TheChek News Flow

This week BoF reported that Farfetch is seeking a ‘white knight’ to avoid collapse. A deal with Amazon could be the answer, writes Imran Amed.

LONDON — At the Fashion Awards at London’s Royal Albert Hall on Monday evening, there was one question on everyone’s minds: what’s really going on at Farfetch?

As the news flow gathered steam this week, the vacuum created by the company’s silence filled with speculation on what might happen next as the industry’s largest e-commerce platform, critical to the operations of hundreds of small- to medium-sized brands and multi-brand boutiques, is reportedly looking at strategic options to boost a weakened cash position, according to a report by BoF’s Malique Morris. Several Farfetch executives, including group president Stephanie Phair, were present at the Awards, but they remained tight-lipped about what is going down inside the company.

The drama began to play out on Nov. 28, when The Telegraph reported that founder José Neves was considering taking Farfetch private and the company abruptly cancelled an earnings announcement set to take place the next day. At first, the news sent Farfetch stock surging by more than 20 percent. But soon it became clear that the company’s results presentation was cancelled for more ominous reasons.

A single sentence in a statement released by Farfetch — “the company will not be providing any forecasts or guidance at this time, and any prior forecasts or guidance should no longer be relied upon”— made it plain that Farfetch had not met its own expectations for Q3.

Then, Richemont, which in August announced a deal to spin off its loss-making Yoox Net-a-Porter unit in a joint venture with Farfetch, issued its own statement saying it “does not envisage lending or investing into Farfetch,” signalling that the deal, only recently approved by regulators in the EU, may be definitively off the table and that Farfetch would have to fend for itself. Afterwards, the platform’s stock plunged by more than 50 percent, briefly trading below $1 a share (at its peak in early 2021, shares traded above $70).

With Richemont out of the running, Farfetch partner Alibaba seems to be the only potential “white knight” likely to come to the rescue. Late Tuesday night, Farfetch issued a statement revealing that J. Michael Evans, president of the Chinese technology giant, had resigned from the Farfetch board stating that this “was in furtherance of the arm’s length commercial relationship between Alibaba Group Holding.”

Could this mean that Alibaba is considering a Farfetch takeover, and so Evans had to recuse himself from the board? Possibly, but Alibaba is fundamentally focused on the Chinese market where Farfetch has a relatively small presence and Alibaba’s hugely successful T-Mall operates a luxury platform called The Luxury Pavillion, which already serves up products from Farfetch and Yoox Net-a-Porter. On the surface, I don’t see much strategic rationale for Alibaba to do this deal, other than to protect its own business with Farfetch in China.

But what about Amazon? It was one of the options that came up in conversation with industry leaders this week. Amazon founder Jeff Bezos first set his sights on the fashion industry more than a decade ago. According to journalist Brad Stone’s The Everything Store, Bezos told employees back in 2007 that “in order to be a $200 billion company, we’ve got to learn how to sell clothes and food.”

The company has since made significant inroads into the mass fashion market with its Amazon Fashion unit, which has surpassed Macy’s and Walmart to become the largest apparel retailer in the United States, but has thus far struggled to gain traction in the luxury market.

Here’s why a Farfetch-Amazon deal would make sense.

1. It would vastly reduce Farfetch’s customer acquisition costs: While Amazon is not technically a luxury player, it already has relationships with millions of customers, including luxury consumers who value the convenience the platform offers and are likely subscribers to Amazon Prime. Farfetch is already the biggest luxury e-commerce player, but it could further tap into Amazon’s vast customer base to acquire new consumers at very low cost, bypassing Meta and Google, and thereby boosting the fashion platform’s chances of achieving profitability, which has remained elusive since the company’s founding in 2008.

2. It would boost Farfetch’s logistics and operations: Imagine the vast improvement in Farfetch delivery times and service — long a bug bear for many Farfetch customers — that Amazon’s world class logistical prowess could bring? All of the delivery options available to Amazon Prime customers would be a game changer for Farfetch.

3. It would give Amazon a significant entree into luxury: Over the years, Amazon has invested substantial resources in trying to gain a foothold in luxury, from sponsoring the Met Gala to underwriting TV shows like Making the Cut. But the company’s attempts at targeting the luxury market, including Amazon Luxury Stores, modelled on Alibaba’s T-Mall Luxury Pavilion, have never gained traction. While Farfetch may be challenged, there is no doubting its dominant position in the fashion e-commerce sector and the value this could offer to Amazon.

4. Amazon and Farfetch are both “platform” businesses. Both Amazon and Farfetch are platform businesses. In fact, part of Neves’ vision for Farfetch from the beginning was to become the Amazon of luxury fashion. Both businesses are predicated on creating a tech-commerce platform accessible to a variety of players, from the smallest independent sellers and boutiques to the largest brands and businesses. Farfetch’s white-label Platform Services business would become even stronger bolstered by Amazon’s unrivalled technological infrastructure, akin to the infrastructure Alibaba provides to luxury and fashion brands in China.

