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The company attributed the expected loss partly to weaker performance at its joint venture business

Dongfeng Motor’s shares slumped after the Chinese automaker said it expects to swing to loss for 2023 amid intensifying competition.

Shares were 11% lower at 3.01 Hong Kong dollars (US$0.38) at the Monday midday break, taking losses this year to 23%.

Wuhan, China-based Dongfeng, a manufacturing partner of Stellantis and one of China’s “big four” state-run automakers, said in a filing ahead of the trading week that it expects to post a net loss of up to 4.0 billion yuan (US$556.6 million) for 2023, from net profit of CNY10.265 billion in 2022.

The company attributed the expected loss partly to weaker performance at its joint venture business, whose sales volume fell by 16% in 2023.

“The market space for the joint venture non-premium brands has been significantly squeezed and the prices of the products have been declining,” the company said in the filing. Dongfeng has a number of joint ventures, including Dongfeng Nissan and Dongfeng Honda.

Dongfeng also cited higher research and development costs and other expenses for its new-energy business behind the likely loss.

Industry vehicle sales in China fell sharply in February amid an intensifying price war. Retail sales of passenger cars declined 46% from January, the China Passenger Car Association said Friday.

Less than two years into the job, Burberry CEO Jonathan Akeroyd is feeling the heat. Gerry Murphy, chairman of the London-based company, is already interviewing potential candidates to replace the 57-year-old British executive, several senior industry executives said, citing head-hunters.

“Gerry is going out and talking to people about potential replacements for Jonathan,” the CEO of a British fashion brand told Miss Tweed. Three other fashion executives and two head-hunters said the same thing in the course of the past three weeks.

Burberry would not comment directly on the search. A spokesman for the company said: “In the normal course of business we would look at succession planning for board roles as they reach term. Jonathan enjoys the full backing of the board.” A source close to Burberry said no official mandate had yet been given to a head-hunting firm.

However, that does not preclude Burberry’s chairman from having informal discussions with potential candidates recommended by head-hunting firms, the fashion executives said. “It’s happening a bit too soon in my view, but I’m afraid the board is already thinking of hiring a new CEO for the company,” the head of one major European fashion company told Miss Tweed on condition of anonymity.

Murphy is catering to investors’ frustration about Burberry’s turnaround, the executives said. Patience is running out. The brand has been a constant work in progress for too many years. But if Murphy and the majority of Burberry’s board members had any experience in fashion and luxury, they would know that it takes time to revamp a brand. It does not happen overnight. And Burberry is a big ship to turn around.

Burberry’s 68-year-old chairman may want to find a replacement for Akeroyd but maybe it’s him who needs to go, along with the majority of Burberry’s board who know and understand little about fashion and luxury, industry sources suggest.

Before joining Burberry in 2018, Murphy worked for the private equity group Blackstone. He was also CEO of DIY group Kingfisher, Carlton Communications, logistics company Exel and Greencore Group, a ready-to-eat food manufacturer. In September 2023, Murphy became chairman of the supermarket group Tesco and resigned as chairman of Tate & Lyle, an international food company. Since he joined Burberry, Murphy has always been doing other things than just focusing on building the British brand.

Of Burberry’s 12-strong board of directors, there are only two people with backgrounds in fashion: Ron Frasch, who ran Saks Fifth Avenue and before that Bergdorf Goodman, and Alessandra Cozzani, who joined in September 2023 from Prada where she spent 20 years and was group chief financial officer. All the others have experience in other areas from women’s rights to corporate governance to finance.

Maybe it’s time the company hired board members with real experience in fashion and luxury and helped it on building the brand’s desirability – instead of topics like the environment, sustainability and inclusivity. Luxury is about selling a good story to customers, about selling them a dream – not about saving the planet or empowering women. That comes after. If the company’s board had any knowledge of the industry, they would put less pressure on Akeroyd, who ran Versace and McQueen for many years before he joined Burberry.

“Burberry is a big company with an old-fashioned board full of PLC types who are stuck in their ways. It’s not easy to change anything there,” one London-based fashion retailer said. If Burberry was taken private and got rid of its crowded board of directors and of bad habits like outlets, it could become the luxury giant the country deserves, industry experts say.

PROMISES

The market’s scrutiny and constant demands for revenue and profit increases make it impossible for Burberry to stop selling shiploads of products at a discount to artificially boost sales. Being private would also allow it to focus on strengthening its UK-based supply chain – as being vertically integrated is the name of the game in luxury today - and building brand equity.

