TheChek News Flow

How a quiet regional poll turned into a debate about Germany’s past and future

An antisemitism scandal has derailed Christian Democrat hopes for forthcoming elections

The upcoming elections in Hessen and Bavaria on October 8 had looked practically tailor-made for Germany’s centre-right Christian Democrats to prove their vigour and resilience. Both are large western states run by conservative minister-presidents favoured for re-election. In Frankfurt, the CDU has governed in discreet harmony with the Greens since 2014. In Munich, its sister party the Christian Social Union has been in power since 1957; it has been sharing it with the Free Voters, a libertarian-ish local party, since 2018. 

Hessen and Bavaria have deeply traditionalist voter bases. At a time when hard-right groups are besieging conservative parties across Europe, this fact has helped keep a surging, radicalised Alternative for Germany at bay in both states. (The AfD is polling at or over 20 per cent nationwide, but only at 16 in Hessen and 12 in Bavaria.)

Coming at the halfway point between general elections, these two state votes were expected to work like midterms in the US: as a protest against the unloved “traffic light” coalition headed by chancellor Olaf Scholz. In an ideal conservative world, they would not merely return the two minister presidents to office but burnish their chances — and the party’s — for national leadership in 2025. Hessen’s Boris Rhein is still a relative unknown; but Bavaria’s Markus Söder has made no secret of his conviction that the place for a man of his stature and ambition is Berlin. 

But in late August, the Free Voters’ leader Hubert Aiwanger had to admit the accuracy of newspaper accusations that he had been found in possession of copies of a leaflet with hateful jokes about concentration camps as a schoolboy in 1987; a number of fellow students subsequently accused him of making antisemitic quips and the Hitler salute.

And with that, a quiet and seemingly predictable regional election campaign turned into an explosive national debate over Germany’s treatment of the Holocaust, its much-vaunted “culture of memory”, the future of the country’s centre-right, and the character and judgment of its conservative leaders. 

It could have been so easy. Aiwanger could have immediately expressed remorse, apologised and atoned. Instead, he remarked thinly that the pamphlet was “disgusting and inhuman”, but he had not written it; shortly thereafter, his brother said he had been the author. A few days later, Aiwanger did aver that he was sorry. Yet his afterthoughts — that he had not been an antisemite “since becoming an adult”, and that he was the victim of a media vendetta — did not help matters. (Aiwanger has flirted with AfD tropes like the “silent majority” and “taking back democracy”.) 

The director of the Dachau concentration camp memorial noted that the pamphlet, far from being a schoolboy’s angry rant, was carefully composed and “full of extreme right codes”. It also reflected an unusual depth of knowledge about how the Nazi machinery of mass murder worked — at a time when a not inconsiderable number of Germans still claimed such nasty details were allied propaganda.

The 90-year-old Charlotte Knobloch, a Holocaust survivor and leader of the Jewish community in Bavaria, said that she had not accepted Aiwanger’s apology. There were nationwide calls for Aiwanger to resign, or for Söder to fire him. 

Remarkably, none of it happened. The obdurate Aiwanger is filling beer tents across Bavaria, cheered by supporters who know that the gifted populist is their party’s single viable candidate. Söder — faced with the realisation that the Greens, whom he has vilified, would be his only alternative — clenched his teeth and said that while he was deeply unsatisfied with Aiwanger’s responses to questions, letting him go now would be “disproportionate”.

Friedrich Merz, the CDU’s national leader, who himself is trying to shift his party towards a more hard-edged conservatism and has referred to the Greens as the “main enemy”, applauded Söder for his “brilliant” handling of the situation. The political fate of the three men is now interlocked; and all three already appear diminished by this sordid episode of lessons from history not learnt.

The voters will deliver their final verdict on October 8 — but there are some warning signs already. The Free Voters’ poll numbers are ticking up, while those of the CSU are slipping. In the last election, in 2018, Söder had himself toyed with an “AfD-lite” discourse. He was punished with the CSU’s lowest vote share since 1950: 37 per cent. The latest poll has it at 36. But more is at stake than the future of Germany’s last big-tent party.