Will such a deal come to pass? Who knows for sure, as so much of what is being said about Farfetch feels purely speculative. But the drama is far from over. It could be a very busy Christmas season for Farfetch’s lawyers and advisors as they navigate the bumpy terrain ahead.

Imran Amed, Founder, CEO and Editor-in-Chief, The Business of Fashion

The luxury giant is keeping a minority stake while handing control over to Jim Gissy and a group of investors.

It’s anchors away for the LVMH Moët Hennessy Louis Vuitton cruise retail business.

The luxury giant said it cut a deal to sell a majority stake of Cruise Line Holdings Co. — parent to the Starboard and Onboard Cruise Services businesses — to a group of private investors led by Jim Gissy. The transaction is expected to close in the next few days.

LVMH said, “The new investors are strategic partners in the vacation retail space with a culture of innovation and a growth mindset.”

Starboard has worked to make the cruise ship a shopping destination in its own right with more than 700 duty-free shops offering indulgences from fine jewelry and Swiss watches to leather accessories and beauty products.

Lisa Bauer, the travel industry veteran who became chief executive officer of Starboard in 2019, will continue to lead the company along with her executive team.

“They will be charged with accelerating the strong post-COVID[-19] pandemic business momentum and developing new cruise retail opportunities, as well as land-based vacation retail,” the luxury group said. “LVMH will continue as an important minority shareholder in this new company.”

Bauer said: “We are so energized with the new opportunities that will open up to us. The entire leadership team is focused on taking the tremendous progress we have made and directing that toward continuing success in 2024 and beyond.”

At sea, the retail business involves familiar brand names but the presentation, context and experience can be very different. Starboard operated 82 cruise ships as of the end of last year.

In an interview with the National Retail Federation this year, Bauer noted that at least 50 percent of the guests on board are celebrating some kind of a milestone.

“To commemorate the occasion, we suggest private retail appointments or a concierge for store outings,” she said. “Experiential retail would also be things that are exclusive, like a local artist from Barcelona that comes aboard and hand-paints on silk scarves.

“One of the funniest things we do is on the Royal Caribbean ships, called the Rising Tide Watch and Scotch event, where guests learn about luxury Swiss timepieces paired with premium scotch as they ascend deck levels,” Bauer said. “Five ships in the Oasis-class series have something called the Rising Tide Bar that goes from Deck Five to the top. On Deck Five we have entry-level watches paired with reasonably priced scotch. On Deck Six, it’s higher-price-point watches and scotch, all the way to the top. It feels like it’s part of the experience, not just retail.”

The group was acknowledged as industry leader of the “Textile, Apparel & Luxury Goods” sector.

MILAN — Moncler Group continues to prove it is serious about its sustainability initiatives, efforts and goals.

For the fifth consecutive year, the group topped the S&P Global Corporate Sustainability Assessment in the “Textile, Apparel & Luxury Goods” sector in the Dow Jones Sustainability Indices World and Europe with the highest score — 89/100.

“Every day, at Moncler and Stone Island, we work to continue integrating sustainability into our business model. We do it with passion, ingenuity, humility and necessary concreteness. We do it with the sense of urgency that environmental and social challenges require,” said the group’s chairman and chief executive officer, Remo Ruffini. “We are on a transformational journey which requires significant changes in the way we work. This collective, transversal path involves those who work within the company as well as those who collaborate with us across the value chain.”

While Ruffini admitted “pride in this achievement, we are aware much remains to be done. We do this out of our firm belief that economic results are important, but so is the way in which they are achieved,” he concluded.

The Dow Jones Sustainability Index ranks the leading sustainability-driven companies based on economic, environmental and social responsibility criteria, which are analyzed by top credit ratings provider S&P Global.

Every year the group reports on its sustainability performances and targets in its consolidated nonfinancial statement. In 2020, Moncler presented its strategic sustainability plan until 2025, “Born to Protect,” which focuses on five strategic drivers: climate action, circular economy, fair sourcing, enhancing diversity and giving back to local communities.

As part of the eco-road map, Moncler is committed to reach net zero emissions by 2050; recycling nylon manufacturing scraps at group sites and across the supply chain; the use in the collections of 50 percent of yarns and fabrics from lower-impact materials by 2025 (recycled, organic or from regenerative agriculture, or certified following specific standards); the traceability of raw materials, and obtaining the Equal Pay certification, among others.

To date, the group lists achievements including the use of around 90 percent of electricity at its directly operated corporate sites worldwide from renewable sources in 2022, estimating to reach 100 percent by the end of 2023; carbon neutrality maintained at its own directly operated corporate sites (production sites, offices, logistic hub and stores) from 2021; 100 percent of nylon scraps from own direct sites recycled; progressive integration in collections of yarns and fabrics from lower-impact materials with the goal of reaching 50 percent by 2025, and almost all single-use virgin plastic eliminated, among others. At the group, 69 percent of employees were women and 51 percent were women in management in 2022. It has also helped protect from the 108,000 people most in need over the last six years, and it estimated it has helped around 140,000 in the 2017 to 2023 period.

