WWD : L’Occitane Will Go Private

L’Occitane Will Go Private
The French beauty company has received enough support to delist from the Hong Kong Stock Exchange.

PARIS – L’Occitane International SA is moving ahead with plans to delist from the Hong Kong Stock Exchange.

In late April, Reinold Geiger, L’Occitane’s majority shareholder, initiated a 1.7 billion euro offer to acquire the 27.4 percent of the company he did not already own, with the backing of Blackstone. His offer valued the maker of Sol de Janeiro, L’Occitane en Provence and Elemis products at around 6 billion euros.

L’Occitane said in a statement Tuesday that 91.97 percent of disinterested shareholders had tendered their shares, which surpasses the threshold needed to move forward with a squeeze-out of shares not tendered to the share offer. Therefore, L’Occitane Holding SA, which is a wholly owned subsidiary of the group’s controlling shareholder, will acquire the remaining shares, leading to the final steps in L’Occitane’s privatization process.

“This transaction will provide our group with the flexibility to make longer-term business decisions,” Geiger said in the statement. “We remain committed to our brand-specific and geography-specific strategies. We firmly believe that this is in the best interests of our employees, business partners and stakeholders, who will benefit from our accelerated growth and enhanced competitiveness in the global skin care and cosmetics industry.”

The company plans to suspend its shares starting Aug. 7.

L’Occitane en Provence was founded in 1976 by Olivier Baussan, an entrepreneur from Manosque, France, 50 miles north of Marseille, who set up a small fragrance and soap facility with $4,000.

In 1994, Geiger became a minority shareholder in L’Occitane before taking it over in 1996, when he became the group’s chairman. The executive took the company public in 2010, raising more than $700 million.

Today, L’Occitane counts more than 3,000 doors in 90-plus countries. Other brands in its portfolio include Melvita and Eborian.

The company’s net sales in the fiscal year ending March 31 reached 25.4 billion euros, a 19.1 percent on-year increase. Its net income declined 18.6 percent to 93.9 million euros.

L’Occitane’s move to go private is countercurrent to some other beauty companies’ recent strategies, with Puig’s initial public offering in May, and Galderma in Switzerland and Douglas in Germany floating in March.

In April, L’Occitane said that a mix of industry dynamics — including its increasingly competitive environment — and pressures of operating as a listed company underlies the rationale for going private.

FT : GSK, Pfizer and Moderna face RSV vaccine sales slump

GSK, Pfizer and Moderna face RSV vaccine sales slump
Pharma groups could see almost threefold drop in demand due to US health official decision, says Airfinity

GSK, Pfizer and Moderna together face an almost threefold reduction in adult respiratory syncytial virus vaccine sales in the US, according to new forecasts, after a health committee narrowed its recommendation for the drug’s use.

The US market for RSV in elderly adults could shrink from $4.7bn a year by 2030 to $1.7bn, according to new analysis by data provider Airfinity, after a US Centers for Disease Control and Prevention committee restricted its endorsement to older patients and those most at risk, and opted not to recommend booster vaccines for adults.

GSK, Pfizer and Moderna have all recently launched vaccines for the cold-like condition that typically strikes in winter, which older adults and young children are particularly vulnerable to.

The CDC’s Advisory Committee on Immunization Practices in June recommended routine vaccinations for the over-75s and those aged 60-74 at increased risk of contracting severe RSV, compared with previous guidance that all adults aged over 60 should be able to receive a vaccine after consulting a doctor. The committee also delayed a decision on whether to expand the vaccine to at-risk 50 to 59-year-olds.

While CDC recommendations can be revised as more data on the vaccines becomes available, Airfinity expects RSV sales for elderly Americans to fall from a forecast $3.7bn to $2.2bn in 2024, according to the data shared with the Financial Times.

The recommendations “will likely stunt revenue growth in the US market unless new data can support [the case for] booster shots,” said Isabella Huettner, Airfinity’s lead analyst of the RSV market.