Roles of government, Environment Agency and Ofwat in monitoring and enforcement of discharges by water companies under scrutiny

England’s environmental watchdog said on Tuesday it had identified “possible failures” by the government and two regulators in the way they monitor and enforce water companies’ handling of sewage spills.

The findings by the Office for Environmental Protection follow a year-long investigation as public anger has grown over the amount of raw sewage being pumped into rivers and coastal waters by water companies.

By law, the discharge of untreated effluent directly into waterways is only allowed under “exceptional circumstances” such as heavy rain. But the watchdog said the Department for Environment, Food and Rural Affairs, the Environment Agency and Ofwat, the water industry regulator, “may have interpreted the law differently, permitting such discharges to occur more often”.

Academics from Imperial College London and campaign groups have collected evidence that suggests some water companies have pumped raw sewage into coastal waters and rivers even during dry periods.

The OEP, which launched the probe after a complaint by the campaign group Wildfish, has given the government and regulators two months to respond to its findings and outline what steps, if any, they plan to take.

This is thought to be the first time the agency, which was set up post-Brexit to replace some of the oversight functions of the European Commission in Brussels, has used its powers. The watchdog can ultimately take legal action to enforce compliance.

Guy Linley-Adams, WildFish’s in-house solicitor, said: “Let’s be quite clear here. Those three public bodies are complicit in allowing the pollution. That must now end.”

The government said that it disagreed with the OEP’s “initial interpretations, which cover points of law spanning over two decades” but it said it would continue to “work constructively” on the issue with the watchdog.

The Environment Agency said it shared the OEP’s “ambition to drive improvements in water quality”, adding: “We will always take action against companies that do not follow the rules or those that are deliberately obstructive.”

Ofwat said: “We welcome the OEP’s considerations, particularly on the clarity of responsibilities for the protection of the environment and we will work with them as their investigation moves forward.”

The intervention comes as water companies face several legal cases and regulatory investigations into sewage outflows.

The Environment Agency last year launched a criminal investigation into companies’ compliance with discharge permits at sewage treatment works. Ofwat also has a separate investigation into the management of sewage treatment works, which could result in hefty fines. Neither investigation has yet been concluded.

Specialist in tank gear boxes has benefited from growing insecurity

German military contractor Renk has announced plans to list its shares on the Frankfurt stock exchange before the end of the year, as the maker of gear boxes for tanks targets expansion abroad.

The Augsburg-based company, which has said it controls 30 per cent of the global market for transmissions in military vehicles, was sold three years ago by Volkswagen to private equity group Triton in a €530mn deal.

Renk said on Tuesday that Triton would remain its largest shareholder after the intended float. It added that there would be a “meaningful free float” of shares, without saying precisely how many would be offered.

Renk makes the transmission for Germany’s Leopard 2 tank, which several countries have supplied to Ukraine for use in its counteroffensive against Russian forces.

The company has benefited from increased international insecurity as Russia’s full-scale invasion of Ukraine has prompted governments to modernise or increase their military capabilities. Renk expects revenues of between €900mn and €1bn this year and 10 per cent year-on-year growth in the “mid term”.

Chief executive Susanne Wiegand said the timing of the initial public offering would allow the company to tap into a “sustainable growth momentum in the global defence industry [and] higher needs for security”.

Aside from its military business, which accounts for about 70 per cent of sales, Renk said it was well positioned to benefit from the energy transition. The company supplies customers that manufacture and work in hydrogen technology, carbon capture and heat pumps for industrial use.

The company, which employs 3,400 people, is also a market leader in slide bearings used in electric motors and water turbines.

A string of German companies have said this year they will seek stock market listings. Sandal maker Birkenstock is seeking an $8bn valuation and medical glass producer Schott Pharma has announced plans to sell shares worth $860mn.

Renk, which is expecting profit margins this year to be in the range of 16 to 17 per cent, is expecting a valuation of roughly €2.5bn. As of June, the company had an order backlog worth €1.7bn, which it said was an all-time high.