After boosting borrowing costs at the fastest pace in four decades, when can the Fed start lowering them?

When Federal Reserve Chair Jerome Powell met on an October afternoon with small-business owners in Pennsylvania, Julie Keene lamented how her family farm and food market had been blindsided by high inflation over the past two years.

“Predictability is just gone,” said Keene, co-owner of Flinchbaugh’s Orchard & Farm Market in Hellam, Pa. “It is very hard to operate a business in a world where there is not predictability.”

Powell curtly told Keene he saw one clear solution: “We get inflation down.”

So far, so good. Inflation has fallen faster this year than many Fed officials anticipated after a hair-raising series of rate increases that none of them envisioned two years ago.

The big questions now are about when the Fed can start cutting rates and by how much. The answers will matter greatly to households, markets and possibly the 2024 presidential election.

One danger is that Powell and his colleagues—blamed for reacting too slowly to address surging inflation two years ago—will wait too long to lower rates as they ensure inflation is fully extinguished. That mistake could curb economic growth too much, causing a recession.

The Fed’s other big error would be to trim rates too soon, failing to vanquish inflation. The central bank doesn’t want to repeat its 1967 mistake, when it cut rates to bolster faltering growth only to see prices take off. Officials are wary of reducing rates prematurely for fear that new shocks—a run-up in oil prices, for example—ignite a new inflationary surge, as occurred throughout the 1970s.

Powell and his colleagues are on track to hold rates steady at their meeting this week. Officials last raised the benchmark federal-funds rate in July to a range between 5.25% and 5.5%, a 22-year high. The rate influences borrowing costs—such as rates on mortgages, credit cards and business loans—throughout the economy.

Fed officials aren’t likely to entertain serious conversations about when to cut rates this week—and potentially for several months unless the economy weakens more than expected.

Still, they don’t think rates need to remain at their current, economically restrictive setting indefinitely. Officials’ updated rate projections, to be released Wednesday after their meeting, will show that most expect to cut rates somewhat next year.

“It would be very difficult if they cut rates now only to turn around and hike again later,” said David Wilcox, a former senior Fed economist who is now at the Peterson Institute for International Economics. “At the same time, they need to be on their front foot, ready to ease as evidence accumulates that…inflation is persuasively moving down.”

Fed officials are trying to balance two risks: One is that they move too slowly to ease policy and the economy finally crumples under the weight of higher interest rates, causing millions of people to lose their jobs.

The other is that they ease prematurely and inflation settles above 3%, a level inconsistent with their 2% goal, which is aimed at providing the kind of predictability that Keene said her business needs.

Flinchbaugh’s, which sells produce and baked goods and operates an apple-processing plant, has been forced to raise prices or accept thinner margins as the costs of fuel, fertilizer and labor soared over the past year. While Keene supports the Fed’s rate increases to lower inflation, she said she hadn’t considered whether they might cause a recession.

“From the production side, yes, we need to get back to a predictable environment,” said Keene. But for her retail business, the idea of a recession “screams ‘freak out’ to me.”

The current business cycle is unlike any the Fed has faced in a half-century, so Powell has no historical playbook to guide his coming decisions. In most rate-hiking episodes in the past 35 years, the Fed sought to prevent inflation from rising rather than to lower it.

The outlook for the U.S. economy has brightened in recent months because inflation and wage growth are slowing. Core inflation, which excludes volatile food and energy prices, was 2.5% at an annualized rate over the six months through October, down from 4.5% over the previous six-month period, according to the Commerce Department.

Lower price pressures have diminished Fed concerns that consumers and businesses will come to expect inflation to stay high, causing it to do so. And slower wage growth has eased fears of a so-called wage-price spiral, in which higher inflation is sustained because paychecks and prices rise in lockstep.

“By aggressively getting rates up above inflation and continuing to hike until inflation rolled over, the Fed overtightened policy to ensure against a wage-price spiral,” said Tim Duy, chief economist at SGH Macro Advisors. “For all intents and purposes, the Fed has restored price stability.”

This opens up a path to lower rates to avoid a recession that might otherwise result from the lagged effects of the Fed’s past increases.

Declining inflation could allow the Fed to consider whether and when to cut rates under two scenarios.

First, the Fed would cut simply because the economy is slowing and unemployment is rising faster than expected. If the unemployment rate starts to rise in a way consistent with past recessions, “we’re back to our normal playbook,” Chicago Fed President Austan Goolsbee said in an interview last month.

A second, more tantalizing prospect for investors is that the Fed would cut even though the economy is doing fine because monthly inflation readings have returned closer to the low levels seen before the pandemic. Holding rates steady as inflation falls would lead inflation-adjusted, or “real,” rates to rise, which the Fed doesn’t want. So officials could cut nominal rates to maintain real rates at a steady level.

Fed governor Christopher Waller fueled optimism about that possibility when he said recently that the central bank could theoretically begin reducing rates by the spring if inflation behaves especially well.

“If we see this [lower] inflation continuing for several more months—I don’t know how long that might be, three months, four months, five months?—we might feel confident that inflation is really down,” said Waller, whose comment drew special attention from investors because he has been a leading advocate for tighter policy since 2021.