GSK’s Arexvy was the world’s first approved RSV vaccine, receiving backing from the US Food and Drug Administration in 2023, shortly before Pfizer’s Abrysvo treatment, which can also be given to pregnant women. Infants can receive Beyfortus, an antibody treatment developed by AstraZeneca and Sanofi.

Analysts consider Arexvy’s US rollout to have been a success, with the company quickly taking two-thirds of RSV vaccine sales in the US and earning blockbuster status within nine months by making more than $1bn in revenue. The company has forecast that Arexvy annual sales will peak above $3bn.

GSK had bet on an expansion of the jab’s use to at-risk over-50s to increase sales, but the ACIP delay has amounted to about $300mn in lost revenue this year, according to Airfinity. GSK, which reports second-quarter results next week, declined to comment on the figures.

ACIP said it needed more data to recommend wider use of the vaccine, after a small number of clinical trial participants developed Guillain-Barré syndrome, a rare condition affecting the immune system.

The ACIP decision in June surprised markets, leading to a 6 per cent drop in GSK’s share price. The RSV jab was Moderna’s second approved product. Shares in the biotech fell after data showed that protection from its recently approved mRNA-based vaccine waned more quickly than rival jabs by GSK and Pfizer.

Calling the decision “a blow” to Pfizer and GSK, Citi analyst Peter Verdult noted that the ACIP decisions were “largely driven by cost-effectiveness”. Arexvy’s list price is $280 per dose, compared with $295 for Abrysvo.

If manufacturers were to reduce list prices, then it was “likely” the RSV vaccination would be considered more cost effective, he added.

The companies should see further growth from increasing international sales, with the launch of RSV vaccines in Europe and Canada. But GSK suffered a further setback in June when the UK chose to use Pfizer’s Abrysvo jab for pregnant women and those over the age of 75 in this winter’s rollout.

Airfinity’s previous estimates of $4.7bn in sales per year had assumed an annual booster shot. If booster shots every two years were recommended, annual revenue for RSV vaccines would reach $6.6bn by 2030.

GSK said: “We have an extensive ongoing development plan for Arexvy and continue to see this exceptional vaccine as a significant long-term growth opportunity for GSK.”

Pfizer said it remained “well positioned in this competitive marketplace”. “The decision by the CDC’s ACIP . . . reinforces the importance of protecting adults over the age of 60 at increased risk for severe RSV disease,” said the New York-based drugmaker. Moderna declined to comment. 

>>> US After Hours Summary: TSLA -4.3%, CSGP -3.8%, V -2.9%, GOOG -1.3% lower on

After Hours Summary: TSLA -4.3%, CSGP -3.8%, V -2.9%, GOOG -1.3% lower on earnings; MANH +8%, STX +5.5%, ENPH +3.6%, TXN +3% higher on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MANH +8%, FTAI +5.7%, STX +5.5%, ENPH +3.6%, ADC +3.3%, TXN +3%, ENVA +2.7%, PKG +2.5%, RRC +2.4%, MTDR +2.1%, BDN +2%, AGR +1.3%, CB +1.1%, EQT +0.6%, MAT +0.5% (also CEO is confident that company will soon have a higher market value, according to Bloomberg), APAM +0.3%

Companies trading higher in after hours in reaction to news: SNDR +6.7% (to join S&P SmallCap 600), AVTR +5.6% (to join S&P MidCap 400), NUVB +4% (announces multiple updates for its taletrectinib program), VLN +4% (Value Base affirms 18.51% active stake (prior 15.09% passive stake); entered Board Nomination Agreement), WDC +2.5% (in sympathy with STX earnings), FTI +1.4% (awarded a substantial contract by Petrobras), ESEA +1.1% (announces 18-month charter contract), SLND +0.5% (completed a sale-leaseback transaction for three properties), QDEL +0.5% (moving to S&P SmallCap 600 from S&P MidCap 400), CTAS +0.4% (increases dividend; also increases share buyback auth by $1 bln), RIOT +0.3% (acquires Block Mining for $92.5 mln), GATO +0.2% (reports continued South-East Deeps extension drilling results), FLS +0.1% (acquires LNG pumping technology from NexGen Cryo), DOV +0.1% (launches new LT35A Air-Hydraulic Lifting Table)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: TSLA -4.3%, CSGP -3.8%, CNI -3.7%, V -2.9%, VBTX -2.3%, GOOG -1.3%, WFRD -1.3% (also authorizes new $500 mln share repurchase program; initiates dividend), VICR -0.9%, CALM -0.4%, COF -0.3% (also reports June card metrics), EGP -0.1%

