Gapping down
In reaction to earnings/guidance:
- CHKP -4.2%
Other news:
- FRC -45.9% (JPMorgan Chase (JPM) acquires substantial majority of assets and assumes certain liabilities of First Republic Bank)
- PLRX -15% (announces positive long-term data from the INTEGRIS-IPF Phase 2a Trial Demonstrating Bexotegrast was well tolerated at 320 mg with durable improvement shown in FVC and across multiple measures)
- MANU -5.3% (Sheikh Jassim bin Hamad Al Thani submitted final GBP 5 bln bid for Manchester United)
- ALPN -3.2% (files for $400 mln mixed securities shelf offering)
- VIRT -2% (has been responding to requests for information from SEC re its information access barriers; may receive a Wells Notice if no settlement reached)
- FGEN -2% (announced a non-dilutive term loan facility with investment)
- NE -1.4% (announces changes to its share capital)
Analyst comments:
- ARCB -1.7% (downgraded to Underperform from Neutral at BofA Securities)
- PFG -0.5% (downgraded to Neutral from Buy at BofA Securities)
Gapping up
In reaction to earnings/guidance:
- SOFI +6.4%, PK +4.1%, EHTH +2.7% (guidance), KBR +2.7%, L +2.2%, NCLH +2.2%
Other news:
- ISEE +18% (to be acquired by Astellas for $40 per share in cash)
- ASND +17.4% (FDA issues complete response letter for TransCon PTH in hypoparathyroidism)
- JSPR +3.8% (files $250 mln mixed shelf securities offering)
- JPM +3.5% (JPMorgan Chase (JPM) acquires substantial majority of assets and assumes certain liabilities of First Republic Bank)
- LI +3.4% (April deliveries)
- ARQT +3.3% (Announces Canadian Approval of ZORYVE)
- MLCO +2.6% (Macau gaming revs)
- WYNN +2.4% (Macau gaming revs)
- LVS +2.1% (Macau gaming revs)
- IMTX +2.1% (announced that Bristol Myers Squibb (BMY) has exercised its option and entered into an exclusive worldwide license for the first T cell receptor engineered T cell therapy candidate from their ongoing collaboration)
- NIO +0.9% (April deliveries)
- XPEV +0.9% (April deliveries)
Analyst comments:
- ALHC +4.8% (upgraded to Outperform from Mkt Perform at Raymond James)
- BIRD +4% (upgraded to Outperform from Market Perform at Telsey Advisory Group)
- ZG +1.8% (upgraded to Mkt Perform from Underperform at Bernstein)
- CMCSA +1.1% (upgraded to Buy from Neutral at BofA Securities)
Early premarket gappers
- Gapping up:
- ISEE +17.8%, EHTH +11.7%, GATO +10.6%, JPM +3.1%, ARQT +3%, LI +3%, SNY +3%, MLCO +2.6%, L +2.2%, RCMT +2%, XPEV +1.1%, LVS +1.1%, KBR +1%, WYNN +0.6%, PH +0.5%, NIO +0.5%
- Gapping down:
- FRC -45.9%, MANU -9.3%, ALPN -3.2%, VIRT -2.7%, NE -2.1%, HEAR -2%, PLRX -1.8%, FE -1.2%, PK -0.9%
Tiffany’s Landmark Opening Brings Glitz and BTS to New York
LVMH continued its Tiffany spending spree with a blowout celebration to mark The Landmark's opening — drawing celebrities, collectors, business titans and others from across the globe.
The store, which had been under gut renovation for four years, drew A-list celebrities like BTS’ Jimin, Pharrell, Anya Taylor-Joy, Michael B. Jordan, Gabriele Union and Dwyane Wade, and Florence Pugh; a fleet of hobnobbing billionaires, such as Stephen Schwarzman and Leon Black, or mere multimillionaires like Larry Gagosian; five Arnaults (including the richest man in the room and world, luxury titan Bernard Arnault); LVMH Moët Hennessy Louis Vuitton executives including Sidney Toledano and Michael Burke; hundreds of journalists that the brand flew in from overseas — plus thousands of fans outside that made Fifth Avenue look like a parade route.
“I had to stop the car from three blocks away and walked here, it couldn’t make it through,” said Tiffany chief executive officer Anthony Ledru on the spectacle.
