. Sanofi had a Covid booster vaccine approved by the European Medicines Agency in 2022 but it has struggled to make a dent in the market.

The licensing agreement caps a tumultuous period for Novavax, whose market value boomed to more than $40bn at the height of the pandemic, propelled by investor excitement over its Covid shot. But it has since had most of its value wiped out.

The vaccine maker has undertaken a $1.1bn cost-cutting drive in the past year to stave off a possible bankruptcy and has faced pressure from an activist investor for a board shake-up.

Novavax suffered from a series of mis-steps with the launch of its Covid vaccine, which was late to market because of a sluggish approval process. It then faced collapsing demand as governments withdrew from procurement deals.

Its vaccine, a more traditional protein-based formulation combined with an adjuvant to boost its effectiveness, has been pitched to patients as a counterpoint to mRNA jabs from BioNTech/Pfizer and Moderna that have inspired vaccine scepticism over rare side effects. But sales have lagged.

“Novavax is now in a stronger position to refocus our efforts on leveraging our technology platform and novel adjuvant,” said John Jacobs, Novavax chief executive.

Novavax will still be allowed to press ahead with the development of its combined Covid-flu shot, which is set to enter late-stage trials in the second half of this year.

Apple plans to announce that it will bring generative A.I. to iPhones after the company’s most significant reorganization in a decade.

Apple’s top software executives decided early last year that Siri, the company’s virtual assistant, needed a brain transplant.

The decision came after the executives Craig Federighi and John Giannandrea spent weeks testing OpenAI’s new chatbot, ChatGPT. The product’s use of generative artificial intelligence, which can write poetry, create computer code and answer complex questions, made Siri look antiquated, said two people familiar with the company’s work, who didn’t have permission to speak publicly.

Introduced in 2011 as the original virtual assistant in every iPhone, Siri had been limited for years to individual requests and had never been able to follow a conversation. It often misunderstood questions. ChatGPT, on the other hand, knew that if someone asked for the weather in San Francisco and then said, “What about New York?” that user wanted another forecast.

The realization that new technology had leapfrogged Siri set in motion the tech giant’s most significant reorganization in more than a decade. Determined to catch up in the tech industry’s A.I. race, Apple has made generative A.I. a tent pole project — the company’s special, internal label that it uses to organize employees around once-in-a-decade initiatives.

Apple is expected to show off its A.I. work at its annual developers conference on June 10 when it releases an improved Siri that is more conversational and versatile, according to three people familiar with the company’s work, who didn’t have permission to speak publicly. Siri’s underlying technology will include a new generative A.I. system that will allow it to chat rather than respond to questions one at a time.

The update to Siri is at the forefront of a broader effort to embrace generative A.I. across Apple’s business. The company is also increasing the memory in this year’s iPhones to support its new Siri capabilities. And it has discussed licensing complementary A.I. models that power chatbots from several companies, including Google, Cohere and OpenAI.

An Apple spokeswoman declined to comment.

Apple executives worry that new A.I. technology threatens the company’s dominance of the global smartphone market because it has the potential to become the primary operating system, displacing the iPhone’s iOS software, said two people familiar with the thinking of Apple’s leadership, who didn’t have permission to speak publicly. This new technology could also create an ecosystem of A.I. apps, known as agents, that can order Ubers or make calendar appointments, undermining Apple’s App Store, which generates about $24 billion in annual sales.

Apple also fears that if it fails to develop its own A.I. system, the iPhone could become a “dumb brick” compared with other technology. While it is unclear how many people regularly use Siri, the iPhone currently takes 85 percent of global smartphone profits and generates more than $200 billion in sales.

That sense of urgency contributed to Apple’s decision to cancel its other big bet — a $10 billion project to develop a self-driving car — and reassign hundreds of engineers to work on A.I.

Apple has also explored creating servers that are powered by its iPhone and Mac processors, two of these people said. Doing so could help Apple save money and create consistency between the tools used for processes in the cloud and on its devices.

Rather than compete directly with ChatGPT by releasing a chatbot that does things like write poetry, the three people familiar with its work said, Apple has focused on making Siri better at handling tasks that it already does, including setting timers, creating calendar appointments and adding items to a grocery list. It also would be able to summarize text messages.

Apple plans to bill the improved Siri as more private than rival A.I. services because it will process requests on iPhones rather than remotely in data centers. The strategy will also save money. OpenAI spends about 12 cents for each word that ChatGPT generates because of cloud computing costs.

(The New York Times sued OpenAI and its partner, Microsoft, in December for copyright infringement of news content related to A.I. systems.)

But Apple faces risks by relying on a smaller A.I. system housed on iPhones rather than a larger one stored in a data center. Research has found that smaller A.I. systems could be more likely to make errors, known as hallucinations, than larger ones.

“It’s always been the Siri vision to have a conversational interface that understands language and context, but it’s a hard problem,” said Tom Gruber, a co-founder of Siri who worked at Apple until 2018. “Now that the technology has changed, it should be possible to do a much better job of that. So long as it’s not a one-size-fits-all effort to answer anything, then they should be able to avoid trouble.”

Apple has several advantages in the A.I. race, including more than two billion devices in use around the world where it can distribute A.I. products. It also has a leading semiconductor team that has been making sophisticated chips capable of powering A.I. tasks like facial recognition.

But for the past decade, Apple has struggled to develop a comprehensive A.I. strategy, and Siri has not had major improvements since its introduction. The assistant’s struggles blunted the appeal of the company’s HomePod smart speaker because it couldn’t consistently perform simple tasks like fulfilling a song request.

The Siri team has failed to get the kind of attention and resources that went to other groups inside Apple, said John Burkey, who worked on Siri for two years before founding a generative A.I. platform, Brighten.ai. The company’s divisions, such as software and hardware, operate independently of one another and share limited information. But A.I. needs to be threaded through products to succeed.

“It’s not in Apple’s DNA,” Mr. Burkey said. “It’s a blind spot.”

Apple has also struggled to recruit and retain leading A.I. researchers. Over the years, it has acquired A.I. companies led by leaders in the field, but they all left after a few years.

The reasons for their departures vary, but one factor is Apple’s secrecy. The company publishes fewer papers on its A.I. work than Google, Meta and Microsoft, and it doesn’t participate in conferences in the same way that its rivals do.

“Research scientists say: ‘What are my other options? Can I go back into academia? Can I go to a research institute, some place where I can work a bit more in the open?’” said Ruslan Salakhutdinov, a leading A.I. researcher, who left Apple in 2020 to return to Carnegie Mellon University.

In recent months, Apple has increased the number of A.I. papers it has published. But prominent A.I. researchers have questioned the value of the papers, saying they are more about creating the impression of meaningful work than providing examples of what Apple may bring to market.

Tsu-Jui Fu, an Apple intern and A.I. doctoral student at the University of California, Santa Barbara, wrote one of Apple’s recent A.I. papers. He spent last summer developing a system for editing photos with written commands rather than Photoshop tools. He said that Apple supported the project by providing him with the necessary G.P.U.s to train the system, but that he had no interaction with the A.I. team working on Apple products.

Though he said he had interviewed for full-time jobs at Adobe and Nvidia, he plans to return to Apple after he graduates because he thinks he can make a bigger difference there.

“A.I. product and research is emerging in Apple, but most companies are very mature,” Mr. Fu said in an interview with The Times. “At Apple, I can have more room to lead a project instead of just being a member of a team doing something.”