Gapping up
In reaction to earnings/guidance:
- MVST +14.6%, SE +11.3%, ONON +11.1%, SSYS +10.9%, GAN +10.3%, NU +9.7%, JD +9.1%, TME +7%, DADA +6.9%, IONQ +6.4%, MAG +6.3%, UUUU +5.4%, TTWO +4.9%, UAL +4.5% (sees higher unit revenue outlook for Q2, demand continues to improve), SHLS +4.4%, HUYA +3.8%, RKLB +3.7% (also CAPSTONE spacecraft preps for launch to lunar orbit), FXLV +3.2%, HD +3.2%, DAC +2.9%, CCSI +1.8%, AER +1.3%, VOD +1.1%, RSKD +0.9%
Other news:
- COIN +6.3% (announces it is "slowing hiring so we can reprioritize our hiring needs against our highest-priority business goals")
- HLGN +5% (to restate Full Year 2021 Financials)
- FFIE +3.6% (provides update on status of SEC filings)
- LOGI +2.8% (increases yearly dividend 10% to CHF 0.96/share)
- LH +2.7% (launches at-home collection device for diabetes risk testing)
- NETI +2.6% (Scorpio Holdings increases stake by 250K shares)
- ABB +2.1% (highlights Energy transition driving profitable growth at Capital Markets Day)
- IREN +2% (names new CFO)
- FSLR +2% (to sell project development and O&M platform in Japan)
- VALE +2% (concludes buyback program and launches new program)
- ABT +1.8% (enters into consent decree with FDA related to infant formula plant could restart plant within two weeks; also confirms FY22 EPS guidance)
- RH +1.8% (announces $500 mln incremental term debt financing)
- IXHL +1.7% (completed a highly constructive pre-IND meeting with the FDA to discuss the development IHL-42X)
- LXU +1.4% (authorizes new $50 mln share repurchase program)
- EAT +1.2% (CEO Wyman Roberts to retire Kevin Hochman named successor)
- WSC +1.2% (acquires Elite Modular Leasing and Sales)
- AGCO +1.1% (provides update on ransomware attack)
- GILD +1% (FDA lifts hold on IND for lenacapavir for HIV)
- UGI +1% (receives funding for RNG projects)
- RPAY +1% (authorizes share repurchase program to purchase up to $50 mln of the Company's Class A common stock)
Analyst comments:
- PBF +5.6% (upgraded to Neutral from Underweight at JP Morgan)
- HEAR +4.9% (upgraded to Outperform from Neutral at Wedbush)
- AMD +3.8% (upgraded to Overweight from Neutral at Piper Sandler)
- SHAK +2.7% (upgraded to Mkt Perform from Underperform at Raymond James)
- TEVA +2.7% (upgraded to Neutral from Underperform at BofA Securities)
- EQR +2.2% (upgraded to Buy from Neutral at Mizuho)
Early premarket gappers
- Gapping up:
- NU +10.8%, GAN +10.3%, TTWO +7.5%, IONQ +7.4%, ONON +7.1%, COIN +7%, TME +6.5%, RKLB +6.3%, MVST +5.7%, UUUU +5.7%, DADA +5.3%, HLGN +5%, SHLS +5%, IREN +4.9%, UAL +4.7%, HD +4.6%, FFIE +4.4%, DAC +4.1%, HUYA +3.3%, SSYS +3.2%, FXLV +3.2%, VALE +2.9%, IMPL +2.8%, NETI +2.6%, FSLR +2.5%, LOGI +2.2%, ABB +2%, CCSI +1.8%, IXHL +1.7%, LXU +1.4%, EAT +1.2%, WSC +1.2%, UGI +1%, RPAY +1%, VOD +1%
- Gapping down:
- GLBE -26.7%, BZFD -10.8%, ALBO -10.4%, NLY -4%, ALLT -3.8%, HPK -2.5%, VMEO -2.4%, TWTR -2.4%, VCYT -2%, SSNC -1.7%, ESEA -1.4%
Military briefing: why Russia and Ukraine are fighting over Snake Island
Black Sea outcrop is as much a tool of propaganda as of military strategy for Moscow and Kyiv
Snake Island leapt to international attention early in Russia’s war against Ukraine when its tiny garrison was told to surrender or face naval bombardment and certain death. “Russian warship, go fnck yourself,” came the now celebrated response from one of its guardsmen, Roman Hrybov.
Three months on, the 0.2 square kilometre island — barely more than an outcrop of rock — remains at the centre of a bitter fight as Ukraine and Russia vie for control of the Black Sea and the conflict’s broader propaganda battle.
Moscow has been unable to reinforce its position there to secure control against Ukrainian drone and air strikes. But nor can Ukraine, which has limited naval capacity, muster sufficient power to regain and hold the island.