It was among the most extravagant fashion events New York has seen in recent memory. Tiffany welcomed guests into its Landmark and then built a tunnel on the sidewalk of 57th Street, where they were guided along to what had been the jeweler’s temporary flagship.
Except the “Flagship Next Door” was cleared out and refurnished especially for the evening — with feathered chandeliers, a Petrossian caviar bar, Dom Perignon Champagne, small porcelain dishes of sous vide chicken with elderflower garnishes on top and where the smell of truffle generally lingered in the air.
The scene was a study in the old and new guard. It was hard to make out how the tried-and-true Tiffany high jewelry collectors felt amid the stream of pulsating nightclub music from DJ Mark Ronson. One woman seemed to strike the right balance: she sashayed through Landmark’s revolving doors with a Schlumberger diamond wreath around her neck and a fuchsia vape in her mouth.
Partygoers got a first glimpse of the Tiffany Landmark’s uniforms that are specially made by Givenchy. The mock turtlenecks with embroidered Tiffany insignias and double-breasted, ’60s-style jackets are meant to represent “our love story with Audrey [Hepburn], our love story with Hubert de Givenchy — it’s a natural match,” said Ledru.
“I think this word gets overused a lot, but it’s just iconic — you think of New York, you think of Tiffany, you think of this building,” said Taylor-Joy, who was among the many Tiffany ambassadors on hand to dispense gushing praise on the building and event. She wore designs from Tiffany’s new Bird on a Rock high jewelry collection that launches along with Landmark and is among the first outings from artistic director Nathalie Verdeille.
Most celebrities in attendance had some type of Tiffany memory that they hold near and dear. “I have the Clinton pattern [of Tiffany flatware] and I actually served my dinner to President Clinton with the Clinton pattern silver — he had never heard of it,” said Martha Stewart.
Hailey Bieber, another Tiffany ambassador, showed up in a little snatched-waist Versace black dress in a TikTok-type ode to Hepburn. Her nails — long and ovular — were an iridescent shade of Tiffany Blue. “I’m calling them Tiffany glaze nails,” she said.
Tiffany seemed intent on the party reaching every sphere of online influence — they called on musicians, content creators and even online fitness gurus to attend and get the word out. Peloton master instructor Ally Love was among those viral names to seemingly pop out from most people’s screens and appear in the flesh — she showed up just before 9 p.m.
And that was around the time that fog started spreading across the event space’s stage — and out trotted a chorus line of eight Radio City Rockettes.
They were followed by a surprise performance from Katy Perry, who sang a full set. Before breaking into her 2008 hit “I Kissed a Girl,” she proclaimed, “I wasn’t supposed to sing this tonight, but it’s a special request from the Arnaults.” Bernard Arnault — along with his next-gen deputies Antoine, Alexandre, Frédéric and Jean — carefully watched from a balcony overhead.
JPMorgan, PNC Submit Bids to Buy First Republic in Government-Led Sale
FDIC is expected to name a winner before First Republic opens Monday morning
The Federal Deposit Insurance Corp. is reviewing bids for First Republic Bank FRC -43.30% and preparing to seize the lender, according to people familiar with the matter, weeks after a $100 billion deposit run shattered its business model.
Big banks including JPMorgan Chase JPM 0.87% & Co. and PNC Financial Services Group Inc. PNC 1.74% submitted offers for the troubled lender earlier Sunday, the people said, and the FDIC went back to the bidders with questions in the evening. The agency is expected to name a winner before First Republic opens Monday morning, the people said.
The March 10 failure of Silicon Valley Bank sent First Republic’s stock down sharply, spooking well-heeled customers with balances exceeding the FDIC’s $250,000 insurance limit. The stock has lost more than 90% of its value since early March.
The First Republic fire sale is an astonishing comedown for a lender that was long the envy of finance. With some $233 billion in assets at the end of the first quarter, it would be the second-largest bank to fail in U.S. history, behind Washington Mutual Inc. in 2008. Rounding out the top four are Silicon Valley Bank and Signature Bank, a New York-based lender that also failed in March.
Analysts said exactly how regulators resolve First Republic will be important in shoring up confidence in the broader banking system. Some said they don’t expect a First Republic failure to kick off a new round of turmoil in the industry.
