WWD : Stéphane Rinderknech Named Chief of LVMH Perfumes and Cosmetics, Other Key

Stéphane Rinderknech Named Chief of LVMH Perfumes and Cosmetics, Other Key Appointments Made
Véronique Courtois heads up Parfums Christian Dior, while Gabrielle Saint-Genis Rodriguez takes the reins of Guerlain.

PARIS — Stéphane Rinderknech has been appointed chairman and chief executive officer of LVMH Moët Hennessy Louis Vuitton’s Perfumes and Cosmetics division.
In the role, he oversees all of the group’s 15 beauty brands, organized under Parfums Christian Dior, Guerlain, LVMH Fragrance Brands and Kendo. Rinderknech, who entered LVMH in 2022, also continues leading LVMH Hospitality Excellence, which includes Hôtels Cheval Blanc and Belmond Hotels and trains. He remains a member of the group’s executive committee as well.
“The appointment of Stéphane Rinderknech at the head of the beauty division completes the reorganization of the group by category,” said Bernard Arnault, chairman and CEO of LVMH and head of Financière Agache, the main family holding company, in a statement.

“Stéphane has since his arrival guided the rebound of our hotel activities with considerable strategic agility, driving tremendous momentum across the entire organization,” Arnault continued. “This experience in a new industry confirmed his ability to adopt, his leadership and direct engagement with teams. His deep understanding of the beauty industry will help him leverage the unique assets of each of our maisons.”

Reporting to Rinderknech in new appointments are Véronique Courtois, who takes up the reins of Parfums Christian Dior, and Gabrielle Saint-Genis Rodriguez, who now steers Guerlain.

“I am delighted with the appointment of Véronique Courtois, who continues her exceptional career path within the LVMH group,” Arnault said. “Over the seven years, during which she was in charge of products and image at Parfums Christian Dior, she significantly elevated the desirability of the maison.

“The success of Sauvage, the world’s leading fragrance, is a prime example of her remarkable contributions,” he added. “Since 2019, Véronique has also done a tremendous job elevating the maison Guerlain. She will draw on her experience to open a new chapter in the growth of Parfums Christian Dior.”

At Dior, Courtois succeeds Laurent Kleitman, who is leaving the company.

“The LVMH group extends its sincere thanks to Laurent for his contributions to the growth, especially during the health crisis, and to the rapid digital transformation of Parfums Christian Dior, as well as for his remarkable human qualities,” LVMH said in the statement. “The group wishes him every success in his future endeavors.”

Saint-Genis Rodriguez for the past four years has served as Make Up For Ever’s CEO.

“Gabrielle Saint-Genis Rodriguez, who has been in the LVMH group for 11 years, followed an admirable journey, meeting many challenges,” Arnault said. “With her leadership and commercial expertise, she was responsible for increasingly important markets at Parfums Christian Dior, contributing to the success of the maison. More recently, she has spurred dynamic momentum at Make Up For Ever with innovative products and highly effective initiatives. Gabrielle has all the required qualities to add wonderful new chapters to the story of maison Guerlain.”

It is the first time Parfums Christian Dior and Guerlain have female CEOs.

Succeeding Rodriguez at Make Up For Ever is Charles-Henri Levaillant, since November 2020 digital and client development director at Louis Vuitton.

“With his successful entrepreneurial background, Charles-Henri Levaillant joined the LVMH group after holding key positions in several other industries,” Arnault said. “At LVMH, he first held a role in the strategic department, gaining a global vision of our business. Since 2020, he has successfully overseen digital developments at Louis Vuitton, accelerating growth and improving the client experience. He will now leverage his experience as he takes up a new operational challenge at the head of Make Up For Ever.”

Meanwhile, Claude Martinez has been appointed chairman and CEO of GAIA, LVMH’s research and innovation center and becomes an adviser on innovation to Arnault.

In November 2019, Martinez stepped down from steering Parfums Christian Dior and took on the title of managing director of LVMH Perfumes and Cosmetics, with oversight of Guerlain, Parfums Givenchy, Parfums Kenzo and Parfums Christian Dior.

“I want to thank Claude for his achievements at Parfums Christian Dior for more than 20 years,” Arnault said. “With his sharp eye and remarkable determination, he has led this magnificent maison to a global leadership position at the very high-end of the market, spreading its unique values of elegance thanks to innovative products, coupled with refined and contemporary communication.