The to-ing and fro-ing over the island is in many ways a microcosm of the war itself. Snake Island has strategic significance, as a military base there could dominate an area spanning hundreds of miles. But the fight has also taken on a totemic significance, spun by both sides to bolster morale.
Despite Hrybov’s valiant refusal to surrender, Snake Island’s garrison did lay down their arms and were later released by the Russians in a prisoner swap.
Snake Island “is strategically useful”, said a western official. “But it also has a symbolism that is possibly even more important.”
According to Greek mythology, Poseidon created Snake Island as a haven for Achilles and Helen. Today, with no trees or fresh water but boasting a helipad and two deepwater piers, the X-shaped rocky protrusion lies in the middle of Ukraine’s crucial shipping lanes. It is also just 35km from the coast of Nato member Romania. (Bucharest’s own claims to the island were dismissed by the International Court of Justice in 2009).
For Ukraine, preventing Moscow from using the island as a missile and naval base would help break Russia’s Black Sea economic blockade of maritime exports, including grain, of which Ukraine is a top global supplier.
Russia could also use the island as a base to attack Odesa and expand the conflict into Moldova and its Moscow-allied breakaway state of Transnistria. It could even potentially hinder the deployment of Nato weapons and troops from Romania.
“The one who controls the island can at any time block the movement of commercial vessels in all directions to the south of Ukraine,” Kyrylo Budanov, chief of Ukraine’s military intelligence, said on Friday.
So far, Ukraine has frustrated Russian attempts to turn Snake Island into a secure base, hitting Russian air defence systems and resupply vessels with air strikes and the Turkish Bayraktar drones that have led to some of Ukraine’s most spectacular military successes.
A video of aerial footage posted by Ukraine’s armed services on May 8 claims to show a drone strike taking down a Russian helicopter hovering over the island. Two days earlier, another video boasted that drone strikes had sunk a Russian patrol boat and destroyed a short-range missile system.
“This is what happens when you weren’t invited to Snake Island,” the post reads as techno music plays.
Moscow has its own version of events. During the attack, according to the Ministry of Defence, Russia shot down four Ukrainian aircraft, almost 30 unmanned aerial vehicles and at least three helicopters. Two dozen Ukrainian “saboteurs” were also purportedly killed, as was the deputy commander of Ukraine’s navy, Colonel Ihor Bedzai. Ukraine has confirmed Bedzai’s death but not the battle in which he died.
“This adventure ended in disaster for Ukraine,” said spokesman Igor Konashenkov.
Michael Kofman, director of Russia studies at the CNA military think-tank, is less convinced, however.
“You can tell from the Russian operation, it’s still unclear what they’re trying to do there,” he told a War on the Rocks podcast. “The Russian military has been the king of not well-co-ordinated efforts . . . sending in units without air support, then getting those lost and sending units to recover them . . . then sending a special forces unit with a helicopter and getting that killed by” Turkish drones.
The Russian army has similarly struggled to mount co-ordinated military operations in the battle for the Donbas, where the bulk of the fighting is now concentrated.
Militarily, analysts say Snake Island’s size and lack of cover make it all but indefensible. Unless Moscow manages to install air defence systems, or place a battleship with similar systems nearby, “Russian positions on the island are unsustainable”, Rochan Consulting, a military analysis group, wrote in a May 15 briefing. “Neither option looks currently viable.”
Ukraine’s immediate aim is not to physically control Snake Island, as its own troops would be as vulnerable as those of Russia. Rather, it wants to stop Moscow from fortifying its position and installing long-range air defence systems that could protect the area and allow for naval operations.
Andriy Zagorodnyuk, a former Ukrainian defence minister who advises the government on security, said Russia’s de facto control of Snake Island “becomes less critical if we destroy everything that arrives”.
Zagorodnyuk said two nearby oil rigs — now under Russian control — are also being used by Russia as military platforms to control and blockade maritime shipping.
“We need to deny their access to our territorial waters,” said Zagorodnyuk. “It’s very much pressing from an economic survival perspective should the war drag on.”
Electric vehicles overtake phones as top source of cobalt demand
Rare metal’s price surges on supply concerns and proliferation of battery-powered cars
Electric vehicles overtook smartphones and personal computers for the first time last year as the main source of demand for cobalt, a rare metal used in lithium-ion batteries.
The automotive industry consumed 59,000 tonnes of cobalt in 2021, or 34 per cent of total demand, as sales of electric and hybrid vehicles doubled, according to a report by the Cobalt Institute.
That outstripped the 26,000 tonnes of metal used in mobile phone manufacturing and 16,000 tonnes in laptops and tablets. Total demand for cobalt was 175,000 tonnes against mined supply of 160,000 tonnes.