First Republic lost so many deposits so quickly that its business model no longer had much value, making it harder for the bank to raise capital, said Steven Kelly, a senior researcher at the Yale Program on Financial Stability.
“This is the last stages of that initial panic. First Republic’s problems started as a result of SVB and Signature. It was a run on the business model,” Mr. Kelly said. “This isn’t the story of 2008, where one bank went down and investors focused on the next biggest bank, which would wobble.”
First Republic’s business model was built around gathering big deposits from rich customers and paying little or no interest on them. The bank, in turn, offered low-interest mortgages to those very same customers.
The strategy began to fray after the Federal Reserve started raising rates to quell inflation. Last month’s customer panic doomed it.
A group of the nation’s biggest banks, including JPMorgan and PNC, came to the rescue with a $30 billion deposit. First Republic hired outside advisers to craft a plan to shore up its finances, but buyers and investors were unwilling to pump money into the bank absent government support.
The deposit run cost First Republic dearly. In its first-quarter earnings report last week, the bank said it filled the $100 billion hole left by fleeing depositors with expensive loans from the Federal Reserve and Federal Home Loan Bank. The bank, in short, was facing a grim future where it would earn less on its loans than it was paying to borrow.
The earnings report sent the bank’s stock down nearly 50% in one day. It continued to tumble as the week went on and closed at $3.51 a share on Friday, down from $115 in early March.
Regulators and bankers hoped the panic had eased after the government stepped in to make uninsured depositors at SVB and Signature Bank whole. But First Republic’s badly damaged balance sheet left it with few good options.
Only a handful of banks could easily absorb First Republic’s assets and deposits. Some of those, such as Wells Fargo & Co., face regulatory hurdles to expansion. Others are still digesting recent deals for other banks. Some banks that took a look at First Republic opted not to bid, including U.S. Bancorp and Bank of America Corp. , according to people familiar with the matter.
Any sale that leads large banks to grow bigger could vex Democrats who have pushed for limits on industry concentration, including banking. But Rep. Ro Khanna (D., Calif.) said he disagreed with other progressive Democrats who have said the nation’s largest banks shouldn’t be allowed to get bigger by swallowing First Republic.
“I think that the FDIC needs to look at the lowest-cost alternative. That’s their mandate,” he said on CBS’s “Face the Nation” on Sunday. “Right now, they may need to work with banks and private capital to save First Republic. That is the state we’re in.”
Total’s chief tells investors European listing to blame for oil group’s trading discount
Patrick Pouyanné makes clear moving French company’s listing to the US is not an option
The chief executive of TotalEnergies has complained to investors that the French oil group’s valuation gap with its US-listed rivals is down to its listing in Europe, not its profitability.
Patrick Pouyanné argued in several investor meetings that while Total’s operations were as profitable as Chevron’s, the French company was trading at a discount only because one was listed in Europe and the other in the US, according to three people with knowledge of the discussions.
However the Frenchman made clear that moving the company’s primary listing to the US was not an option partly for political reasons, they said.
One top-10 shareholder said Total considered moving the primary listing to the US but realised that “culturally it was too difficult”. A second shareholder said Pouyanné took the view that “if Total was US-listed it would be much better but, of course, it is impossible for Total to move its listing so it’s not on the cards”.
The comments underline growing concerns among Europe-listed groups with global operations over the yawning gap with US-listed peers in the past years, making them vulnerable to takeover bids or prompting them to explore moving their primary listings to the US to access a wider pool of investors.
ExxonMobil and Chevron are valued at about six times their cash flow on the US market, compared with about four times for Total, about three times for BP and Shell, which are both listed in the UK.
The Financial Times previously reported that Shell’s top executives in 2021 discussed the advantages of shifting the Anglo-Dutch energy group’s listing and headquarters to the US, but they ultimately decided that Shell would leave the Netherlands and consolidate its base and stock market listing in London.
Irene Himona, managing director for oil and gas at Société Générale, said Total leaving Paris for a primary listing, while hard to imagine, could not be ruled out.
“After the Shell relocation from Holland to the UK, I personally would never say ‘never’,” Himona said. “If nothing changes, at some distant point in time something has to give: either they move voluntarily or with encouragement from activist investors; or someone really big attempts to take them over; or, at the current [rate of share buybacks], they eventually buy themselves back and go private.”