“More recently, he took on a broader role within the beauty division,” the executive said. “I am delighted to see Claude take on the leadership of an initiative with great potential for the LVMH group, our new GAIA research center. I am also pleased that we will benefit from his experience through is role as advisor to topics related to innovation.”

A seasoned beauty executive, Rinderknech spent most of his career at L’Oréal, lastly — between 2019 and 2022 — as the company’s president of the North America Zone, CEO of L’Oréal USA and a member of the group’s executive committee.

For decades there has been no one executive helming LVMH’s Perfumes and Cosmetics division. It’s a big and fast-growing business. In 2022, the division generated sales of 7.72 billion euros, up 17 percent on-year.

LVMH ranked sixth in the most recent WWD Beauty Inc Top 100 listing of beauty manufacturers, which reflected 2021 sales and was published in April 2022.

The grouping of all of LVMH’s fragrance and cosmetics holdings under one executive’s purview comes at a time when the beauty industry’s competitiveness is ramping up.

As groups like L’Oréal keep gaining market share, LVMH’s rival Kering is diving back into the beauty game full-force. As previously reported, Kering in early February revealed it had hired a seasoned Estée Lauder Cos. executive, Raffaella Cornaggia, to develop the beauty category, taking brands such as Bottega Veneta, Balenciaga and others in-house, as starters.

The executive shift in LVMH’s Perfumes and Cosmetics division comes two months after a spate of leadership changes shook the top of Louis Vuitton and Dior, LVMH’s flagship fashion houses. Pietro Beccari was named chairman and CEO of Louis Vuitton and Delphine Arnault was named CEO of Dior.

Rinderknech is a graduate of ISG Business School in Paris. He began at the world’s largest beauty company in 2002, within its American travel retail division, then accrued additional responsibilities when taking on positions in Japan and South Korea.

Rinderknech moved to China in 2011, first as general manager of L’Oréal’s Luxe division, then as head of the Consumer Products division before being promoted to president and CEO of L’Oréal China for all divisions and corporate operations.

Rinderknech became a member of L’Oréal’s executive committee in 2018 and a year later assumed the management helm of L’Oréal USA.

Hailed as a rising star and viable candidate to be CEO of L’Oréal’s global operations one day, Rinderknech was responsible for increasing the company’s China business by 30 percent during his time as CEO of that division. His strength in digital marketing — e-commerce accounted for 40 percent of L’Oréal’s sales in the country when he left — was a key driver behind his appointment in the U.S., where Rinderknech was charged with accelerating L’Oréal’s digital transformation.

At LVMH under Rinderknech is also Stéphanie Medioni, executive president of LVMH Perfumes and Cosmetics, who will retain the responsibility for Aqua di Parma, Benefit Cosmetics, Fresh, Make Up For Ever, Maison Francis Kurkdjian, Loewe Parfums Officine Universelle Buly and Stella by Stella McCartney.

Also reporting to Rinderknech will be Hugues Dusseaux, deputy president of the beauty division; Maud Alvarez-Pereyre, global senior vice president of human resources at LVMH Beauty; Bruno Bavouzet, R&D executive vice president at LVMH, and Jean-Michel Moutin, chief operating officer of LVMH Beauty.

While LVMH is known for growing and grooming executive talent from within, it has recruited a number of high-profile L’Oréal executives in recent years, including Renaud de Lesquen, president and CEO of Givenchy; Damien Bertrand, CEO of Loro Piana, and Pierre-Emmanuel Angeloglou, executive vice president, strategic missions for fashion and leather goods at Louis Vuitton.

The last person to oversee all of LVMH’s beauty holdings was Patrick Choël, who held the title of president of LVMH’s Perfume and Cosmetics division for six-and-a-half years, until retiring from that role in March 2004. That division was restructured after his departure. Under the-then new organization, brand chiefs no longer reported directly to one executive on all business matters.

Martinez, who at the time was president and CEO of Parfums Christian Dior, began also overseeing brand synergies, such as research and development and purchasing, and reported directly to Arnault. Other brand heads began reporting to Antonio Belloni, LVMH’s group managing director.

Belloni and Chantal Gaemperle, executive vice president of human resources and synergies at LVMH, have helped spearhead the divisional shifts at the group.

FT : Can Balenciaga change the narrative?