The mismatch in those figures highlights one of the biggest challenges facing the automotive industry as it goes electric: securing enough raw material. As more electric vehicles are rolled out, concerns are mounting about potential supply crunches for crucial battery metals from cobalt to lithium and nickel. Demand from the car industry is expected to account for half of the cobalt demand by 2026.
Cobalt is seen as particularly problematic because it is a byproduct of mining copper and nickel, and supply is very concentrated by geography and company.
Almost three-quarters of the world’s mined cobalt supply comes from the Democratic Republic of Congo, where production is dominated by Chinese companies and London-listed Glencore. The Cobalt Institute report shows that the central African country produced 118,000 tonnes of cobalt in 2021 — significantly more than the next largest supplier, Australia, at just 5,600 tonnes.
That has fuelled speculation about whether a big carmaker might acquire a miner. Tesla’s chief executive Elon Musk told an industry conference last week that he was open to the idea.
“It’s not out of the question,” he said at the FT Future of the Car Summit. “We will address whatever limitations are on accelerating the world’s transition to sustainable energy. It’s not that we wish to buy mining companies, but if that’s the only way to accelerate the transition, then we will do that.” Tesla has a goal of producing 20mn electric vehicles annually, up from 1mn last year.
A growing number of electric cars in China — the world’s largest EV market — are powered by lost-cost lithium-iron phosphate batteries, which generally have inferior range and performance. But the top models in the US and Europe are still dominated by nickel-cobalt chemistries. These batteries accounted for three-quarters of global EV demand in 2021, according to the report.
“Cobalt-containing batteries are a technology of choice for many car manufacturers in Europe, North America and China,” said Adam McCarthy, president of the Cobalt Institute.
Looking ahead, the institute sees cobalt demand hitting 320,000 tonnes in the next five years, up from 175,000 tonnes in 2021, as the car industry produces more battery-powered vehicles.
While supply is expected to pick up this year and in 2023, leading to a more balanced market, the Cobalt Institute says it will start to slow from 2024, leading to large deficits. “From 2024-26 supply growth will average 8 per cent per year, compared to more than 12 per cent for demand,” the report projected.
The price of cobalt doubled last year, rising from $16 a pound to $32/lb on the back of strong demand from the automotive sector and supply disruptions. It is currently trading at $37/lb.
Elon Musk raises prospect of lower price for Twitter deal
Tesla chief executive pushes bot concerns amid speculation he is trying to reopen or walk away from deal
Elon Musk acknowledged on Monday that his agreed $44bn purchase of Twitter might fall through and that a lower price was “not out of the question”, adding to Wall Street fears that he is reconsidering his offer for the company.
The comments at the All-In Summit in Miami came three days after Musk declared on Twitter that he was putting the deal “on hold” over concerns there were more fake accounts on the platform than the “less than 5 per cent” that the social media company claims.
On Tuesday morning, Musk hit out again at Twitter chief executive Parag Agrawal for refusing to provide proof over the number of fake accounts. He tweeted that the “deal cannot move forward until he does”.
Musk’s comments have fuelled speculation on Wall Street that the Tesla and SpaceX chief executive is seeking to renegotiate the deal or walk away entirely, though he has said he is still committed to the transaction.
Asked on Monday if his Twitter purchase will go through, Musk said: “It really depends on a lot of factors here. I’m still waiting for some sort of logical explanation for the number of sort of fake or spam accounts on Twitter. And Twitter is refusing to tell us. This seems like a strange thing.”
He said he believed at least 20 per cent of the accounts on the network were fake, and that the proportion could be as high as 90 per cent.
Musk faces a $1bn break-up fee if he walks away, though Twitter can also sue him to force him to go through with the deal unless he can point to any significant information that was not disclosed at the time of the agreement.
Musk said it may be “a material adverse misstatement” if the number of bots is well above the 5 per cent that Twitter has disclosed. “Like if you said, OK, I’m going to agree to buy your house. You say the house has less than 5 per cent termites. That’s an acceptable number. But if it turns out it the right per cent is 90 per cent termites, that’s not OK.”
Musk latched on to the issue of fake accounts after a regulatory filing earlier this month in which Twitter repeated a standard warning that its estimate “may not accurately represent the actual number” of fake accounts, and the true total “could be higher”.
The timing of his intervention over a longstanding matter raised worries on Wall Street that he would use the issue as an excuse to reopen negotiations.
Twitter’s shares fell nearly 8 per cent on Monday, leaving them 30 per cent below the $54.20 a share that Musk has agreed to pay for the company. Most of the decline came before the reports of the billionaire’s comments about potentially paying a lower price.