A second top-10 Total shareholder said that “there’s a bit of fatigue” among the European oil majors including Total because “they are more advanced in their climate strategy but not recognised for the transition they’re making”.
Like BP and Shell, Total has committed to transitioning from selling fossil fuels alone to also providing low or zero-carbon energy, after facing intense pressure from European shareholders to tackle climate change. Yet investors have not rewarded the green drive, and Exxon and Chevron have stuck to their oil and gas roots more and have been rewarded by US shareholders more willing to back fossil fuel companies for longer.
One adviser to the French company said there was “no way” Pouyanné — who previously held advisory and chief of staff jobs in the French government before moving into the private sector — would be allowed to move headquarters, despite his frustrations.
Total declined to comment on Pouyanné’s conversations with investors but said the US was a vital market. The company remained “convinced” it could generate attractive returns by investing in renewables and pumping oil and gas, it said.
Total was founded by the French state in 1924 and listed in Paris in 1929 but the French government retained as much as 30 per cent of the company until the early 1990s. It is now the largest energy company in the Cac 40 index.
As the US grew more central to Total’s strategy, the group listed additional shares in New York in 1991. The company is the largest exporter of US liquefied natural gas and a major investor in North American renewables, where it has 0.9GW of renewable power installed and 1.6GW under construction. About 42 per cent of its shareholders are based in the US.
Getir in talks to take over German grocery app rival Flink
Discussions come as consolidation accelerates in one of the pandemic’s hottest tech sectors
Grocery delivery app pioneer Getir is in talks to take over its lossmaking German rival Flink, according to people familiar with the deal, as consolidation accelerates in one of the pandemic’s hottest tech sectors.
The discussions between the two European groups are continuing and there is no guarantee of an agreement being reached, the people said.
The talks come almost five months after Getir, the Istanbul-based online grocery start-up, closed its acquisition of Berlin-based rival Gorillas in a $1.2bn deal that valued the combined group at $10bn.
Flink is one of Europe’s last remaining independent grocery delivery groups after a wave of consolidation over the past year, as capital-intensive businesses have fallen out of favour with investors given rising interest rates and the risk of a looming recession.
Founded in Berlin in 2020, Flink in January said it expects its core German business to be profitable by the end of 2023, after hitting €400mn in sales in 2022. The entire business, including subsidiaries in France and the Netherlands that launched last year, would be profitable by the fourth quarter of 2024, it added.
Both Getir and Flink share a common investor in Abu Dhabi sovereign wealth fund Mubadala Investment Company.
Flink is also in talks to raise around $100mn of funding from its existing investors at a valuation of more than $1bn, according to people familiar with the effort.
That would mark a comedown from late 2021, when the firm raised $750mn of financing at a $2.1bn valuation, before taking the new funding into account.
Getir and Flink declined to comment.
After more than a dozen rapid grocery apps — which promised to deliver groceries and convenience-store items in as little as 10 minutes — launched in the US and Europe by mid-2021, only a handful of players now remain.
Several smaller rapid delivery apps have either sold or pivoted their business models. In 2021, Getir acquired UK-based Weezy while US-based Gopuff bought Dija and Fancy and DoorDash invested in Germany’s Flink.
Getir’s acquisition of Gorillas in December brought together two of the most prominent start-ups to expand across Europe over the past two years. A merger between Getir and Flink would leave US-based Gopuff as one of the last big players in the sector.
As competition lessens, investors in the surviving players remain optimistic that cash-rich, time-poor consumers will still be prepared to pay a premium for the convenience of fast delivery of daily essentials, even at a time of high inflation.
Japan’s Astellas to buy Iveric Bio for $5.9bn in US biotech deal
Japanese companies seek growth beyond their shrinking domestic market
Astellas Pharma agreed to buy US biotech group Iveric Bio for roughly $5.9bn, marking the Japanese drugmaker’s largest-ever acquisition and giving it access to the rapidly expanding market for age-related eye diseases.
Astellas said on Monday that it would use cash and loans to buy the New Jersey-based company, formerly known as Ophthotech, for $40 per share, representing a premium of 22 per cent to the US company’s closing price on Friday.
