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The brand's Fluffy Residences around the world marked the garment's 10th anniversary but the Italian brand has built its reputation over the years with other outerwear hits such as the camel coat, the 101801 design and the robe-like Manuela

Max Mara’s creative director Ian Griffiths still marvels at the success of the Teddy Coat, which marked its 10th anniversary in 2023. “Who would have guessed that the old coat I found by chance in a cabinet would have turned out to be such a hit around the world?”

And a hit it is, not only in terms of its business performance, as Max Mara has sold 90,000 of the coats, but also in light of the international visibility it has brought to the brand, increasing its relevance on social media and attracting a younger clientele while retaining its loyal customers.

Brand awareness further soared through the Fluffy Residence activations in main cities around the world celebrating the Teddy Coat’s birthday. These are spaces reimagined as a home where everything is wrapped in the coat’s signature fluffy beige fabric, from the kitchen countertop, bookshelves and flowers to tableware, the bed with a giant teddy bear figure sitting on it, and even the bathroom. Numerous posts appeared on social media, with visitors posing for selfies in their favorite rooms.

Griffiths is keenly aware of the power of social media and word of mouth. He recalled that the first person to publicly wear the Teddy Coat a decade ago was stylist and fashion entrepreneur Carine Roitfeld and she helped draw attention to the style with that “viral image,” he said.

“It’s a scary world, and this coat helps protect and cuddle, it’s cocooning, but it is also eye-catching. It’s a look-at-me item in the spirit of our times,” the designer said. “And it’s soft to touch but also rich, yet one of the secrets of the coat is that it is light.”

The coat, which is made of natural fibers and is available in 30 different colors, has sparked numerous imitations, but Griffiths believes that the fit gives the copies away.

Griffiths said this is “not a seasonal product and is transversal across generations.”

Retailing at between 1,200 and 2,300 euros, it is in line with Max Mara founder Achille Maramotti’s belief that the brand should be accessible for the working woman. “The demand has been overwhelming,” Griffiths said. “We are not the ones to choose what represents us but apparently the Teddy touched a nerve,” he noted simply, “and it also has an element of irony, tongue-in-cheek fun.”

Marking the anniversary, the Teddy Ten project includes special editions of the style, such as the new Sparkling version with sequins, or the Mini Teddy Coat for children ages five to 12 with accessories such as gloves or soft hats.

The Fluffy Residence was installed in New York, where Max Mara opened its first pop-up in SoHo in a space entirely covered in Teddy fabric, passing through London at Harrods, and subsequently Hong Kong, at the luxury mall IFS Chengdu, and in Milan at the Portrait Hotel, returning to London at Covent Garden, where the experience included a magic mirror with a camera that captured a visitor’s images and reimagined them with a Teddy twist.

When Maramotti established the Max Mara company in 1951, he began with a firm intention — to dress the wives of local doctors and lawyers, while couturiers in Paris were fighting to dress the wealthiest and aristocrats. Actually, Maramotti was a pioneer, anticipating the future: In a few years, those women, who in 1951 were only wives, started to become doctors and lawyers themselves. “And they became chief executive officers and started sitting on the boards. Max Mara has grown up with them,” Griffiths said proudly.

Inspired by the styles of legendary French couturiers, Cristóbal Balenciaga and Christian Dior in particular, Maramotti tweaked their designs with precise tailoring, clean silhouettes and lean proportions toward a more Italian fashion sensibility that was Max Mara’s signature.

Maramotti tapped into Italy’s desire to emerge from the ashes of World War II, building Max Mara’s fashion reputation with clothes that were as elegant as they were accessible and wearable. He inherited a passion for fashion from his great-grandmother, Marina Rinaldi, who ran a high-society atelier in the heart of Reggio Emilia.

When the Swinging ’60s exploded in London, Maramotti jumped on that bandwagon by launching Sportmax, a secondary line for the younger crowd.

Griffiths may continue to marvel at the success of the Teddy Coat, but Max Mara has built its reputation over the years with a long list of coats that have made history, such as the 101801 design, which celebrated its 40th anniversary in 2021, or the robe-like Manuela coat launched in the ’90s. The camel coat has become a brand staple, appearing on display at London’s Victoria & Albert Museum, at the Fashion Museum of Paris and in Copenhagen’s Industry Museum. Griffiths on his own Instagram account often uses the hashtag #camelandia to complement the images.