Companies trading lower in after hours in reaction to news: GERN -12.3% (Chief Commercial Officer to depart), ALGM -6.7% (25 mln share offer, wherein funds will be used to repurchase shares from majority shareholder, Sanken Electric; files mixed shelf and files for common stock offering by selling shareholders; also provides guidance), ATKR -5.1% (CFO to depart, names new CFO), EL -2% (names new CFO), META -1.5% (in sympathy with GOOG earnings), SNAP -1.4% (in sympathy with GOOG earnings), RIVN -1.4% (in sympathy with TSLA earnings), GOEV -0.9% (files mixed shelf securities offering), PINS -0.8% (in sympathy with GOOG earnings), LDOS -0.4% (hackers leak internal docs stolen from the company, according to Bloomberg), LCID -0.4% (in sympathy with TSLA earnings)

>>> Index Changes: Avantor to join S&P MidCap 400; QuidelOrtho & Schneider Natio

Index Changes: Avantor to join S&P MidCap 400; QuidelOrtho & Schneider National to join S&P SmallCap 600
  • Avantor (AVTR) will replace QuidelOrtho (QDEL) in the S&P MidCap 400, and QuidelOrtho will replace Hibbett (HIBB) in the S&P SmallCap 600 effective prior to the opening of trading on Friday, July 26.
    • JD Sports Fashion is acquiring Hibbett in a deal expected to close soon pending final closing conditions.
  • Schneider National (SNDR) will replace U.S. Silica Holdings (SLCA) in the S&P SmallCap 600 effective prior to the opening of trading on Wednesday, July 31.
    • Apollo Global Management (APO) is acquiring U.S. Silica Holdings in a deal expected to close soon pending final closing conditions.

FT : Rolls-Royce boss warns of prolonged supply chain strains

Rolls-Royce boss warns of prolonged supply chain strains

The supply chain strains hampering the aerospace industry could persist for another two years, the head of Rolls-Royce has warned, in one of the bleakest assessments yet of the challenges facing manufacturers.

Tufan Erginbilgic, chief executive of the UK engineer whose engines power some of the world’s largest aircraft including the Airbus A350, said the industry was in the throes of “one of the worst supply chain environments it has ever experienced”. 

Companies were dealing with a range of issues, from shortages of skilled labour to parts. The supply crunch could last for another 18 to 24 months, he said at the Farnborough air show.

The industry had been among the hardest hit by the Covid pandemic only to bounce back sharply amid resurgent demand from airlines for new aircraft. Manufacturers and their suppliers, said Erginbilgic, were also “recovering to a moving target because the industry is still growing”.

Despite the supply chain problems, he said demand for air travel remained strong. The company is investing more than £1bn over the coming years to improve the durability and performance of its Trent family of engines which power widebody aircraft.

It is also working on a smaller version of its UltraFan engine demonstrator to explore technology for the narrow-body jet market.

Erginbilgic’s comments on the supply chain echo those of other industry executives at the air show, even as Airbus and Boeing notched up more orders from airlines. Airbus announced orders from Japan Airlines and Virgin Atlantic on Tuesday, while Boeing sealed a deal with Qatar Airways.

GE Aerospace on Tuesday raised its profit outlook for the full year but warned that shortages of materials had hit shipments of its engines.