“The global need for technological renewal of the armed forces as a result of the changing times will continue to be a driver of our growth in the future,” said Wigand when announcing the company’s most recent earnings in early September.

It's been a busy few months at Kering, and the group's to-do list just got longer following Alexander McQueen's split with its longtime creative director Sarah Burton.

LONDON — Amid a frenzy of activity over the past few months, Kering has made another abrupt move, parting ways with Sarah Burton, the longtime creative director of Alexander McQueen who took the helm of the house following the death of its namesake designer.

Alexander McQueen, which is wholly owned by Kering, and Burton said Monday they were ending their collaboration after two decades and that a “new creative organization” would be revealed in due course.

The announcement was the latest in a series of rapid-fire moves at Kering, which is looking to reshape itself as a dynamic player in an ever-more competitive space and seek new avenues of growth as sales momentum fades at its flagship brand Gucci, Saint Laurent, Bottega Veneta and Balenciaga.

Kering doesn’t break out sales for Alexander McQueen, one of its smallest brands, but it’s likely the London label contributed to Kering’s lackluster results in the first half. The brand also has a new chief executive officer, Gianfilippo Testa, who is under pressure to make changes.

Over the summer Kering snatched up the high-end fragrance house Creed for a reported $3.8 billion and then followed the deal up a few weeks later, agreeing to buy 30 percent of Valentino for 1.7 billion euros, with an option to take full control of the Italian brand by 2028.

As reported, Kering has been under pressure from activist investors to make a transformational acquisition that would put it on a more equal footing with rival LVMH Moët Hennessy Louis Vuitton and make it less reliant on Gucci, which accounted for 67 percent of the group’s operating profit last year.

Meanwhile, in May, Kering installed a new designer at Gucci, Sabato De Sarno, who’ll be showing his first collection for the brand later this month. Kering is also in the process of searching for the successor to Marco Bizzarri, the brand’s CEO, who is leaving after Gucci’s runway show on Sept. 22.

Kering also had a major management reshuffle earlier this year, granting wider powers to Saint Laurent CEO Francesca Bellettini. Those changes came against the backdrop of Kering’s weak performance in the second quarter that saw Gucci miss market expectations.

The company is still smarting from its “error of judgment” — in the words of François-Henri Pinault, chairman and CEO of Kering — at Balenciaga.

Last year, the brand released a campaign featuring children posing alongside logo beer glasses and teddy bears dressed in bondage gear. Another included a handbag resting on a page from the 2008 Supreme Court ruling “United States v. Williams,” which confirmed the promotion of child pornography as illegal and not protected by freedom of speech.

All of those events have made analysts’ heads spin and have sent Kering’s share price down 11.7 percent over the past 12 months. The shares were relatively flat Monday at 468.15 euros.

Bernstein’s Luca Solca said he was surprised by Kering’s latest move.

“It is remarkable that Kering is opening yet another front with the change of creative directors at Alexander McQueen. This only adds to the fish to fry — which were already very abundant,” said Solca.

He added that, in the broader context, Burton’s departure “confirms that the pace of change in fashion and luxury is accelerating. The creative director’s lifespan is shorter as competition for relevance and newness is increasing.”

Earlier this month, HSBC laid out the many challenges Kering is facing.

HSBC’s latest luxury goods report noted there is “no clarity” on the timing of a rebound at Gucci, “and doubts might remain on the duration of that rebound until a permanent CEO starts running the brand.” The bank said that while the Creed and Valentino brands both have merits, “these are not transformational at the group level.”

Others would disagree. In its report, TD Cowen said it believes Kering is “pivoting and optimizing the brand portfolio with the same force and flexibility as a start-up,” noting that risks remain and include a slower-than-expected turnaround at Gucci, management change integration, and slower trends in the U.S.

On Monday, no clear reason was given for McQueen and Burton parting ways.

Pinault lauded her “experience, sensitivity and talent,” and said she continued to evolve the “artistic expression of this iconic house. She kept and continued Lee [Alexander McQueen’s] heritage, attention to detail and unique vision, while adding her own personal, highly creative touch.”