For six years now it’s been promises, promises and little delivery. Annual revenue has been stagnating while that of many industry peers has soared. In the year to April 1, 2023, Burberry’s annual revenue reached £3.094 billion, up from £2.73 billion in the year to March 30, 2019. Comparatively, brands like Dior, Loewe, Prada, Chanel and Loro Piana recorded double-digit increases in the post-pandemic years of 2021 and 2022. In October, LVMH said Dior’s size had been multiplied by three in the past seven years, hinting that such growth could not go on forever.

In January, Burberry issued a profit warning and reported a 7 percent drop in sales in the 13 weeks to Dec. 30 which it blamed on tough market conditions. Meanwhile, bigger rivals such as Dior, Louis Vuitton and Prada posted growth of 9-10 percent for the quarter to Dec. 31.

Some investors are losing faith in Burberry’s brand elevation strategy and medium-term target of £4 billion revenue. The company’s share price has more than halved since its all-time peak of 2,656 pence in April 2023. The stock closed on Friday at 1,258 pence.

CHECKERED HISTORY

Between 2018 and 2022, Burberry was led by two Italians, CEO Marco Gobbetti and designer Riccardo Tisci – a duo that did not produce great results. Gobbetti focused on topics such as sustainability instead of brand positioning and storytelling. Meanwhile, Tisci turned Burberry into an urban, gender-fluid sporty brand and disconnected it from its British roots and timeless elegance heritage. As a result, even Britons lost interest in the brand.

Gobbetti left without finishing the job and now it looks like Akeroyd is not going to be given enough time to finish his either. Burberry’s chairman is becoming as impatient as shareholders. If Murphy was a seasoned fashion executive and the company was controlled by an entity or a family that had long-term investment horizons, he would not care about what investors think and invest in the brand so that 10 or 20 years from now, it would be more desirable than it is today. One of Burberry’s main problems is that it is 100-percent owned by institutional investors who focus on the short term. Luxury is a long-term game. LVMH CEO Bernard Arnault knows this too well. And that’s part of the reason why LVMH is the best in class in the industry and the No.1 group in terms of market capitalization.

HIGH HOPES

In 2022, Gobbetti resigned from Burberry after being offered a lucrative package to run Italy’s Ferragamo, a brand that published dire results again this week for reasons Miss Tweed explained in October. A few months after he joined Burberry, Akeroyd appointed designer Daniel Lee. Lee had successfully revamped Bottega Veneta and introduced hugely popular products such as the bright green Pouch bag and Lido mules. He also did brash things such as closing down Bottega Veneta’s social media accounts in 2021 – months before he was sacked from the brand for outrageous behavior.

The plan was for Lee to give Burberry new momentum by turning it into a cool brand even Britons would want to wear. But somehow Lee’s magic has not worked yet. His products started hitting the stores last September, 11 months after his arrival, but buyers say they’ve not been selling like hot cakes.

“Lee’s arrival has not really created much traction in terms of sales,” one London-based online wholesaler told Miss Tweed.

Lee’s runway show last fall and advertising campaign shot on the rocky Isle of Skye in Scotland were well received by the press. The collection presented during London Fashion Week in February also got positive reviews, with buyers and journalists praising his chocolate brown and beige looks. Buyers say Lee clarified the brand’s message. He also brought back the equestrian knight – first introduced in the early 20th century – and tinted it in bright blue. It’s now everywhere, from boutiques to ad campaigns. Color is definitely one of Lee’s strengths. But his eye for the right hue and his overall creativity have somehow not been enough to create buzz and stimulate demand, particularly for Burberry’s handbags, on which the company pinned high hopes since that’s where the fat is in fashion.

Burberry is mainly known for its beige, black and red check and its £2,000 trench coats. Its biggest business is in countries such as China and South Korea, where consumers snap up its scarves, trenches and shirts featuring its famous tartan at discount prices. That’s one of Burberry’s biggest problems. Burberry derives a significant proportion of revenue from outlets not only in Asia but also in North America and Europe.

When shoppers see Burberry’s products marked 40 percent or 60 percent off, they cannot believe it’s a luxury brand. The company routinely refuses to divulge what percentage of revenue comes from outlets. Some analysts say it is as much as 30 percent. Also, shooting itself in the foot, Burberry had to get rid of Tisci’s past collections, selling them at big discounts, a move that further eroded the brand’s perceived exclusivity.