Can Balenciaga change the narrative?
Kering senior management went on a charm offensive as Balenciaga and Alexander McQueen returned to the runway at Paris Fashion Week

At Balenciaga’s autumn/winter 2023 show on Sunday morning, François-Henri Pinault, the billionaire chair of Balenciaga owner Kering, and Cédric Charbit, the brand’s chief executive, walked up and down the front row smiling and shaking hands with editors.

The handshaking, and the show that followed, were meant to spark a reset at Balenciaga, which was Kering’s second-fastest growing brand until a pair of ad campaigns — one showcasing children alongside bondage-inspired accessories and empty wine glasses — backfired late last year, leading US cable channel Fox News to (sensationally) accuse the brand of promoting paedophilia.

Charbit and Balenciaga creative director Demna Gvasalia (who prefers to go by only his first name professionally) took more than a week to apologise for the campaign and condemn child abuse. Sales took a hit, and Kim Kardashian, the brand’s principal ambassador and campaign star, has publicly distanced herself from the brand.

She and other celebrities were missing at Sunday’s show, held in the subterranean Carrousel du Louvre, a storied if modest show venue by Balenciaga standards. Missing too were the awe-inspiring show sets of the past few seasons, which saw models (and Kanye West) trudging through mud pits and blizzard-like conditions, to be replaced by a windowless space carpeted in clean white muslin, the material traditionally used to work out the shape of garments before fabric is tacked on.

That left the eye to rest on the models and the clothes. In a note left on each guest’s seat, Demna wrote that fashion had become “an entertainment”, and that he wanted to refocus on its essence — “the art of making clothes”. That mainly meant tailoring, with wide-shouldered jackets that blended seamlessly into the top halves of trousers — pockets and belt-loops included — and trousers cut with four legs instead of two.

Was it a different Balenciaga? Not at all. The casting was much the same. As were the ways the models’ bodies were enlarged and distorted through cut and proportion. Rounded and high-shouldered men’s jackets in black leather made the models look hunchbacked and predatory — interesting, yes, but perhaps not the best look for Balenciaga right now. The pleated, cape-back evening dresses may do more for its image rehabilitation, if the brand can get them on the red carpet again (it worked for Dolce & Gabbana).

It felt more like a reset — and a very good one — at fellow Kering brand Alexander McQueen, which on Saturday returned to the Paris Fashion Week schedule for the first time since the start of the pandemic. It was also the first under Gianfilippo Testa, who joined Alexander McQueen as chief executive officer last May from fellow Kering brand Gucci.

Actor Eddie Redmayne, unmissable in a red coat, looked on as the model Naomi Campbell stepped out in an immaculately tailored black jumpsuit swept in a double arc at the breast. A pair of wide-leg black leather trousers with a deep single-pleat front, suits with hand-painted pinstripes and simple, perfect trenchcoats in beige cotton and aubergine leather were further testament to the brand’s tailoring abilities. For the red carpet, there were anatomical dresses in technical fabrics and white braided wool that hinted at the skeletal and muscular structures of the bodies beneath.

Backstage, designer Sarah Burton, who worked with Lee McQueen for 14 years before she succeeded him as creative director in 2010, said she wanted to get “almost back to the beginnings of McQueen”, which meant a return to tailoring and Savile Row, where McQueen learnt his craft. “During Covid, working at home, you had to really work with what you had,” Burton explained. “So we went back to construction, went back to techniques of tailoring and dressmaking, that felt like very early McQueen, where we began.”

“It feels important to be grounded now,” she continued. “The world is in such chaos.” It’s another reason for wanting to shift the conversation back to clothes.

FT : Silver Lake and Canadian pension fund bid $12bn for Qualtrics

Silver Lake and Canadian pension fund bid $12bn for Qualtrics
Deal for survey software group would be one of largest this year

US private equity group Silver Lake and one of Canada’s largest pension funds have offered to buy Qualtrics for $12.4bn in what would be one of the largest deals of the year.

The potential transaction comes as SAP, Qualtrics’ majority owner, looks to divest a 71 per cent stake as part of restructuring at the German software group.

SAP acquired Qualtrics, a seller of software tools companies use to survey customers and employees, for $8bn in 2018 and listed it in the US three years later.

After notifying shareholders of its plan to divest its stake, Silver Lake, which owns a 4.1 per cent stake in Qualtrics, expressed interest in taking the Utah-based software company private last month.