The case for cuts under that scenario “has nothing to do with trying to save the economy or recession,” he said.

Officials have been reluctant to entertain public conversations around cutting rates for fear that Wall Street will race ahead and assume more reductions than could be warranted. That reaction could itself reduce borrowing costs, making it harder for the Fed to keep economic growth slow enough to finish the inflation fight.

“There are plenty of things that could cause them to say, ‘We’re not in a rush to do this,’” said Eric Rosengren, a former president of the Boston Fed. He thinks a rate cut as soon as the second quarter of 2024 is possible if inflation continues sliding on its current path.

Most of the disagreements over when the Fed should cut stem from differences over whether inflation will continue declining.

One camp says that getting inflation down from a high of 7.1% last year to 3% in October is going to prove much easier than lowering it from 3% to the Fed’s 2% target. That is because most of the drop so far has reflected the unwinding of pandemic-related bottlenecks and worker shortages.

The fear is that this “last mile” of inflation reduction will require creating more slack in the economy—such as unemployed workers or idled factories. “I can’t see declaring ‘mission accomplished’ until you see some more labor market slack,” said Raghuram Rajan, a former governor of India’s central bank.

Such a strategy almost invites the Fed to keep policy too tight for too long. “Given that monetary policy operates with lag, it does set us up to likely overtighten. I don’t see how to avoid that,” Minneapolis Fed President Neel Kashkari said in an interview last month.

Another camp doesn’t assume the last mile will be particularly difficult. “There’s no evidence that we’ve stalled at 3%” inflation, Goolsbee said earlier this month.

One reason for optimism is that higher housing costs have been a driver of inflation over the past two years, but rent growth has slowed sharply over the past year. Because of the way government agencies calculate shelter costs, those declines filter through to official inflation gauges more gradually.

A model built by Wilcox, who is also a senior economist at Bloomberg Economics, indicates that the cool-down in rents could lower core inflation to 2.1% by the end of next year. The math “encourages me to think that the U.S. is much closer to conquering excess inflation than is commonly appreciated,” he said.

Since last year, Powell has been laser-focused on ensuring that he doesn’t repeat the mistakes of Arthur Burns, the Fed chairman in the 1970s who failed to beat rampant inflation—in part, because the central bank eased policy too soon to prevent higher joblessness. Paul Volcker later tamed soaring prices as chairman by ratcheting rates up so high they caused painful recessions in the early 1980s.

But as price pressures ebb, Powell faces the prospect of doing something that his predecessors couldn’t: lowering inflation without a big increase in joblessness.

It would be the central banking equivalent of what Capt. Chesley “Sully” Sullenberger achieved in 2009 by safely landing a commercial jet on a stretch of the Hudson River in New York City after losing engine power.

“It is very hard because the more he wants to be a ‘Sully,’ the more the markets know that he might blink,” said Rajan. “The compromise is staying put, watching what happens and being ready to raise rates if this doesn’t play out as everyone thinks.”

Cyrille Vigneron, the CEO of Cartier, is to leave the French jeweler in 2025 at the latest, according to several sources close parent Richemont. It’s not because of poor trading at Cartier, since the brand is still growing in spite of the current downturn in luxury spending. The main reason is that relations between Vigneron and Richemont Chairman Johann Rupert have soured in recent months, the sources say.

Vigneron is being hamstrung by the Richemont group in many areas, whether it’s investments by the brand, new products or marketing campaigns. At a budget meeting late last month, Rupert and Vigneron locked horns yet again, sources close to the group said.

“I think relations have never been so bad,” one of the sources said. “Tensions between Rupert and Vigneron are at an all-time high.”

Richemont declined to comment.

Rupert is known for his strong character and for shouting at executives during meetings. Vigneron, like every senior manager at Richemont, had grown used to it. Only today he’s finding it increasingly difficult to cope with Rupert’s public humiliations, people close to the group said. Vigneron has an incentive to stay in his job at least until 2025 since that’s when he gets the maximum payout and stock options he is due to receive. In the year to March 31, Vigneron’s remuneration totaled 5.4 million Swiss francs.

If relations are so bad that the two men can no longer continue working together, it’s possible that Vigneron may agree on a deal with Rupert and leave earlier, several industry sources said. Talk about the expected departure of Cartier’s CEO has become a recurring theme in the watch and jewelry industry. So much so that in a note last month, broker HSBC flagged the risk that Vigneron could be leaving. “We believe the departure of Cyrille Vigneron, the current Cartier CEO, from the group could be considered problematic by the market,” HSBC wrote in the note, referring to the risks the brand faced.

Cartier is the world’s biggest jewelry brand, generating close to €10 billion in annual turnover. It also represents more than 70 percent of Richemont’s operating profit. Hence what happens to Cartier’s leadership team is a top concern for investors.