The company said deliveries of its Leap engines, which power Airbus and Boeing narrow-body jets, were down 29 per cent in the second quarter to the end of June from the same period a year ago. 

Campbell Wilson, chief executive of Air India, which placed one of the biggest aviation orders globally last year from both Boeing and Airbus, said “we are talking a good couple of years” before the supply chain challenges are under control.

While Boeing has had production of its best-selling 737 Max aircraft capped by US regulators as it seeks to raise its manufacturing standards following the mid-air blow out of a section of one of its planes in January, Airbus has also had to push back plans to ramp up output. 

The European plane maker cut its annual profit outlook last month and warned of fresh supply chain snarls. It said it would deliver “around 770” commercial aircraft this year, down from a previous forecast of 800. 

The company also pushed back its target of producing 75 a month of its best-selling A320 family of jets from 2026 to 2027.

Airbus at the time singled out engine shortages from Pratt & Whitney as well as CFM International, both suppliers to the popular A320 family, among the challenges. 

Airbus has also launched an efficiency programme to help counter rising costs and boost productivity at its commercial aircraft business. Christian Scherer, head of commercial aircraft at Airbus, separately told the Financial Times on Monday, that demand for new aircraft remained strong. 

“The fact that our delivery rate is constrained by some supply chain issues . . . is frustrating because we should be surfing right now and enjoying, finally, the relief from these difficult years the whole industry has gone through,” said Scherer.

“Instead, the company is “running from one supply issue to another,” he added. 

With both P&W and CFM investing in their supply chains, Scherer said he expected these investments to “bear fruit early next year”. 

Tony Douglas, chief executive of Riyadh Air, said manufacturers were being more open and realistic about delivery delays. “There is a lot more honesty out there now. I think we have moved through the denial phase. There was a period of denial.”  

>>> US Close Dow -0.14% S&P -0.16% Nasdaq -0.06% Russell +1.02%

Closing Stock Market Summary
The equity market had a mixed showing today. The S&P 500 (-0.2%), Nasdaq Composite (-0.1%), and Dow Jones Industrial Average (-0.1%) closed with losses after trading slightly higher or slightly lower through the entire session.

Meanwhile, the Russell 2000 continued its recent outperformance, jumping 1.1% today. The small cap index is 9.6% higher this month and the S&P 500 shows a 1.7% gain in July.

Mixed responses to earnings news contributed to the mixed feeling in the market. UPS (UPS 127.68, -17.50, -12.1%) was among the losing standouts after missing earnings estimates. NXP Semiconductors (NXPI 262.30, -21.51, -7.6%), and Nucor (NUE 161.55, -1.79, -1.1%) were also among the notable losers following their quarterly results.

Spotify (SPOT 330.79, +35.34, +12.0%), Lockheed Martin (LMT 501.29, +26.70, +5.6%), and Sherwin-Williams (SWH 344.50, +22.15, +6.9%) were winning standouts following their reports.

The mixed disposition in the market also stemmed from some hesitation in front of the bulk of earnings season and following yesterday's solid rally.

Only three of the S&P 500 sectors registered gains -- materials (+0.4%), financials (+0.1%), and consumer discretionary (+0.02%) -- while the energy (-1.6%), utilities (-0.7%), and consumer staples (-0.3%) registered the largest declines.

The 10-yr note yield declined two basis points to 4.24% and the 2-yr note yield settled four basis points lower at 4.48%.
  • Nasdaq Composite:+19.9% YTD
  • S&P 500: +16.5% YTD
  • Russell 2000: +10.7% YTD
  • S&P Midcap 400: +10.0% YTD
  • Dow Jones Industrial Average: +7.1% YTD
Reviewing today's economic data:
  • June Existing Home Sales 3.89 mln (consensus 4.00 mln); Prior 4.11 mln
    • The key takeaway from the report is that sales activity slowed to levels last seen at the end of 2023, suggesting that elevated mortgage rates and low inventory are offsetting a seasonal activity boost that would be normally seen in the summer.