STRATEGY

Lee’s marketing and designs may be strong, but there have been some execution and strategy issues. For starters, Burberry released last fall a new collection of bags priced at £2,500 – or £1,000 more than what its bags usually cost. The timing was unfortunate. Consumers in the past year have been focusing on value for money and have been reluctant to splurge on brands without the cachet of a Chanel, a Dior or a Loewe. “When you sell £2,000 raincoats, other products should be less expensive, not more expensive,” explained the managing director of one big French leather goods maker based in Paris. “For example, if I buy an expensive suit at a menswear brand, the shoes should not be as expensive, otherwise why buy them from this brand? I get better value for money from more legitimate Italian or French shoe brands. Slapping a high price on a product does not mean it’s luxury. Consumers are not stupid. Burberry should not behave like it’s Chanel because it’s not.”

Of course, it takes time to get products to markets – particularly for Burberry, whose supply chain is spread out around the world. Still, the company could have foreseen consumer trends 18 months ago, when interest rates started to rise and consumers were tightening their purse strings.

“Burberry has not figured out yet how to build a strong story around its handbags,” one Paris wholesaler told Miss Tweed this week. Yet, Lee’s new collection of bags carry names that fit its identity and heritage: the Chess, the Knight and the Shield. But their shapes are not particularly compelling, fashion critics say.

Also, you can’t find them easily on the brand’s website. They don’t jump at you when you log on to the home page. Nor do you see much of Lee’s videos and ad campaigns. The website – which is a brand’s main shop window – is difficult to navigate and you quickly end up with endless lists of products. There is little quality editorial content on it.

SENSE OF HUMOR

Some critics would like to see Burberry leverage one of Britain’s main cultural assets: its sense of humor. There isn’t much lightness and humor in Lee’s world. You find it more with brands such as America’s Thom Browne (part of Zegna Group), France’s Hermès and Britain’s Paul Smith.

Other experts complain about the fact that Burberry does not dominate the menswear category in Britain. It should be the go-to place for City types to get a nice suit, shirt or jacket. Instead, they go to Italian brands such as Zegna, Loro Piana or Brunello Cucinelli. It’s a shame considering Britain’s heritage in tailoring, with London’s famous Savile Row and prestigious brands such as Gieves & Hawkes, now in the hands of Frasers Group. Britain is where dandyism was born. Burberry used to be the reference for coats. Back in 1965, one in five coats exported from Britain was a Burberry product – the brand says so on its website.

In the UK, Burberry has not managed to woo women with fashionable designs and it has put off ordinary men with overly edgy clothes. “Burberry should be the ultimate reference in menswear but it’s not,” one London wholesaler said. Perhaps it should split its design team. Keep Daniel Lee for women and appoint a designer for menswear who can look after those millions of men who just want to look elegant without too many fashion bells and whistles. Dunhill may hold the record in Britain in terms of accumulated losses but it’s doing a much better job catering to those men who just want to look elegant and refined.

Bitcoin bulls are not the bigger fools 

The most popular cryptocurrency is starting to look like more than a passing fad

Ruchir Sharma

The writer is chair of Rockefeller International

Once dismissed as fanatics, the bitcoin bulls must be feeling vindicated. They made an accurate call on the cryptocurrency’s potential for gains — witness the staggering rally under way — and were right, at least in part, for the right reasons. 

When bitcoin was all the rage at the start of this decade, many serious investors and traditional economists spurned it as a useless fad — even a fraud. Their scorn, seemingly confirmed by its crash in 2022, persists today while the currency separates itself from the pack. 

Back in 2021, bitcoin was often grouped alongside other favourites of the day-trading crowd, such as unprofitable tech and meme stocks. Today those other bubblets are trading on average at half their peaks, while bitcoin recently hit an all-time high. It is extremely unusual for a bubble to burst and then recover to reach new heights so quickly, and suggests that something real and sustainable is going on.  

Bitcoin’s comeback is remarkable, as well, for defying the general shape of the current bull market, which is heavily concentrated in the Big Tech stocks. Investors have taken the tech heavyweights seriously throughout, perhaps even more so now that they are seen as the giants most likely to dominate the future of artificial intelligence. Bitcoin gets no boost from AI mania.   