Silver Lake and the Canada Pension Plan Investment Board, its partner on the proposed buyout, are offering to pay $18.15 for Qualtrics, or a 6 per cent premium to Friday’s closing share price.

The price represents a 73 per cent premium from Qualtrics trading value before SAP notified shareholders of its intention to divest its stake.

>>> US Research Calls

Research Calls

  • Upgrades:
    • Emerson (EMR) upgraded to Buy from Neutral at UBS; tgt lowered to $97
    • HashiCorp (HCP) upgraded to Buy from Hold at Needham; tgt $39
    • Meritage (MTH) upgraded to Overweight from Neutral at JP Morgan; tgt $129
    • Monster Beverage (MNST) upgraded to Buy from Neutral at Redburn; tgt $120
    • REV Group (REVG) upgraded to Outperform from Neutral at Robert W. Baird; tgt $16
    • Ternium S.A. (TX) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt raised to $52
    • Vir Biotechnology (VIR) upgraded to Overweight from Neutral at JP Morgan; tgt lowered to $34
  • Downgrades:
    • Allbirds (BIRD) downgraded to Neutral from Outperform at Wedbush; tgt $3
    • D.R. Horton (DHI) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $102.50
    • Energy Vault (NRGV) downgraded to Neutral from Buy at Guggenheim
    • Healthcare Realty (HR) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $20
    • Intercontinental Hotels Group (IHG) downgraded to Equal Weight from Overweight at Barclays
    • KB Home (KBH) downgraded to Underweight from Overweight at JP Morgan; tgt lowered to $32.50
    • Silvergate Capital (SI) downgraded to Underperform from Neutral at Wedbush; tgt lowered to $4
    • Wendy's (WEN) downgraded to Neutral from Buy at Northcoast
  • Others:
    • Apple (AAPL) initiated with a Buy at Goldman; tgt $199
    • Bristol-Myers (BMY) initiated with a Hold at Jefferies; tgt $62
    • Eli Lilly (LLY) initiated with a Hold at Jefferies; tgt $290
    • General Electric (GE) assumed with a Neutral at JP Morgan; tgt $88
    • Merck (MRK) initiated with a Buy at Jefferies; tgt $125
    • Nextracker (NXT) initiated with a Buy at ROTH MKM; tgt $45
    • Nextracker (NXT) initiated with a Buy at Truist; tgt $40
    • Nextracker (NXT) initiated with a Neutral at BofA Securities; tgt $36
    • Nextracker (NXT) initiated with a Neutral at Citigroup; tgt $36
    • Nextracker (NXT) initiated with a Sector Outperform at Scotiabank
    • Nextracker (NXT) initiated with a Sector Weight at KeyBanc Capital Markets
    • Nextracker (NXT) initiated with an Outperform at Exane BNP Paribas
    • Nextracker (NXT) initiated with an Overweight at Barclays; tgt $42
    • Nextracker (NXT) initiated with an Overweight at JP Morgan; tgt $42
    • Pfizer (PFE) initiated with a Hold at Jefferies; tgt $43
    • SolarEdge Technologies (SEDG) initiated with a Sector Weight at KeyBanc Capital Markets

>>> US Gapping down

Gapping down

News:

  • ACRS -36.5% (preliminary topline data from 12-week phase 2a study of oral zunsemetinib; study did not meet primary or secondary efficacy endpoints)
  • ESPR -26.2% (reports Landmark CLEAR outcomes study demonstrates NEXLETOL tablet is the only LDL-C lowering therapy since statins to reduce hard ischemic events)
  • ADAP -25.6% (Adaptimmune Therapeutics and TCR² Therapeutics (TCRR) announce strategic combination)
  • DV -3.8% (launches offering of 12.5 mln shares of common stock by Providence VII U.S. Holdings L.P. and Providence Butternut Co-Investment L.P.)
  • INCY -2.7% (to discontinue Phase 3 LIMBER-304 trial following results of a pre-planned interim analysis)
  • RNG -2.2% (files for 1,265,456 share common stock offering by selling shareholders)
  • PGTI -1.9% (CFO John Kunz has stepped down, effective Feb 27)
  • AL -1.9% (announced long-term lease placements for three new Airbus A350-900 widebody aircraft with Air France)
  • AVB -1.5% (reports February operating metrics)
  • NSC -1.5% (Second NSC train derails in Ohio about a month after East Palestine derailment; no hazardous materials were involved, according to NYT)
  • CBOE -1.1% (Reports Trading Volume for February)