Among other things, Rupert has criticized Vigneron for finding the time to publish posts on social media in which he philosophizes about beauty, luxury and management. In one post on LinkedIn, Vigneron discussed the “paradoxes of change and stability.” He wrote: “The more significant the change the more stability it needs. Changing a luxury brand strategy needs time to bear visible fruit. Continuity in management and policy are critical to bring results. Changing directions too often only brings confusion.”

If Vigneron leaves in 2025, he will have been at Cartier’s helm for a decade, since he started at the brand on Jan. 1, 2016. By then he will be 65. Before taking the executive reins at Cartier, Vigneron was President of LVMH Japan and worked for Richemont from 1988 to 2013, mostly at Cartier where he was managing director of Cartier Japan and managing director of Cartier Europe.

WHO COULD REPLACE VIGNERON?

Several candidates have been lining up to replace Vigneron. Louis Ferla, Vacheron Constantin CEO, is the most likely to step into his shoes, sources close to the group say. Last year, Ferla won the CEO of the year prize for bringing Vacheron Constantin’s annual sales to €1 billion. Rupert and other Richemont managers fêted him for it in his homeland in South Africa. Ferla has solid experience at Cartier. Before taking the helm at Vacheron Constantin, he spent more than 11 years at the French jeweler, where he was International Director Clients and Business Development and a member of the executive committee.

“For me, there is no doubt that Louis Ferla is the best positioned to succeed Vigneron,” a former senior Richemont executive told Miss Tweed on condition of anonymity. “He ticks the box of success with Vacheron Constantin and knows Cartier well.”

Ferla is an affable man, loved by his teams at Vacheron Constantin. If Ferla takes up the top job at Cartier, internal sources at Richemont expect that the new CEO of Vacheron Constantin will be Laurent Perves, currently the watch brand’s Chief Commercial Officer. “He is widely regarded as Ferla’s anointed successor,” one person close to the brand said.

However, there are other candidates vying to land the Cartier CEO job. Renaud Litré, the brand’s Chief Commercial Officer and Richemont’s Platform Officer, is also jockeying to position himself as a potential successor to Vigneron. He has the double responsibility of looking after Cartier’s international operations and overseeing Richemont’s e-commerce and IT. Litré is currently handling the debacle with online fashion retailers Farfetch and Yoox-Net-A-Porter. Following the collapse in Farfetch’s share price, Richemont has put on pause a deal to sell a minority stake in YNAP to Farfetch and adopt the company’s technology for its brands’ e-commerce sales.

Industry sources believe it’s a shame that Richemont is not going forward with this deal, having spent so many management hours finalizing the complex transaction in August 2022. Also, despite its financial troubles Farfetch has one of the best e-commerce technologies in the world. It would have set Richemont’s brands apart from rivals. Rupert could have just acquired Farfetch, which is now worth $412 million. It would appear that Richemont’s chairman got cold feet and wants to distance himself from Farfetch. Last week, the Swiss group said it was not planning on lending money to Farfetch or investing in the company and was reassessing the deal they agreed in 2022. It received regulatory approvals in October.

Litré reports directly to Rupert on Farfetch. That gives him extra power in relation to Vigneron. “Litré is now the strong man between Cartier and the group, and he has been overshadowing Vigneron,” said one person close to the Richemont group. Litré’s fortunes may be strongly influenced by the outcome of talks between Farfetch and Richemont, sources close to the group say.

Another potential candidate to replace Vigneron is Emmanuel Perrin, CEO of Richemont’s Specialist Watchmakers division and President of the Fédération de la Haute Horlogerie, which helps organize the annual trade fair Watches & Wonders at Palexpo in Geneva. Perrin is the nephew of Alain-Dominique Perrin, a legend at Richemont who was the group’s CEO and led Cartier for many years. ADP, as people in the industry call the 81-year-old former executive, remains an influential figure. He currently works as a consultant for Richemont. ADP will be lobbying hard for his nephew to take the top job at Cartier. However, Emmanuel Perrin is not the most loved boss at Richemont. Many industry sources believe that he does not stand much of a chance to replace Vigneron.

Whoever lands what is the most coveted CEO job in the jewelry industry will have to redouble efforts to develop Cartier’s watches, industry experts say. The brand has been resting on its laurels somewhat. It keeps relaunching old models such as the Pasha and the Santos. The last major launch of a new watch model was the Drive in 2016 but it has not been a major commercial success.

In jewelry, Cartier makes the bulk of its sales with its Love, Juste un Clou and Trinity collections. The Clash collection, launched two years ago, has been doing well but has not been a huge commercial success, industry sources say.

Beyond Cartier, Richemont has other important human resources issues to solve. Two brands at the group have been without a CEO for several months. Montblanc’s CEO Nicolas Baretzki left after a decade in the job, eager to embark on a new adventure, industry sources said. He has been replaced on an interim basis by Philippe Fortunato, who is in charge of Richemont’s Fashion and Accessories division, they added.

Watchmaker Roger Dubuis lost CEO Nicola Andreatta a few months ago and it’s not yet clear who will replace him. Emmanuel Perrin has been managing the brand since Andreatta’s departure.