The bitcoin bulls have been proved mostly right about its prospects as a long-term investment — and, in this regard, as the king of the cryptos. Since the low point in late 2022, its price is up around 300 per cent, more than all but one (solana) of the other top 10 cryptos. Moreover, it is growing fast from a much larger base: with a market cap of more than $1.3tn, bitcoin is now three times larger than its closest competitor (ethereum). Of the 100 largest cryptos, five are at or near all-time highs — bitcoin and four others that are specks in comparison.

Sceptics doubted that bitcoin could ever be taken seriously while its price was swinging so wildly. But its volatility has been dropping sharply, according to Bloomberg, and is at historic lows — nearly five times less volatile than at the dizzy highs of the past decade. It is, though, still less safe as a currency than the dollar (which is seven times less volatile) or as an investment than gold (nearly four times less volatile).    

The fundamental story has not confirmed the bulls’ case for bitcoin in every way. They expected that, lifted by its popularity among the young, it would become the new “digital gold”. That’s still a dream. Gold has been more than holding its own, trading at all-time highs and far above its fair value based on inflation expectations. To diversify away from the dollar, central banks worldwide are buying gold, not bitcoin, at a record pace.   

More significantly, bitcoin is far from confirming the vision that it would emerge as a medium of exchange. A global index of “grassroots” crypto usage shows the adoption rate in general has fallen by about 60 per cent from the recent peak in 2021. Countries that are still rapidly adopting cryptocurrencies tend to be troubled ones with beleaguered national currencies, such as Ukraine and El Salvador.  

Bitcoin accounts for less than 10 per cent of the transactions in cryptocurrencies worldwide. Some 70 per cent of bitcoin accounts have been dormant for a year, suggesting people are buying the currency to hold as an investment, not to use for purchases at Starbucks. In the few places where people use cryptocurrencies for commercial transactions, they are turning to stablecoins, which were designed to track hard currencies and trade at a steady price.   

Nonetheless, trends favour the bulls. They had said that bitcoin would be propped up by the inherent limits on its supply. The output of bitcoin “mines” halves every four years, with the next cut coming in April. That is a big driver of the current rally. 

Many big institutions now see the cryptocurrency as a legitimate investment. In recent years, they have been increasing their holdings at an average rate in the strong double digits. In January, following approval by the US Securities and Exchange Commission, 11 of them opened new bitcoin ETFs to the general public, and that market is on course to grow from $50bn now to $300bn in 2025. 

Bitcoin increasingly looks more like an asset with staying power than a passing fad. Froth is a feature of any runaway bull market but for now it is the so-called fanatics, not the sceptics, who have good reason to celebrate. There is an old Wall Street saying for moments like this: only the fools are dancing, but the bigger fools are watching.

Dealmaking slowdown leaves private equity with record unsold assets

Bain & Co report reveals how rapidly the industry has grown as well as the challenges created by higher interest rates

Private equity groups globally are sitting on a record 28,000 unsold companies worth more than $3tn, as a sharp slowdown in dealmaking creates a crunch for investors looking to sell assets. 

The numbers, revealed in consultancy firm Bain & Co’s annual private equity report, show how rapidly the industry has grown over the past decade, as well as the challenges it faces from higher interest rates that have increased financing costs. 

“It may be another two to three years before the money starts to come back [to investors],” Hugh MacArthur, chair of Bain’s private equity practice, told the Financial Times. “It’s probably the number one concern in the marketplace right now.”

Last year, the combined value of companies that the industry sold privately or on public markets fell 44 per cent on 2022 to its lowest level in a decade. 

The decline in value was even bigger where private equity firms sold portfolio companies to rivals, a practice that makes the industry look like a potential “pyramid scheme”, according to one critical investor.

The value of companies sold to other buyout groups fell by 47 per cent last year, with a mismatch in opinion over how much the assets were worth being the main reason why. 

More than 40 per cent of the companies waiting to be sold are at least four years old, the Bain report found, suggesting their owners should be getting ready to sell. Private equity firms generally own portfolio companies for three to five years, though in some cases it can be longer.

“Half of that $3.2tn should be in the window of being sold,” MacArthur said. “It’s going to be a multiyear issue.”

Private equity’s need for liquidity — to pay out investors that want to exit — is difficult to meet when assets are hard to sell.

This has prompted the industry to use alternative money-raising tactics, including “net asset value” financing — loans secured against typically highly indebted portfolio companies — and transferring companies to new internal funds. This can allow in new investors while others exit. 