Over the years Max Mara has worked with such marquee names as Karl Lagerfeld, Domenico Dolce and Stefano Gabbana, Jean-Charles de Castelbajac and Narciso Rodriguez. But, in line with Max Mara’s understated style, the brand always took center stage and the designers’ names never appeared — until Griffiths, who joined the company in 1987, fresh out of the Royal College of Art, and a winner of a Max Mara contest in 1985. In 2005, with the blessing of Max Mara’s owners, the Maramotti family, Griffiths began to emerge as the lead designer of the brand.

The daughter of one of Max Mara’s first retailers, Laura Lusuardi, who is fashion director of the group’s labels — which include Sportmax, Max & Co., Marina Rinaldi and Pennyblack, to name a few — joined the house in the ’60s, and helped put together the archives, also buying back designs during her travels around the world, acquiring looks from Chanel and Madame Grès to Courrèges and Yves Saint Laurent.

Max Mara coat designer Anne-Marie Beretta was instrumental in the ’80s in delivering avant-garde shapes and cementing the success of the camel coat. The camel coat “was a symbol of male authority and was revisited for women,” Griffiths has said.

Along with Beretta’s sketches, Max Mara has meticulously saved illustrations by Norma Robinson, Lagerfeld, Emmanuelle Khanh, de Castelbajac and the other designers who have contributed to the brand’s success.

Griffiths also recalled how Maramotti pioneered the concept of capsule collections, asking then-“It” girl and Dior model Lison Bonfils to design a capsule in the early ‘60s — also in the archives.

Photographers who have shot ad campaigns for the brand include Sarah Moon, Paolo Roversi, Peter Lindbergh, Richard Avedon and Steven Klein.

Though he remained group chairman, in the early ‘90s, Maramotti passed the torch to his three children: Luigi, Ignazio Maramotti, and Maria Ludovica Maramotti. The founder, who owned one of Italy’s largest private art collections, died in 2005. A legacy is the Collezione Maramotti, the museum of contemporary art based in Reggio Emilia, near the Max Mara group’s headquarters.

Fitch downgrade further formalises default, the third for an African country in as many years

Ethiopia has become the third African country to formally default on its debt in as many years, after missing the deadline this week to make a $33mn interest payment on its only international bond.

Fitch Ratings on Wednesday downgraded the country’s credit rating to “restricted default” after a grace period for a payment originally due on December 11 expired.

Africa’s second most populous country first sought debt relief in 2021 as pressures from the coronavirus pandemic and conflict in the northern Tigray region hampered economic growth.

Despite a truce to end its two-year civil war late last year, its economy is under pressure with an annual inflation rate of 28 per cent, foreign currency shortages and growing debt repayments.

Ethiopia reached an agreement in principle with sovereign creditors including China last month to suspend debt payments and restructure its $1bn international bond, but the government said parallel talks with pension funds and other private creditors had stalled.

“Statements by the Ministry of Finance suggest that the non-payment reflects the effort to provide equal treatment to private creditors following agreements with official creditors to suspend debt service,” Fitch said in a statement.

The finance ministry had told bondholders earlier this month that the payment was “an affordable amount” but that it had decided to withhold the payment so it could treat different groups of creditors equitably.

The default puts the east African country among a growing number of emerging economies that have defaulted on their debt in the aftermath of the pandemic. According to the World Bank, there have been 18 sovereign defaults in 10 developing countries in the past three years — greater than the number recorded in all of the previous two decades.

Ethiopia is seeking to renegotiate its obligations through the G20’s common framework, which coordinates debt relief across public as well as private lenders and has been used by two other African countries, Zambia and Ghana, with mixed success.

Credit rating agency S&P Global downgraded Ethiopia’s debt to default on December 15 after the initial deadline for payment was missed.

Fitch has kept its rating on Ethiopia’s local currency long-term bonds at triple C minus as the government has continued payments on that debt and has not announced any intention for domestic debt restructuring.

Ethiopian officials expect that an IMF programme, necessary to start negotiating a comprehensive debt treatment under the common framework, will come in the first quarter of next year, according to Fitch, but the rating agency said “this may still be optimistic”.

Global defence orders surge as geopolitical tensions mount

Sustained state spending on weapons drives investor interest in sector

The order books of the world’s biggest defence companies are near record highs after growing by more than 10 per cent in just two years because of rising geopolitical tension, including the conflict in Ukraine. 

An analysis by the Financial Times of 15 defence groups, including the largest US contractors, Britain’s BAE Systems and South Korea’s Hanwha Aerospace, found that at the end of 2022 — the latest for which full-year data is available — their combined order backlogs were $777.6bn, up from $701.2bn two years earlier.