Wednesday's economic calendar features:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 3.9%)
  • 9:45 ET: flash July S&P Global U.S. Manufacturing PMI (prior 51.6) and flash July S&P Global U.S. Services PMI (prior 55.3)
  • 10:00 ET: June New Home Sales (consensus 640,000; prior 619,000)
  • 10:30 ET: Weekly crude oil inventories (prior -4.87 mln)

(ZH) Signs Of Severe Credit-Card And Auto-Loan Stress In Generation Z

Signs Of Severe Credit-Card And Auto-Loan Stress In Generation Z

The economy is slowing and that will hit the zoomers first and the hardest, especially renters...
Shaky Ground

The idea for this post comes from the Wall Street Journal article American Borrowers Are on Shakier Ground.
Years of higher inflation and interest rates have left consumers mired in debt, even as overall economy hums.
I dispute the Journal’s statement the “overall economy hums”.
If the economy was humming we would not see charts like I am about to present.
Unexpected Expenses
The report was updated May 21, 2024 but it it only through 2023. Zoomers and younger Millennials are in trouble.
Rot Starts at the Periphery
JPMorgan’s second-quarter profit declined 9% year-over-year to $13.1 billion. That figure excludes one-time items, including a $7.9 billion gain on an exchange of the bank’s shares of Visa.
Credit-card loans rose faster than spending at all three banks, a sign that more borrowers carried over balances month to month.
“When you really dig into what’s happening across different consumers, the folks on the lower end of the wealth or income spectrum are struggling more,” Wells Fargo Chief Financial Officer Mike Santomassimo said on a call with reporters.
JPMorgan’s credit-card arm—the biggest in the country—said charge-offs on loans rose by nearly two-thirds from a year earlier. The rise in part reflected a normalization from years of historically low levels, Chief Financial Officer Jeremy Barnum told reporter
JPMorgan CEO Jamie Dimon repeated his view that interest rates could wind up staying higher than some economists have forecast.
“Market valuations and credit spreads seem to reflect a rather benign economic outlook,” he said in prepared remarks. “But there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world.”
Auto Loans Plunging
The above chart and the next few are from the New York Fed Household Debt and Credit Report for 2024 Q1.
Are auto loans a sign of a humming economy? I think not.
Transition into Serious 90+ Auto New York Fed Quarterly Report
Transition into Serious 90+ Credit Cards New York Fed Quarterly Report
Maxed Out Borrowers
If you have maxed out your credit card there is about a 33 percent chance you are delinquent.
Who might that be?
Maxed Out Credit Card Users
The preceding two charts are from the New York Fed report Delinquency Is Increasingly in the Cards for Maxed‑Out Borrowers
Notably Gen Z has the highest delinquency transition rate, but Millennials were the only group whose delinquency exceeded their pre-pandemic rate.
Let’s return to the first chart, repeated for convenience.
Percentage of Consumers with Unpaid Bills by Homeownership Status
Over 25 percent of those who rent have unpaid bills! Over 10 percent have not paid their water, gas, or electric bills.
This isn’t humming. It’s the verge of disaster. And I have been talking about this setup all year.
Generational Homeownership Rates
Home ownership rates courtesy of Apartment List
The Fed does not see this freight train coming even though it is standing in the middle or the track facing the oncoming train. This is despite nearly all of the charts in this post are from Fed reports.
And most economists are as blind as the Fed.
Unemployment Rate by Age Group
Candidate Preference by Age Group
An amazing 41 percent of those 18-34 are for Trump with only 30 percent for Biden.
That’s an unprecedented 11 percentage point gap for Republicans. In 2020 this age group voted overwhelmingly for Biden.
I discussed the above poll and also candidate preference by race in Post-Debate USA Today-Suffolk Poll Has Grim News for President Biden
Please click on link for 11 charts.
So who are the renters that will decide the election?
Zoomers, millennials, and black renters. They are priced out of a home while watching rent go up at least 0.4 percent every month for 33 months. That string finally snapped in June with a 0.3 percent rise.