However, beyond Cartier and brands without a CEO, the one question investors would like answered is who will replace Rupert. The 73-year-old South African billionaire continues to decide everything at Richemont. He is also leading the charge on the group’s plans to build a fragrance and cosmetics unit.

“We are getting many questions around succession planning at Richemont,” HSBC said in its note last month. “Some investors have been surprised at how dominant Chairman Johann Rupert remains in terms of decision making and communication.”

Rupert has said that none of his three children would succeed him and has refused to provide any detail on who could replace him one day. His succession remains one of the many mysteries surrounding Richemont, together with what is the group’s vision now with regards to e-commerce and partnership with Farfetch. It may not be too late to save the deal.

The Japanese star will become the highest-paid player in U.S. sports history, despite an elbow injury that casts some doubt over his future as a two-way sensation

Shohei Ohtani on Saturday announced that he will join the Los Angeles Dodgers, resolving the biggest mystery in baseball. He is set to sign a contract worth $700 million over the next 10 years that will make him one of the highest-paid athletes in pro sports history.

The move ends Ohtani’s six-year tenure with the Los Angeles Angels, where the 29-year-old Japanese star established himself as a modern-day Babe Ruth. He can pitch, he can hit, and he does both at an elite standard at the highest level of the game.

Ohtani, a two-time American League MVP, hit 44 home runs in 2023, while also making 23 starts as a pitcher until his season was cut short by an elbow injury. The injury will keep him off the mound for at least the 2024 season, but he is expected to be the designated hitter while his elbow heals throughout the year.

The hope is that Ohtani will return as a pitcher for 2025, and soon after regain the ability to be the remarkable two-way player that he was for stretches of his time in Anaheim. The Dodgers will commit an average of $70 million per year to Ohtani with the vision of him pitching and hitting proficiently over the span of his contract.

The majority of the salary will be deferred to lessen the luxury tax burden on the Dodgers, according to a person familiar with Ohtani’s contract structure. It is unclear if there are incentives or benchmarks included for reaching certain pitching or hitting milestones throughout the course of the contract.

By choosing the Dodgers, Ohtani rejected the efforts of some of baseball’s other big-market teams and their efforts to sign the most anticipated free agent of all time. The Angels, who will try to break a 10-year playoff drought this year, will be remembered as the team who lost one of the most remarkable players the sport has ever seen—to the more glamorous team that plays up the road.

The Dodgers, on the other hand, won’t merely be getting one of the greatest talents in baseball history. Ohtani is also an economy in and of himself. The Angels found themselves the beneficiaries of massive Japanese interest during his six years in Anaheim, with the club even advertising Japanese cat food during games late in his tenure.

The process that took Ohtani to Los Angeles was unusually secretive. Teams were warned by Ohtani’s camp that any leaks would rule them out of the running for his signature.

Then again, these were unique circumstances for a unique free agency situation in which the player had almost all of the $700 million leverage. For anyone else, this total contract figure would have been unimaginable. For Ohtani, who will turn 30 years old next season, salary was only the starting point for the financial calculations a team would make in deciding to sign him for what may be the rest of his career.

Through this deal, the Dodgers will challenge the New York Yankees as baseball’s most internationally beloved brand. This will catapult their business and marketing operations into a new semisphere: Where Ohtani goes, Japanese media interest follows.

When it comes to Ohtani’s actual contract, however, the Dodgers organization is working on entirely new ground. His dual abilities as a pitcher and a hitter make him easy to covet, but there were a slew of considerations in how to structure a contract for the truly unprecedented free agent. Hence, the use of deferrals in the megadeal.

Ohtani is unable to pitch for at least the next season following surgery on his torn elbow ligament—his second such procedure—but has indicated that he intends to keep pitching once he is recovered. The questions that will follow Ohtani as his career proceeds will be his ability to maintain his two-way role. What are the chances that Ohtani will make it to the conclusion of his 10-year year contract as a productive pitcher and hitter? Ohtani has already beaten the odds by becoming a two-time MVP while doing both, so the strongest precedent set by this unprecedented player is his ability to accomplish previously unimaginable things.

The Dodgers will now bear the responsibility that the Angels could never achieve: Getting Ohtani to the playoffs, the biggest stage of the game. If competing in meaningful games was Ohtani’s priority in this free agency campaign—as his representatives say is this case—then the Dodgers were his surest bet. Los Angeles has reached the playoffs every year since 2013, including winning the World Series in the shortened 2020 season. For the Dodgers, a deep playoff run isn’t just the expectation each season, but seemingly the minimum.

Ohtani, who played alongside Mike Trout in Anaheim for six seasons without a fruitful push to the playoffs, will now be surrounded by the likes of Mookie Betts, Freddie Freeman, and Clayton Kershaw. The Dodgers have assembled baseball’s best superteam with Ohtani at the center.

China uranium grab poses threat to western energy supply, warns Yellow Cake

Prices of nuclear commodity at 15-year high as governments scramble to secure sources of fuel for power stations

China is making an aggressive push to tie up global uranium supply amid a worldwide rush to secure nuclear fuel, warned the boss of Yellow Cake, a London-listed investment vehicle for the radioactive commodity.