The deal marks the latest acquisition by Japanese companies — including beer maker Kirin and IT specialist Fujitsu — seeking growth outside their shrinking home market, even as a weaker yen makes takeovers more expensive.
Astellas, Japan’s second-largest pharmaceutical company by revenue, has spent more than ¥1tn ($7.3bn) in overseas acquisitions and partnerships since 2007, including its $3bn purchase of US drugmaker Audentes Therapeutics in 2020 and its $3.8bn takeover of US-based oncology specialist OSI Pharmaceuticals in 2010.
The latest acquisition will add Iveric’s ACP to Astellas’ portfolio. ACP is a treatment currently in trials for geographic atrophy, an eye disease that affects 1.6mn patients in the US. Shares in Astellas briefly rose 2 per cent following the deal’s announcement.
“We hope that ACP will become our third pillar” alongside menopause drug candidate fezolinetant and bladder cancer treatment padcev, said Naoki Okamura, who took over as chief executive in April, during an online news conference.
Astellas is searching for new blockbuster medicines with sales of $1bn and more a year. It is under pressure because its US patent for Xtandi, a popular prostate cancer drug whose sales are shared with Pfizer, is expiring in 2027. For the current fiscal year until March 2024, Astellas expects sales of ¥670bn from Xtandi.
What does luxury mean to John Elkann?
TURIN - Exor, the investment company of Italy’s Agnelli family, is on the lookout for further acquisitions in luxury. It’s already the biggest shareholder of the automaker Ferrari, one of the world’s most desirable cars. Now the Milan-listed company is in exploratory talks with a few other high-end brands, a senior industry source close to the company said. No concrete deal is afoot yet.
Exor is competing against the deep pockets and full Rolodexes of LVMH, Kering and the Qatari investment company Mayhoola, which owns the Italian fashion house Valentino. All three are keen to buy brands and suppliers.
To date, Exor has only made a few minor forays into luxury. It bought 80 percent of the lossmaking Hermès-backed Chinese luxury brand Shang Xia in December 2020. Five months later, it bought 24 percent of the French shoemaker Christian Louboutin.
Its results statement earlier this month said it had €5 billion in cash for acquisitions after completing the sale of its reinsurer PartnerRE.Some patriotic Italians say the Agnellis are the only ones with the financial firepower and national support to build a luxury group to rival French ones like LVMH and Kering. But this does not look likely anytime soon.
In an April 17 letter to Exor’s shareholders the word luxury only appears briefly and at the very end. “At Exor, we are focusing on deploying our capital within the healthcare, luxury and technology sectors, although we remain open to opportunities outside those industries where we can build great companies with great people,” said John Elkann, scion of the Agnelli family industrial empire and CEO of Exor.In its results statement,Elkann gives a deep-dive analysis of many of Exor’s investments in these areas but makes no mention of Louboutin or Shang Xia. Miss Tweed tried to find out more about the performance of these businesses and what their strategy might be.
THE AGNELLI CLAN
But first who are the Agnellis and what are their ambitions in luxury? Historically, Fiat was the biggest private employer in Italy, making the Agnellis Italy's most powerful and influential family. As a result, they are often described as the de facto royal family of la Repubblica Italiana. However, their influence in Italy has dwindled. Elkann, the chosen heir of his grandfather Gianni Agnelli, has moved many parts of the family business out of Italy over the past decade. Fiat merged with Peugeot two years ago to become Stellantis, which is based in the Netherlands.
Elkann, through Exor, is the largest shareholder in Stellantis, controls the Turin football club Juventus and owns the Turin newspaperLa Stampa.Exor is alsothe biggest shareholder of The Economist Group. The Agnelli family is now considered part of the global plutocratic elite, rather than anything specifically Italian nowadays.
LUXURY INVESTMENTS
Elkann thinks he understands luxury because he has led Ferrari successfully over several decades, sources close to the company say. Cars and fashion are two different animals, but there are some common denominators. There are waiting lists for the bright red sports cars with the prancing horse just like there are for Hermès’ Kelly handbags.
It may be no coincidence that Hermès CEO Axel Dumas sits on Exor’s board since last year. His relationship with Elkann goes back a while. Although it was making losses, he convinced Elkann to take over Shang Xia and tap into Chinese consumers’ growing appetite for homegrown brands. That experiment has yet to yield profits.