Burton thanked Pinault and the late McQueen and said she was “looking forward to the future and my next chapter.”

While Kering’s move may have seemed abrupt, the group does have a reputation for granting significant power and autonomy to its creative leaders and then terminating the relationship if the business stalls, or a fashion trend runs its course.

It’s also an open question whether Burton and a succession of managers managed to transform Alexander McQueen from a designer label into a luxury brand.

A few years ago, Kering also admitted that its plan was to focus on mega-brands rather than smaller labels. It sold Christopher Kane and Stella McCartney back to their respective designers and ended its partnership with Tomas Maier for his signature brand shortly after the designer gave up the creative reins at Bottega Veneta. (Maier was succeeded by Daniel Lee, who made Bottega a hot brand during his tenure but was abruptly pushed out for undisclosed reasons only to land at Burberry, where he is now the British brand’s creative director.)

McQueen is different from those other smaller brands as Kering owns 100 percent, having purchased the remaining stake from the designer’s family not long after his death.

With a sale or spin-off unlikely, the new creative organization could mean the arrival of another British designer, which will mark the start of a new era. Whomever it is will not have worked directly with the late McQueen, who remains a legend worldwide for his distinctive silhouettes, inventive designs and couturier’s hand.

Grace Wales Bonner, with her tailoring expertise and eye for detail, might be a candidate. At the same time, Kering has a reputation for taking risks on second-in-command profiles, as it has done at Bottega Veneta and Gucci twice, and at McQueen with Burton.

Burton spent her whole career at McQueen. After studying print fashion at the Central Saint Martins College of Art and Design in the late ’90s, one of her instructors, Simon Ungless, introduced her to McQueen in 1996.

He offered her an internship at his design house. After she graduated, Burton became McQueen’s personal assistant and was promoted in 2000 to head of womenswear.

Following McQueen’s suicide in 2010, Burton was named creative director, keeping the designer’s aesthetic alive with poetic runway shows, a ravishingly dark aesthetic and pin-sharp tailoring.

She added a certain delicacy to the lavish, embellished and painterly men’s and women’s collections, and represented a sure set of hands.

She also portrayed herself as a couturier, with a big pair of scissors in the pocket of her faded jeans and straight pins at the ready, piercing the trademark navy wool sweaters she wore here and there.

She leaned into the intense craftsmanship and tailoring prowess for which Lee McQueen was known, and drew heavily on English inspirations and traditional fabrics, materials and techniques.

But she steered clear of provocation, and McQueen’s reputation for being at the cutting edge of the zeitgeist and the social conversation. The late designer was the first to cast an amputee model, tackle the issue of mental illness head-on, and livestream a fashion show. Lee McQueen’s theatrical shows in London and Paris in the ’90s arguably were the pioneer of today’s runway extravaganzas, featuring everything from indoor rain to fire to robots painting a model’s dress and more.

A quiet person who chose to live behind the scenes, rarely gave interviews and, equally rarely, if ever, took a bow at the end of the show, Burton spent her long tenure championing young designers and students.

She created a special space for them on the top floor of the brand’s Bond Street store, donated piles of deadstock to their collections and encouraged school-aged children to express their creativity with special projects during lockdown.

While she has long been an insider favorite and a designer’s designer, she catapulted to fame in 2011 after designing the wedding dresses for Kate Middleton, now Princess of Wales, and her younger sister and maid of honor, Pippa Middleton.

For the evening reception, Kate changed into another design by Burton for Alexander McQueen, a satin dress with a sweetheart neckline and beaded belt.

Burton has remained the princess’ go-to designer for special occasions. She often opts for brisk military style jackets with the signature McQueen sharp shoulder.

Following the royal wedding, Burton received the Designer of the Year Award in 2011 at the British Fashion Awards and a year later took home the royal honor of OBE or The Most Excellent Order of the British Empire, for her services in the fashion industry.

At the CFDA Awards in June 2019 Burton received the International Award.

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Bron has extensive experience in the department store sector overseas and will join the upscale Bloomingdale's in November.