NAV loans in particular are under more scrutiny from investors as they have become more common. The Institutional Limited Partners Association, an industry body that represents professional private equity investors, is working on draft recommendations to obtain more disclosure about when they are used and their risks. 

The problems buyout groups are having with selling assets is leading to a divergence in fortunes when they try to raise new money from investors. 

“It was truly a year of haves and have-nots,” the Bain report said. Just 20 funds accounted for more than half of the $448bn raised by private equity, with investors concentrating on firms with records of returning cash to their backers. 

The “secondaries” market — of private equity investors buying and selling existing stakes in funds and PE firms moving assets from older to new funds — was another bright spot. 

The amount of money raised in the secondaries market nearly doubled last year, with firms including Blackstone and Lexington Partners both raising more than $20bn each. 

There are also some signs that the traditional IPO exit route is making a comeback.

Last week, German beauty retailer Douglas, a business backed by private equity group CVC Capital Partners, announces plans to list in Frankfurt seeking a valuation of about €6bn. 

EQT-backed dermatology company Galderma also announced its intention to raise $2.3bn in an IPO on the Swiss stock exchange, at a valuation of around $20bn. 

There have also been a few examples of assets trading between peers including the sale of a stake in software company Cotiviti by Veritas Capital to KKR in a deal valuing the business at $11bn.

Companies have raised $3.2bn since January, more than double last year, but challenges remain

Europe’s market for initial public offerings has made its strongest start to a year since the pandemic, as new highs for stocks and the prospect of interest rate cuts raise hopes for a sustained recovery in listings.

Companies have raised $3.2bn in European IPOs since January, more than double the amount over the same period last year, a performance that puts the market on track for the best first quarter since 2021, according to data from the London Stock Exchange Group. 

The market was given fresh momentum last week after two private-equity owned companies set out IPO plans in a bid to take advantage of the more benign conditions.

Germany beauty retailer Douglas, owned by CVC, is aiming to raise €1.1bn on the Frankfurt stock exchange and is seeking a valuation of €6bn. Dermatology group Galderma, controlled by Swedish buyout group EQT, revealed it is seeking to raise $2.3bn in an IPO on the Swiss bourse.

“We are at the early stage of a recovery in the IPO cycle,” said Suneel Hargunani, the co-head of equity capital markets for Europe, the Middle East and Africa at Citigroup. “Confidence will build on a deal by deal basis.”

Management teams and bankers have taken confidence from several major European stock indices, including Germany’s Dax and France’s CAC 40, hitting record highs this year. The broad Stoxx Europe 600 index is up 5 per cent this year and has climbed by almost a fifth since the start of 2023.

With the exception of 2021, when the listings market on both sides of the Atlantic was galvanised by the effect of interest rate cuts, European IPOs have raised more this quarter than at any comparable point since 2015, according to LSEG data.

But bankers caution that IPOs will need to be well received if the market is going to build further momentum.

“Aftermarket and pricing success will contribute to expanding the pipeline but the sentiment is still somewhat cautious,” said Stephane Gruffat, co-head of Emea equity capital markets for Deutsche Bank.

Shares in two of the biggest European IPOs this year — German defence contractor Renk and Athens International Airport — have climbed since the companies listed last month.

There are several high-profile companies lining up to launch IPOs should the wider European stock market continue to head higher, an outcome analysts have said is more likely if the European Central Bank starts cutting interest rates. The ECB this week signalled June is the earliest it is likely to cut rates after it lowered its forecasts for inflation for this year and next.

Italian luxury sports shoe brand Golden Goose, owned by UK buyout firm Permira, and Puig, the Spanish beauty and fashion group behind brands including Charlotte Tilbury, have both signalled plans to list.

According to people familiar with the matter, private equity group CVC is also reviving plans for an IPO after postponing them last year. CVC declined to comment.

The German transportation start-up Flix, which owns the Greyhound brand in the US, is weighing launching an IPO as soon as June in Germany at a roughly €4bn valuation, according to people familiar with the matter. That would make it the first venture-backed IPO in Europe this year. Flix declined to comment.

“Volatility is low, markets have been fairly buoyant, inflation feels like it’s more in check and people are now fixed on rate cuts for June, and there’s a pretty big backlog,” said Lyle Schwartz, head of Emea equity capital markets for Evercore. “The dials are green and these well-telegraphed deals are smart to take advantage before things may get a little more volatile.”