Analyst comments:

  • SI -8.7% (downgraded to Underperform from Neutral at Wedbush)
  • BIRD -2.3% (downgraded to Neutral from Outperform at Wedbush)
  • KBH -1.4% (downgraded to Underweight from Overweight at JP Morgan)
  • WEN -1.4% (downgraded to Neutral from Buy at Northcoast)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • AZUL +21.4%, CIEN +10%, CECO +5.1%, RIDE +1.8%

Other news:

  • BBIO +57.5% (Phase 2 Cohort 5 Results of Infigratinib in Achondroplasia Demonstrating Mean Increase in Annualized Height Velocity of 3.03 cm/year with No Treatment-related Adverse Events)
  • TCRR +33.1% (Adaptimmune Therapeutics (ADAP) and TCR² Therapeutics (TCRR) announce strategic combination)
  • MLYS +5.9% (Presents Positive Lorundrostat Results from the Phase 2 Target-HTN Trial at ACC.23/WCC)
  • ATAI +5.1% (Announces Key Clinical Pipeline and Corporate Updates)
  • RLYB +4.9% (announced that clinical proof-of-concept has been achieved in a Phase 1b study for RLYB212)
  • IVVD +3.4% (announces the election of VYD222 to advance into the clinic as a novel monoclonal antibody therapeutic option for COVID-19)
  • CYTK +3.3% (Presents Results From Cohort 4 of REDWOOD-HCM and Long-Term Results From FOREST-HCM at the American College of Cardiology 72nd Annual Scientific Session)
  • SSB +2.5% (enters into separation and transition agreement with Exec Chairman)
  • SLM +2% (CFO Steven McGarry to retire in Feb 2024; co is conducting an extensive search to identify his successor)
  • ETNB +2% (Presents New Analysis of Data from Phase 2 ENTRIGUE Trial of Pegozafermin in Patients with Severe Hypertriglyceridemia (SHTG) at American College of Cardiology's Annual Scientific Session Together with World Congress of Cardiology)
  • NGL +1.4% (signs agreements to sell marine assets for $111.65 mln)
  • GATO +1.3% (Provides Bi-Weekly Status Report)
  • AMRN +1% (reports New REDUCE-IT Data at ACC.23/WCC Showing Benefit of VASCEPA/VAZKEPA (Icosapent Ethyl) in High-Risk Patients with a Recent Acute Coronary Syndrome Event)

Analyst comments:

  • VIR +5.1% (upgraded to Overweight from Neutral at JP Morgan)
  • MTH +1.2% (upgraded to Overweight from Neutral at JP Morgan)

WSJ : KKR Could Lose the Battle for Telecom Italia—and Win the War

KKR Could Lose the Battle for Telecom Italia—and Win the War

It is now KKR versus the Italian government in the battle for control of Italy’s broadband network. If that sounds like an unequal fight, it is—but that might work out fine for the U.S. private equity group.

Shares in Telecom Italia, Italy’s old telecommunications monopoly, jumped at the European open on Monday after it said late Sunday that it received a bid for its fixed-line network from a consortium comprising Italian state fund CDP and Australian infrastructure investor Macquarie. KKR bid for the network last month, having previously floated the idea of buying the entire company.

But this is no conventional bidding war. Everyone involved already has links with the asset. The most likely outcome is some kind of deal that works out for all parties—with the awkward exception of top Telecom Italia shareholder Vivendi.

CDP already owns about 10% of Telecom Italia, and Rome can veto the sale of assets deemed of strategic national value. CDP and Macquarie own a smaller broadband network, Open Fiber, that Rome has long wanted to merge with Telecom Italia’s. Meanwhile, KKR already has a minority stake in part of the Telecom Italia network now for sale. Losing the current bidding process could simultaneously hand it a profitable exit.

One uncertainty is the European Union antitrust process, which could get in the way of a network merger arranged by CDP. Another is Vivendi, whose 2015 bet on Telecom Italia has misfired badly. With an almost 24% stake it can vote down any deal, but its price expectations for the network business seem unrealistically high.

Yet the fresh bid does make it a bit more likely that something, finally, will happen to restructure debt-laden Telecom Italia—and bring Italy further into the digital age.