André Liebenberg, chief executive of the Aim-traded company, said the west was lagging behind in securing uranium after prices hit a 15-year high and as Chinese firms purchase supplies on the open market, sign long-term contracts and buy up mines.

“Any mineral they need, they will look to tie up,” he said. “Chinese efforts to secure supply will certainly create competition for resources, and given resource opportunities are limited, they will challenge western utilities’ ability to source supply.”

Uranium has been one of the best-performing commodities of the year, climbing 70 per cent to trade at $81 per pound, its highest since 2007.

The blistering rally has been supported by governments supporting nuclear energy — a constant and low-carbon power source — by extending the lifetime of plants and considering building new reactors in the wake of gas prices skyrocketing last year.

At the UN’s recent COP28 climate conference in Dubai, 22 world leaders declared a commitment to treble nuclear capacity globally by 2050 compared with 2020 levels, further adding positive sentiment to an already boisterous market.

The price rise for the raw material has lifted Yellow Cake, which was founded in 2018 to give investors a way to gain exposure to an anticipated bull run for uranium. Liebenberg said there was a “decent chance” of the price breaking through $100 per pound next year.

After a decade of under-investment in new production and years of a supply glut following the global pullback in atomic power after the 2011 Fukushima nuclear disaster, uranium prices have returned to strength.

Yellow Cake has a 10-year supply agreement with Kazatomprom, the world’s largest producer of uranium, to buy $100mn of the mineral each year from the Kazakh company, which Yellow Cake then holds in storage facilities in Canada and France. At present, Yellow Cake holds the equivalent to almost 20 per cent of annual global supply.

Reflecting the surge in uranium prices, shares in Yellow Cake have rallied 54 per cent this year, taking its market capitalisation to £1.3bn. Last week the company said its net asset value had jumped from $1bn in March to $1.8bn as of early December.

To cash in, the company would either need to sell its holdings of uranium at higher prices than those at which it bought them or be taken over by a utility in need of supply.

China, the world’s second-largest producer of nuclear power, accounts for almost half the reactors under construction globally.

“The Chinese are running around looking for new supply,” Liebenberg said. “If they want to meet their nuclear plans by the end of the decade, then they will need new pounds.”

Beijing has set a goal of self-sufficiency in nuclear fuel through its goal of producing a third of its uranium needs domestically, obtaining another third via investment in foreign mines, and buying the remainder on the market.

China National Uranium Corporation and a subsidiary of CGN — China General Nuclear Power Group — have already taken equity in mines across Niger, Namibia and Kazakhstan, while CNUC is constructing a warehouse in Xinjiang next to the Kazakh border that aims to serve as a major uranium trading hub.

The drive by China to snap up supply adds to the headache that the west faces from relying on Russia, which controls almost 50 per cent of global uranium-enrichment capacity.

Liebenberg said that if Russia were to cut nuclear fuel supplies to the west, then utilities would face disruption in the five years that it would take to build a supply chain independent of Moscow.

How Liontrust’s decade of dealmaking came unstuck

The UK asset manager is being ejected from the FTSE 250 after billions in outflows and losing half its market value

When Liontrust is ejected from the FTSE 250 this month, it will cap a year in which the UK asset manager has suffered billions in outflows, attempted a doomed bid for Swiss rival GAM and shed half its market value.

The London-based money manager was once a darling of the sector, with chief executive John Ions presiding over an increase in assets from £1bn to £36bn in the decade to September 2021.

Then, Ions put the company’s success down to having the right products, listening to clients, and “momentum”, with the group benefiting from a decade of rising equity markets and later households’ pandemic-era savings.

But shares in the £27bn UK asset manager have lost four-fifths of their value since their peak in August 2021, and assets have dropped by a quarter.

Part of the pain has been sector-wide, with midsized managers finding themselves squeezed between juggernauts, such as BlackRock and Vanguard, and specialist managers, such as Baillie Gifford. The flight to passive funds has compounded pressure to cut fees at the same time as regulatory costs have been rising.

“You have got to be a trillion dollar manager offering lots of things, or you have to be a really efficiently run specialist,” said one former partner at Liontrust. “The middle of the road [firms] are all suffering.”

Liontrust declined to comment for this article.

Founded in 1995, Liontrust made its name as a boutique UK equities growth house. Since Ions was named chief executive in 2010, he has embarked on an acquisition spree, buying seven firms in 12 years as part of a push to diversify the fund house.

But that effort has had mixed results. The purchase of Alliance Trust Investments in 2017 is widely seen as a success, bringing sustainable investing expertise to Liontrust just as the theme found favour with investors.

Other deals are still to pay off. Acquisitions of Neptune Investment Management in 2019 and Architas in 2020 have yet to generate gross profits above their costs. The 2022 acquisition of equities boutique Majedie for £120mn, was an “unmitigated disaster”, said Robert Sage, analyst at Peel Hunt.