The trend’s momentum continued into 2023. In the first six months of this year — the latest comprehensive quarterly data available — combined backlogs at these companies stood at $764bn, swelling their future pipeline of work as governments kept placing orders.

The sustained spending has spurred investors’ interest in the sector. MSCI’s global benchmark for the industry’s stocks is up 25 per cent over the past 12 months. Europe’s Stoxx aerospace and defence stocks index has risen by more than 50 per cent over the same period. 

The gains reflect conviction among investors that higher defence spending by governments is here to stay. 

Total global military expenditure increased by 3.7 per cent in real terms in 2022 to a new high of $2,240bn, according to the Stockholm International Peace Research Institute.

Military expenditure in Europe had its steepest year-on-year increase in at least 30 years as governments in the region announced new orders for ammunition and tanks to replenish national stockpiles depleted by donations sent to Ukraine.

Hanwha Aerospace recorded the biggest rise in new orders, with its backlog soaring from $2.4bn in 2020 to $15.2bn at the end of 2022, according to the FT analysis.

The company, the country’s biggest arms producer, which makes the K-9 self-propelled howitzer tank, has benefited significantly from Ukraine-related orders, in particular from Poland.

South Korea has catapulted up the ranks of arms sellers over the past two years because of significant export orders, particularly from eastern European countries. It was the world’s ninth-largest seller of arms in 2022, up from 31st place in 2000, according to Sipri. 

German tank maker Rheinmetall has been another beneficiary of higher spending in the wake of the war in Ukraine, with its order backlog rising from $14.8bn in 2020 to $27.9bn in 2022. Its backlog stood at $32.5bn at the half-year.

Not all of the higher spending is related to Ukraine. BAE Systems’ order backlog, for example, has risen from $61.8bn to $70.8bn in 2022 thanks to new orders for existing programmes, including submarines, frigates and fighter aircraft. Its order backlog hit a record $84.2bn in the first six months of 2023.

Some of the causes of higher backlogs predate Russia’s full-scale invasion of Ukraine, according to Nick Cunningham, analyst at Agency Partners.

“The reality is lead times for policymaking, budgets and placing orders are so long that the invasion of almost two years ago is only just appearing in orders and barely in revenues, except for a few shorter-cycle specialists such as Rheinmetall,” he said.

Despite receiving new orders, many European and US defence companies have struggled to significantly increase production capacity amid persistent supply chain disruptions and labour shortages.

Analysis by Sipri of the 100 largest companies found that revenues from sales of arms and military services totalled $597bn in 2022, 3.5 per cent less than 2021 in real terms, even as demand rose sharply. 

Cunningham said the order pipeline “looks really strong, so we expect more to come in”. He expects the “book to bill ratio” — the ratio of orders to deliveries — to stay above one, meaning backlogs should “increase for some time to come”.

Sharp increase before mayoral elections will offer households relief but also complicate efforts to control inflation

Turkey’s government has delivered another steep minimum wage rise amid a long-running cost of living crisis, complicating efforts to rein in chronic inflation but likely to resonate with voters before nationwide municipal elections next year.

The monthly minimum wage will be raised to a net TL17,002 ($578), per month in 2024, Vedat Işıkhan, labour minister, said at a press conference. That is double the rate at the start of this year and a 49 per cent increase from a mid-year adjustment.

“We are pleased to once again fulfil our pledge to prevent our workers from being crushed by inflation,” he said. About a third of the population of 86mn people earn the minimum wage, and other salary rises are determined by the base pay.

A currency crisis in late 2021 sparked Turkey’s worst inflation in a quarter century, and the lira continues to depreciate, losing some 35 per cent of its value against the dollar this year. The cost of food, utilities and rent have all skyrocketed, incurring pain for most Turkish households.

However, higher wages also strongly contribute to pushing up inflation, which reached 62 per cent last month. The central bank was only expecting a peak to be reached in May at 70 per cent, and it may now be forced to continue raising interest rates to cool demand.

The bank has lifted the benchmark interest rate by 34 percentage points since June after President Recep Tayyip Erdoğan was re-elected and appointed a new governor to undo his pre-election economic policies. He had forced the previous bank chief to cut interest rates to single digits to expand the $900bn economy during his election campaign.

In a concession to the fight against inflation, the government has ruled out another increase to the minimum wage before 2025.

Turks are due back at the polls on March 31 to vote for mayors across the country. Erdoğan has vowed to retake control of Istanbul, the biggest city, and the capital Ankara from the opposition, building on the momentum of his re-election earlier this year, when he began his third decade at the helm.