Since then, Exor has tried to buy into other other luxury houses as well. In 2021, Elkann approached Italian designer Giorgio Armani about a cash and shares deal for his brand, offering Armani a significant share in the combined entity. Armani turned him down, several industry sources said. Armani is now 88 years old and his heirs may take a different view. Elkann will probably make another approach to the heirs when the time comes, the sources said. For the moment, the jury is still out on Elkann’s ability to run and grow luxury brands.
CHANEL
The person who oversees Elkann’s investments in Louboutin and Shang Xia is Suzanne Heywood, Exor’s Chief Operating Officer, a former British civil servant and McKinsey & Company partner. Prior to Exor’s investment in Shang Xia, Heywood sat on the board of Chanel for four years starting in 2017. It was part of Elkann’s plan to give her an opportunity to find out more about luxury. Heywood explored many of the brand’s different businesses, from fashion to make-up and high jewelry, the source close to the company said. In 2017, the French luxury powerhouse started the multi-year process of moving its headquarters from Paris to London. Heywood helped Chanel set up a board structure and an audit committee. “The relationship was mutually beneficial,” the industry source close to Exor told Miss Tweed on condition of anonymity.
Heywood now sits on the board of Louboutin and chairs Shang Xia. She is in talks with various brands Exor could invest in, and also in regular contact with head-hunters to find potential recruits in the luxury industry, the senior industry source said.
CRITICAL FRIEND
Exor believes it can compete against big groups because it is not bent on buying control. It is happy to remain the biggest minority shareholder and act a “critical friend” alongside the CEO-designer duo, the senior industry source said. That’s what convinced Louboutin’s shareholders to choose it over Gucci owner Kering in April 2021. Kering wanted control, Exor didn’t. It paid €541 million for a 24 percent stake in a deal that valued the luxury shoemaker at €2.2 billion – a pretty high price industry analysts said back then. Louboutin today makes under €1 billion in annual sales.
In its 2022 results published earlier this month, Exor reported that between 2021 and 2022, Louboutin’s net profit rose to €119 million up from €90 million and Shang Xia’s losses widened to €25 million from €10 million. The group injected €5 million into the Chinese brand.
LOUBOUTIN
Exor did not provide many figures regarding Louboutin. However, a source close to the company said the shoemaker’s organic sales growth in 2022 was in “double digits.” Louboutin is quite different from other rival luxury shoe brands in that every shop in the world has a different assortment and concept. Its boutique in Miami will have shoes with feathers and in bright, exotic colors, for example, while in New York it will carry mainly shoes for the office.
Some industry sources said Christian Louboutin and his investment partner Bruno Chambelland pocketed several hundreds of millions of euros each when they sold to Exor two years ago. They are no longer as hungry to make Louboutin grow as they were before the deal. But the industry source close to Exor say the Italian company is happy to be patient, though it would like to see the French shoemaker increase its presence in China where demand is growing. Louboutin also needs to address sustainability, a topic on which it is quite late compared to rivals, industry insiders say.
Louboutin is a very creative brand, but customers don’t always get what they want. When you go to a Louboutin boutique, you cannot just ask for the model you want. You need to give your size and the sales assistant will tell you what you can buy. Unsurprisingly, the brand needs to get rid of important amounts of unsold stock every year.
Marco Tosi, Louboutin’s Chief Operating Officer, gave more interesting details at Miss Tweed’s Luxury at the Summit conference in Val d’Isère in early April. The company makes around 1,000 shoe prototypes a year and puts into production only 200 of them. Around 75 percent of Louboutin’s products were renewed every three months, he said. That involved a complex logistical organization of more than 1,000 different suppliers. “Did you know that every stiletto required 240 different operations?” Tosi asked. “And some 100 people manipulated the product before it arrives in a store.” Louboutin’s best-selling Kate stilettos cost €745, or half the minimum monthly salary in France. The brand has diversified into bags and make-up in recent years, but they represent a small proportion of its total sales.