Assets at Majedie’s Tortoise fund plummeted from £712mn in May to £10mn in August after its two managers left. The manager of another Majedie fund, the £1.2bn Edinburgh Investment Trust, announced his retirement in October.

Ions’ latest attempted deal was a £96mn bid for struggling asset manager GAM, announced in May, which he declared would “create a global asset manager, well-positioned for long-term growth”.

But GAM shareholders were unmoved. The bid was derailed by activist group NewGAMe and ultimately only one-third of GAM shareholders backed the takeover in August. Liontrust was forced to retreat.

One top 10 shareholder in Liontrust said the board misjudged how the market would react to the proposed deal, saying that the benefits of the tie-up were never “crystal clear”. “It is already a tough environment and you’re doing something that people aren’t jumping at,” the investor said.

This had been the “toughest period” of Ions tenure, said the chief executive of a rival asset manager, and the collapse of the GAM deal “doesn’t make it easy for [him]”.

Investors have in the meantime pulled a net amount of £3.2bn from Liontrust funds over the six months to the end of September, on top of £4.8bn redeemed in the year to March. Market moves and investment performance have pushed assets down a further £3bn over the 18 months to the end of September.

Despite Ions’ expansion strategy, the asset manager’s main focus has remained UK equities, which are deeply unloved by investors. Investors have pulled £10.6bn from UK stocks so far this year.

Ions “lost some credibility” as a result of the botched GAM deal, said one analyst. Liontrust’s board has also come in for scrutiny, even before the failed GAM bid.

In March, a row erupted over the 12-year tenure of Alastair Barbour, who has served as chair for the past four years. Corporate governance best practice restricts board members to nine-year terms. Fellow board members Emma Howard Boyd and Quintin Price resigned, and at the AGM in September, 15 per cent of shareholders voted against Barbour’s re-election. Barbour remains in the post.

One top 25 shareholder told the Financial Times that Liontrust’s shares look cheap following the sell-off. “Some of the funds and the fund managers there are strong and have strong track records, and that’s what we are backing,” he said.

But the big risk of fund manager departure remained, said the former partner at the company. Liontrust had some “excellent” fund managers, he said. “[But] if they walk out of the door there’s nothing left.”

Plight of North East factory and wider dearth of orders highlight fears over future of UK’s train manufacturers

Hitachi’s rail business has taken a multimillion-pound writedown on the value of its factory in the North East of England as fears grow over the future of Britain’s train manufacturers.

The Japanese conglomerate’s UK operation flagged a £64.8mn impairment against the value of its Newton Aycliffe plant in its accounts for the year to the end of March, which were published online last month.

The £82mn factory in County Durham opened in 2015 and is delivering trains for Avanti West Coast and East Midlands Railway.

But like other plants across the UK, it is facing a dearth of new orders from cash-strapped British train companies.

Hitachi flagged a “production gap” at the plant in its accounts, alongside supply chain pressures and rising inflation.

The accounts added that the writedown “should not be interpreted that Newton Aycliffe is entering into a period of cessation”.

Still, the news will add to the sense of crisis facing the UK’s train factories, and comes as industry warnings over major job losses have ramped up.

Alstom this week warned it only has six weeks of work left at its plant in Derby, and that some of its suppliers have already gone into liquidation.

The French company has said it is preparing for a “significant reduction in manufacturing activity” and consulted on more than 1,300 job losses including permanent staff and contractors.

“Major job losses are almost certain” if there are no new orders for trains soon, according to the Railway Industry Association.

The LNER east-coast franchise placed an order for 10 trains this year, but other than that there has been no major new business since the government sought high-speed trains for HS2 from Alstom and Hitachi in December 2021.

The future of that contract is now uncertain after the decision to cancel the second phase of the rail link.

Before the HS2 order, the most recent for the mainline train fleet was in December 2019.

“We are, I think, in crisis as an industry,” said David Clarke, technical director of the RIA. “We have had two orders in the last three years and neither of those is sufficient to plug the gap.”

The hiatus has come as the industry has faced a financial crisis following the pandemic, with the sector hit by the rise in homeworking.

Alan Strickland, Labour candidate for the new seat of Newton Aycliffe and Spennymoor, wrote to transport secretary Mark Harper a few days ago, saying the government was failing to support Hitachi.

“Instead the Tory government’s dithering and delay on HS2 and other rail projects has created major uncertainty for our proud rail industry,” he said.

Hitachi said in a statement: “We continue work with industry stakeholders and the UK government on opportunities surrounding new rolling stock orders such that we can continue to support and further enhance our investments here in the UK.”  

The government controls the industry’s finances and signs off on new orders. It has committed to supporting the sector and said it is “working with all rolling stock manufacturers on the future pipeline of orders”.

Rail minister Huw Merriman told parliament this week that a tender for new trains for the TransPennine Express route was launched this week and that contract awards are expected between late 2024 and early 2025 for other major orders.

But shadow transport secretary Louise Haigh said inaction had left “the future of rail manufacturing in the UK in doubt”.

“Ministers must now provide urgent clarity on the short-term rolling stock pipeline and the thousands of jobs that depend on it.”