WSJ : Tech Giants Are Chipping In Fast on AI

Tech Giants Are Chipping In Fast on AI
Broadcom describes a sense of urgency among data-center operators scaling up to meet demand

Tech giants are moving fast on artificial intelligence, even if they have to hit the brakes elsewhere.

The latest confirmation of that trend came from an unexpected source. Broadcom, AVGO 5.70% a chip maker most commonly associated with radio-frequency components used in the iPhone, used its fiscal first-quarter results late last week to discuss the increase in business it is seeing from customers scrambling to beef up their networks for generative AI—the technology made popular by the ChatGPT chatbot tool that Microsoft is now wrapping into its Bing search engine to take on rival Google. Google is responding by working to integrate its own generative AI technology into its search tool.


The search announcements from both companies took place last month and don’t seem to have been the result of years of quiet planning. Broadcom Chief Executive Officer Hock Tan said on Thursday’s earnings call that a jump in AI-driven demand for his company’s data-center components “happened over the last 90 days.” He expects sales of the company’s Ethernet switch products deployed for AI uses to exceed $800 million this year compared with $200 million last year. He also said that generative AI is giving a boost to the company’s “compute offload accelerated business” at the major tech players, revenue from which he expects to hit $3 billion in the current fiscal year compared with $2 billion last year.

Broadcom is hardly the only chip maker looking to capitalize on the AI boom. The computational demands of generative AI are such that even those running already massive cloud-computing networks need to boost their capabilities to handle the extra load. In its own earnings call two weeks ago, Nvidia projected a pickup in sales for its data-center segment and announced a new business to provide access to its AI software tools. Nvidia’s shares have jumped 15% since those results and are now up 63% for the year. Broadcom’s shares rose nearly 6% on Friday—the stock’s biggest post-earnings move in more than a year.

Still, data-center suppliers won’t be getting blank checks this year. The tech titans that operate the largest networks— Amazon, Microsoft, Google-parent Alphabet and Facebook -parent Meta Platforms—spent $99 billion combined last year on data-center capital expenditures, according to estimates from Dell’Oro Group. That is up 36% from the year before, setting up for a major step down this year as those companies digest their spending and deal with their own slowing core businesses. Dell’Oro Research Director Baron Fung estimates that data-center capital expenditures by the four aforementioned companies will rise only in the high-single-digit percentage range this year.

That deceleration won’t be shared equally, though. Marvell Technology saw its shares slip nearly 5% on Friday following its own results that included a disappointing revenue forecast for the current fiscal quarter ending in April. The company says data-center customers are working through inventory in areas such as controllers for data storage, though CEO Matt Murphy noted on the company’s call that the same customers are “prioritizing key growth areas such as AI and [machine learning], with potentially much larger investment over the next few years.”

That is a good situation for Broadcom, which has been relatively quiet about its AI efforts and is sometimes penalized by investors for its heavy exposure to Apple Inc. given the iPhone maker’s well-known desire to design more of its own chips. Analyst Stacy Rasgon of Bernstein says Broadcom’s latest disclosures makes it an underappreciated play in the AI space, with a valuation far cheaper than other chip makers such as Nvidia and AMD that have ridden high on the market’s hype about the technology.

It is a good time to have some chips in the AI game.

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • TCRR +42.1%, SSB +4.1%, SLM +2%, ETNB +1.6%, CYTK +1.3%, GATO +1.3%, BIIB +0.8%, UMC +0.7%, GOOD +0.6%
  • Gapping down:
    • ESPR -21.9%, ADAP -15.3%, PGTI -2.7%, RNG -2.1%, MLYS -2%, AVB -1.5%, INCY -1.5%, CBOE -1.1%, WEN -1%, DVN -0.8%

WSJ : EV Startups Brace for Another Tough Year as Cash Dwindles

EV Startups Brace for Another Tough Year as Cash Dwindles
After worrying about producing enough autos, young electric-vehicle makers are now concerned about selling them

For many of the electric-vehicle startups, last year was rife with supply-chain constraints and manufacturing troubles that hindered their efforts to get off to a fast start.

Now, young companies such as Rivian Automotive Inc. RIVN 7.63% and Lucid Group Inc. LCID 4.81% are facing a more pressing challenge this year: They need to right their factory operations before running through their cash reserves.

The earnings results over the past few weeks for these EV makers illustrated the urgency of their predicament. While these companies are now producing vehicles, losses continue to mount as they have struggled to spool up assembly lines and boost sales as planned, whittling down their financial cushions and increasing the likelihood of needing to raise more money.