Around one quarter of Louboutin’s production is internalized, Tosi explained. That allows the company to cut production when demand is down and produce in very small quantities if it so wishes. Louboutin puts out 4,000 new products every year, he said. With so many different product references, the brand faces stock management problems. Around two years ago, it started opening outlets in its main markets in Europe, Asia and North American to turn some of that stock into cash. It now has around seven of them, the senior industry source close to Exor said.
Adding to the company’s supply chain complexity, big groups such as LVMH, Kering and Chanel have been taking away production capacity in the past decade, buying up the best shoemakers in Italy.
SHANG XIA
That said, Louboutin is an easy business for Exor to manage compared to Shang Xia. The brand has been in soul-searching mode since it parted ways with its Chinese founder Jiang Qiong Er last year. Er is still advising Exor on luxury matters, as Miss Tweed reported, but is no longer involved in the day-to-day running of the business. When Hermès launched Shang Xia in 2010, the brand’s story was about China’s ancestral savoir faire such as bamboo weaving, “eggshell” porcelain and hand-washed cashmere. It was meant to be the Hermès of China.
But Shang Xia turned out to be a money pit. After 10 years of losses, Hermès got it off its balance sheet. After Exor bought control in 2020, the Italian company realized that the market for its artisanal products was in fact quite small and its customer base quite old. “What Exor had was a brand that made beautiful pieces, some of them went into museums, but it was not a commercial brand, so it needed to be re-oriented,” the senior industry source close to Exor said.
In 2021, Exor hired Chinese designer Yang Li to develop a new line of clothing that would be quintessentially Chinese and of high quality. But an original, desirable and relevant Chinese fashion identity is not easy to pin down, Heywood and Elkann now understand. What does Chinese fashion stand for? If you live in a country with no freedom of expression, how is fashion supposed to thrive and reflect the Zeitgeist? Plus, the Chinese have been wearing Western-style clothes for centuries. Cutting-edge fashion was naturally European, they’ve long thought. That is currently changing with China’s rising cultural self-esteem known as guochao, or “national trend.”Chinese brands like Guo Pei and Masha Ma may be poetic and growing. But they steer clear of making any bold statements, as Miss Tweed reported in 2020.
Shang Xia’s core business in the past few years has been furniture. How do you build a fashion brand when your best-selling product is a carbon fiber chair? Li has produced three collections presented during Paris Fashion Week. None got very positive reviews. “There was a strong streetwear undercurrent that came through in leggings, shirt jackets, bombers and puffers with aerial mountain prints, some pinned with sculpted leather swallows,” WWD wrote about the last collection presented in March. “But all in all, the collection didn’t project a lot of luxury, and it’s unclear where Shang Xia is going in terms of landing on a set of recognizable brand codes.”
The rival Chinese luxury brand Icicle has the same problem. It uses beautiful and expensive fabrics but it does not have a particularly identifiable style or cachet. Icicle has several boutiques in Paris but none of them are profitable, industry sources say. They serve as marketing to show Chinese tourists that the brand has an international presence.
Elkann and Heywood are aware that the Chinese brand needs to find its footing and fine-tune its storytelling. There is no point investing too much in expanding its retail network in China and abroad until it’s got its strategy right, people close to the brand say. One of designer Li’s recurring themes is the Ming dynasty (1368-1644), one of China’s richest periods known for its exceptional porcelains, paintings, lacquers and textiles. So he added to the back of a coat the same large stripe found on the brand’s so-called Ming carbon fiber chair. But that is not enough to make people rave about Shang Xia.
Since 2019, Exor has also been trying to develop a clothing line around Ferrari but that business remains small, industry sources say. Exor has been staging runway shows in Maranello, the northern Italian town where Ferrari is headquartered, and invited fashion journalists to cover the event. But these clothes are sold only in a few stores and outlets in Italy and in the United States. Since September 2022, the Ferrari fashion brand is led by Carla Luini, who has never run a fashion business before. Luini worked for jewelers Pandora, Bulgari and the consumer goods group Procter & Gamble prior to joining Ferrari last year. Ferrari’s designer Rocco Iannone previously worked as creative director for Italian menswear brand Pal Zileri, one of Mayhoola’s most unsuccessful fashion ventures.
Now we understand why Exor remains so quiet about fashion and luxury. There’s not that much to trumpet about. However, that may change if Elkann manages to turn Shang Xia into a success story and invests in promising up and coming fashion and luxury brands.