Obesity and diabetes companies soared this year, while the rest of pharma did poorly

In pharma, you can take a larger slice of the healthcare pie than your peers, but you are still constrained by the size of the pie. No matter how good your cancer or diabetes drug is, healthcare systems will still have to keep paying for heart disease and rheumatoid arthritis treatments too.

That, in a nutshell, is why the divergence of obesity-diabetes companies from the rest of the industry in recent years can’t go on forever. In 2023, Eli Lilly LLY 1.90%increase; green up pointing triangle and Novo Nordisk NVO 0.97%increase; green up pointing triangle have risen more than 50% each, to become the two largest pharma companies by market capitalization, with their combined value now hovering around $1 trillion. By comparison, the rest of the industry badly underperformed the market, with the NYSE Arca Pharmaceutical Index rising a measly 4% compared with 24% for the S&P 500.

The difference in market caps implies that these two companies will consume a disproportionate amount of our healthcare dollars. But in the long term, one drug category cannot crowd out every other area in medicine because payers have budgetary ceilings and drugs wind up facing competition.

Analyst estimates show sales revenue for Novo and Lilly each growing by at least 15% in 2024 thanks to surging demand for their obesity drugs, known as GLP-1s. Sales for Novo’s Ozempic and Wegovy and Lilly’s Mounjaro and Zepbound are expected to nearly triple from about $22 billion this year to $57 billion in 2028, according to FactSet. No one in the industry comes close to such growth. And both companies are working on the next generation compounds that might continue delivering growth even when the patents of those drugs expire.

But while the obesity opportunity is real, these aren’t magical solutions to America’s unhealthy eating habits. There are still plenty of questions about their safety, insurance coverage and how long patients will be willing to stay on them.

While the obesity darlings won’t necessarily lose momentum soon, it is reasonable to bet that the much cheaper but still growing crop of pharma companies like AstraZeneca AZN 1.28%increase; green up pointing triangle, Merck and Johnson & Johnson JNJ 0.13%increase; green up pointing triangle will start to close the gap. Even industry laggards like Pfizer PFE 0.70%increase; green up pointing triangle and Bristol-Myers Squibb BMY -0.47%decrease; red down pointing triangle, down 45% and 28% respectively this year, should start to rebound.

That is partly down to valuation. Lilly at this point looks like a tech company, with a price to forward earnings multiple of 47. The industry average is 16. Bristol Myers, the laggard, fetches just seven times earnings.

AstraZeneca has one of the strongest growth profiles outside of the obesity duo. Analysts on FactSet see the company delivering 10% sales growth next year. It is also expecting a number of catalysts including data from breast cancer and early-stage lung cancer trials that could unlock share-price upside, note Berenberg analysts. Jared Holz, a healthcare-equity strategist at Mizuho, recommends Merck, pointing to consistent earnings beats and active business development. “There are companies now that may not have as exciting of a story to tell as the obesity category, but they are trading at a fraction of the valuation with plenty of room to grow,” says Holz.

One reason obesity won’t go away as the main story is that it is such a clean narrative. America is suffering from an obesity epidemic and the drugs have demonstrated they can help reduce the incidence of things like kidney disease, heart attacks and even addictive behaviors. By contrast, it is much harder to sell a generalist investor on more niche areas like Novartis’ NVS 1.18%increase; green up pointing triangle radioligand therapy or Merck’s pulmonary arterial hypertension drug.

Another reason Lilly and Novo won’t necessarily sell off next year is momentum. These drugs are just starting to take off, which makes for great quarterly comparisons. Jefferies healthcare strategist Will Sevush explains that while valuations could become detached from reality, the market doesn’t tend to correct until the key product that is driving share gains starts to plateau. “When they’re beating every quarter and analyst estimates are going higher, usually those stocks tend to work,” he says.

He points to how Gilead’s GILD 0.53%increase; green up pointing triangle stock quadrupled between 2012 and 2014 due to excitement over its hepatitis C treatments. The stock only peaked in 2015 when the company started missing analyst estimates and facing competition from an AbbVie ABBV 0.17%increase; green up pointing triangle drug. In the case of Eli Lilly, Mounjaro has beaten estimates in five of the last six quarters, according to FactSet. And the obesity version of the drug, Zepbound, just received Food and Drug Administration approval, so Lilly remains fairly early on in the cycle. Meanwhile, there is no major competition on the horizon to Novo and Lilly for the next few years.

The upshot is a more subtle message to healthcare investors: Don’t count on a total mean reversion. But after a year of extraordinary divergence, a more diversified approach that includes some less exciting, but still solid, names makes more sense.

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