Bloomingdale’s, after months of considering several candidates from around the world, has selected Olivier Bron as its next chief executive officer.

Bron, who has more than 20 years’ experience in retail leadership roles, most recently was CEO of Central Group’s Central and Robinson Department Stores in Thailand.

Prior to Central and Robinson, he served as chief operating officer and director of strategy for French retail group Galeries Lafayette in Paris, and before that spent more than a decade at Bain & Company, the global consulting firm, where he focused on retail transformations.

Bron will start working at Bloomingdale’s in November. He will report to Tony Spring, the former CEO of Bloomingdale’s who last March vacated that role to become president and CEO-elect of Macy’s Inc., the parent company of Macy’s, Bloomingdale’s and Bluemercury. Spring will succeed current Macy’s Inc. chairman and CEO Jeff Gennette, who is retiring in February.

Running Bloomingdale’s is a plum job in retailing. It’s a high-profile business with a clear image, a grip on contemporary fashion, luxury accessories and upscale home furnishings, and lots of energy. While noting that Bron will be leading Bloomingdale’s across all facets of the business and its overall strategy, Macy’s Inc. pointed out that he will also be responsible for building upon the store’s offering of designers, advanced contemporary and exclusive private brands. Bloomingdale’s has a strong chief merchant, Denise Magid.

Considering Spring spent his entire 36-year career at Bloomingdale’s before taking on the Macy’s Inc. corporate role, it’s expected he will work very closely with Bron on plans. Spring joined the store in 1987 as an executive trainee and steadily rose up the ranks through a broad range of experiences in buying, merchandising, marketing, stores and operations. A few years ago he was also given responsibilities for transforming Bluemercury.

Bron’s work history is different, being that his early career days were on the consulting side, spending 12-and-a-half years at Bain, until shifting to running department stores overseas. Bron will be relocating with his family to New York. Bloomingdale’s has offices in Long Island City, Queens, and at its 59th Street flagship in Manhattan.

“In Olivier, we have found an authentic and charismatic leader who understands and appreciates Bloomingdale’s culture, unique positioning in the marketplace, and unparalleled multicategory assortment,” Spring said in a statement Tuesday morning. “His extensive international retail career and deep knowledge of the luxury market will be invaluable as we pursue additional opportunities for growth.”

“I am honored to be named the next CEO of Bloomingdale’s,” said Bron in a statement. “Throughout its 150-plus year history, Bloomingdale’s has represented the best assortment of premium products in the marketplace. I’ve been a long time admirer of the brand and of Tony, who has built the foundation for such an incredible organization with inspiring talent and loyal customers. I look forward to building on the team’s momentum across Bloomingdale’s, including new store formats and continued digital expansion.”

The two executives were not available for further comment.

In its announcement, Macy’s Inc. credited Bron for devising and executing a strategy for sustainable growth at Central. At Galeries Lafayette, he was credited for playing “a pivotal role in driving operational efficiency and strategic planning.”

Bron has been leading Central since November 2021 when the company celebrated its 75th birthday and unveiled a five-year, 15 billion baht growth strategy, which translates to about $450 million at current exchange rates. The plan entailed store openings and renovations across Thailand; creating seamless online and offline shopping experiences; elevating products, services, the app, personalization, CRM programs and social media, and creating a big campaign for the anniversary.

At the Paris-based Galeries Lafayette, Bron was instrumental in ramping up growth with store openings in and outside France, specifically China and the Middle East.

“It’s normal that department stores don’t develop internationally because there’s no economy of scale abroad — we don’t necessarily share all of the brands, the clients aren’t the same and, in comparison with other types of businesses, there isn’t necessarily an advantage or considerable synergies to rolling out our model abroad,” Bron was quoted while at Galerie.

Still, Bron and the team were confident they had the right model for expansion abroad, Bron explained. “We will only develop abroad in regions where the brand awareness of Galeries Lafayette is the strongest,” Bron said.