Rivian, once flush with capital after raising nearly $12 billion in an initial public offering in 2021, burned through $6.6 billion in cash last year. Analysts predict it could go through another roughly $6 billion based on projected expenses for this year.

Despite cost-cutting measures and efforts to increase output at its sole factory in Normal, Ill., executives are still anticipating a difficult year. Rivian forecast in February it would make 50,000 electric trucks, sport-utility vehicles and vans in 2023, well below Wall Street’s estimates and a figure that sent its stock down 18% the following day.

Lucid, a maker of high-end electric sedans, also fell short on some fronts, reporting a drop in reservations in the last half of the year, to 28,000 at the end of December from 37,000 in June and setting an underwhelming production target for this year.

“Last year, our focus was on solving production bottlenecks,” Lucid Chief Executive Peter Rawlinson said. “Now in terms of sales, that’s my focus right now.”

Fisker Inc., FSR 3.10% a California-based EV startup that went public in 2020 through a reverse-merger deal, had a more upbeat earnings report, telling investors it plans to deliver its first model—the electric Ocean SUV—in the coming months. The company’s shares surged 30% following the February earnings announcement.

Still, Fisker faces a tight timeline to hit its full-year production target and has little leeway for error. The company reported it had $736 million in cash at the end of 2022 and said it expected expenses to total up to $610 million this year.

The landscape for these startups has dramatically shifted from when they initially went public in 2020 and 2021.

Investor zeal for companies promising to reshape the car business was running high then, and the financial markets were pouring cash into the EV space, hoping to find the next Tesla Inc. These aspiring auto manufacturers raked in billions of dollars before they made or sold a single car.

In all, investors have plowed over $123 billion in these EV startups through public offerings, reverse-merger deals and other funding mechanisms in the past three years, according to Dealogic.

Within the past year, though, Wall Street’s patience for the startups’ manufacturing woes has started to evaporate.

Some EV startups such as Lordstown Motors Corp. RIDE 5.66% , Faraday Future Intelligent Electric Inc. FFIE 12.16% and Nikola Corp. NKLA 1.90% already hit cash problems forcing them to delay vehicles and scale back their ambitions.

Others, such as Polestar Automotive Holding UK PSNY -2.24% PLC, have posted better sales and a slimmer net loss than expected. The Swedish startup expects sales volume to increase by 60% this year to 80,000 units and recently raised $1.6 billion, which executives say is sufficient to fund operations this year.

Meanwhile, the strong car demand that helped push up vehicle prices across the board over the past few years is starting to weaken. Some EV makers have already adjusted prices down or are offering discounts.

Analysts say the need for raising capital could grow as these startups struggle with the costs of scaling their business and as capital markets are tightening.

Rivian’s stock is down about 80% from its IPO price, after it cut its production target in half last year and still narrowly missed the 25,000-goal by about 700 vehicles, due to missing parts.

This year, Rivian is planning more downtime at its factory to reorganize the line to produce more cars. It has already had two rounds of layoffs and delayed key projects, such as its next generation of vehicles, to preserve cash. Executives say supply-chain constraints, particularly on semiconductors, will continue to dent its production numbers this year, but it has enough cash to last until 2025.

Lucid recently raised $1.5 billion in funding from a share sale and had a total of $1.74 billion in cash and cash equivalents at the end of December—enough to last until the first quarter of 2024, executives say. The Newark, Calif.-based startup offered a cautious view on the year, though, and raised concerns about consumer demand.

Fisker said it had sufficient cash to launch its first vehicle, the Ocean, but said it was also examining raising more funds from lenders.

The auto industry has long been a capital-intensive business difficult for newcomers to penetrate. Tesla posted losses for years, while it struggled to build manufacturing scale, and relied on regular cash injections to stay afloat.

“The hard part is building the cars and the entire supply chain that goes with the cars,” Tesla Chief Executive Elon Musk said Wednesday. “This is a logistics challenge of extraordinary difficulty.”

In many ways, this new crop of EV startups faces a more difficult path. Tesla had few rivals for its cars when it launched the Model S over a decade ago, said Doug Betts, president of the automotive division at data-analytics company J.D. Power.

Now, these startups are also going up against more traditional car companies that have established supply chains and massive manufacturing operations. Competition is also getting fierce on the luxury end of the EV market, which is where these young companies are trying to target customers, analysts say.