Within the U.S. department store sector, Bloomingdale’s has been getting the highest reviews from consumers, primarily for quality luxury and contemporary offerings, crisp displays and an energized shopping experience abetted by associations with pop culture. The business has generally been performing well, though comparable sales were down 2.6 percent in the second quarter this year. Bestselling categories were beauty, women’s contemporary and designer apparel, shoes and the outlet locations, while handbags, men’s and dresses were soft.

Though business has been tough, Bloomingdale’s seems destined for increased support from corporate for expansion, particularly due to Spring’s intimate knowledge of the chain, including his last nine years as CEO and chairman there. He knows the opportunities.

With only 34 stores and 20 outlets there’s room for additional Bloomingdale’s in Texas, Arizona and the Northwest, where there are no stores, and markets that already have Bloomingdale’s could be filled in with Bloomies units, which are scaled-down versions of the department store. There are two Bloomies in operation, a 22,000-square-foot site in the Mosaic District lifestyle center in Fairfax, Va., and a 51,000-square-foot unit in the Westfield Old Orchard Mall in Skokie, Ill. A third Bloomies is scheduled to open in November in the University Village in the Ravenna neighborhood north of downtown Seattle. The expansion signals that it’s so far, so good with the small-store strategy, though too soon to green-light an aggressive rollout.

The Bloomies specialty store is small compared to Bloomingdale’s department stores, which average 150,000 to 200,000 square feet (excluding the flagship, which is about 600,000 square feet). Bloomingdale’s SoHo, at 78,000 square feet of selling, is the upscale chain’s second-smallest store, and Bloomingdales’s outlets average 25,000 square feet.

Opportunities overseas could be considered. Bloomingdale’s only has two international stores, which are licensed units in Dubai and Kuwait. Bloomingdale’s will also advance its online business, which was developed late in the game compared to Macy’s and other retailers. Also, Bloomingdale’s just launched a marketplace format on its website enabling the retailer to broaden its assortment.

Pre-pandemic, Bloomingdale’s annual volume was about $3 billion. Last year, the brand went all out to mark its 150th birthday.

Bloomingdale’s longevity and success stem from a culture of merchandising innovation and fashion risk-taking, a sense of theater, cautious expansion, an eclectic upscale assortment ranging from accessible to luxury, and continuity of management and ownership. In the last 50 years there have been only three CEOs, and the retailer has had only three owners in its 150 years in business.

But we are firmly in the realm of tinkering while Rome burns

Privatisation talk is in the air as Italy prepares its 2024 budget. Finance minister Giancarlo Giorgetti has been dropping some heavy hints. Yet it is hard to see the government led by Prime Minister Giorgia Meloni relinquishing any measure of control over the local economy. The outcome could be a privatisation molehill, rather than a mountain. 

Italy is struggling under a debt load that is above 140 per cent of GDP. The market value of stakes in companies might be some €50bn-€60bn. But Italy is unlikely to have the appetite for anything like that sort of a sale. 

The government has more than a few heirlooms in its attic. These include large stakes in energy giants Eni, Enel, Snam, and Terna. The state also owns all of rail group Ferrovie Dello Stato, and is set to plough a couple of billion euros into private equity giant KKR’s takeover of Telecom Italia’s network.

The balance is a lucky dip comprising shares in troubled lender Monte dei Paschi, postal service Poste Italiane and defence group Leonardo.

Meloni’s rightwing politics do not embrace free markets, however. Witness the summer’s misguided windfall tax on banks and a mooted cap on airfares.

Debt rules meanwhile create disincentives to sell-offs. Under Italian law, proceeds from asset sales cannot fund budget deficits. They can only be counted to offset debt. And even tens of billions of euros would be a drop in the ocean compared with Italy’s €2.8tn of debt. 

This means the government may limit itself to sales that are clearly necessary, or easy to do. This suggests it will press forward on the sale of 41 per cent of Ita Airways to Lufthansa, via a €325mn capital increase. It may accelerate the sale of its 64 per cent stake in bailed-out bank Monte dei Paschi, which has a market capitalisation of €3.2bn. And it may trim its shareholdings in Poste and energy group Eni, while maintaining control.

None of these are bad ideas. But we are firmly in the realm of tinkering while Rome burns.