Earlier on Monday, Musk challenged Agrawal on the platform after the Twitter chief executive published a lengthy thread outlining the methodology behind its estimate that spam makes up less than 5 per cent of its user base, arguing that the figure could not be accurately ascertained by third parties without access to data such as IP addresses, geolocation and phone numbers.
Agrawal wrote: “We don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can’t share).”
He added that the “error margins on our estimates give us confidence in our public statements each quarter”.
“We shared an overview of the estimation process with Elon a week ago and look forward to continuing the conversation with him, and all of you,” Agrawal wrote on Twitter.
Musk replied with an emoji of a pile of poo. In a second tweet, he wrote: “So how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter.”
Musk also said at the Miami event that he was open to the idea of Twitter transforming into something akin to the west’s WeChat, the all-encompassing “superapp” in China that allows users to shop, text and post to social media all within one app.
“Such an app would be really useful (in the west),” Musk said, adding that he was not sure whether Twitter should become this superapp, or whether it should be built from scratch. But he was certain about one thing: “This thing needs to exist.”
Lebanon’s Hizbollah and allies lose majority in election
Blow to country’s most formidable political and military force as independents make gains
Iran-backed group Hizbollah and its allies have lost their majority in Lebanon’s parliamentary election, in a surprise blow to the country’s most formidable political and military force.
Hizbollah and its two major allies secured at least 44 seats, down from 47 in the 2018 poll. Some of the other politicians it relies on to make up its current 71 seat majority have also lost their seats. No one party or bloc has emerged as an outright winner, raising the possibility of further deadlock in the crisis-hit country.
Independents — many of whom emerged from a civil society movement that called for political change — and parties opposed to Hizbollah and its allies secured at least 13 of the 128 seats, according to the official tally. Several parties said they would appeal.
These are the first elections since the collapse of the country’s economy in 2019 and a deadly 2020 port explosion in Beirut. Lebanon’s political class has so far evaded accountability for its role in bringing the country to its knees.
The new government must negotiate economic reforms needed to unlock billions of dollars in loans and aid to steer Lebanon out of its economic crisis. But analysts say Sunday’s results could further fragment an already deeply divided parliament, leading to political paralysis at a critical time for the country.
Together with the Free Patriotic Movement, the Maronite Christian party of President Michel Aoun; Amal, the Shia militia-turned-party, as well as some MPs in minority parties; Hizbollah had held a majority of at least 71 seats since 2018.
Hizbollah and Amal retained the 27 seats allocated to Shia Muslims under the country’s confessional system, despite nascent discontent within its traditional strongholds. But the allies they relied on for their majority — the FPM and other individuals — lost some seats.
Two of the new independents were elected in Christian and Druze districts in southern Lebanon that have traditionally been dominated by Hizbollah allies, with one of them ousting the deputy speaker of parliament.
The Christian Lebanese Forces party, led by former warlord Samir Geagea, gained several seats. The Lebanese Forces is a fierce critic of Hizbollah and Geagea enjoys close ties with Iran’s regional rival, Saudi Arabia.
The emergence of independents will make it even less likely that lawmakers will be able to work together to pass laws to kick-start Lebanon’s recovery, analysts say. “What you do have is a more fragmented parliament . . . Together, they do not see eye to eye on many things . . . But they will have an important role to play collectively,” said Maha Yahya, director of the Beirut-based Carnegie Middle East Center.
Prime Minister Najib Mikati urged the newly elected lawmakers to act quickly to agree a government “because what we are going through cannot withstand bickering at the expense of priorities.”
The Lebanese Association for Democratic Elections, an independent election observer, said it documented more than 3,500 violations, including barely conscious voters carried into polling stations on stretchers. It said their monitors were threatened and beaten by members of various ruling parties, including Hizbollah, Amal and the Lebanese Forces.
Luxury Brands Are Counting on Americans to Keep Spending
With parts of China in lockdown, brands need demand in the U.S. to stay high
Luxury brands face a slump in China as major cities battle to bring Covid-19 cases under control. There is only so far America’s big spenders can help.
Shanghai, home to around 15% of mainland China’s luxury stores, is just starting to emerge from a grueling lockdown. Beijing, where a further 13% of the country’s designer boutiques are based, is in “shadow” lockdown, with schools, restaurants and bars closed. Luxury companies such as LVMH Moët Hennessy Louis Vuitton LVMUY -0.62% and Gucci’s owner Kering say that footfall is lower even in cities that don’t face restrictions due to a drop in domestic tourism. Most listed European brands exited the first quarter with sales in mainland China down 30% to 40%, according to UBS UBS -1.10% estimates.
Sales of personal luxury goods—top-end handbags, watches and the like—have been booming in the U.S. Before the pandemic, the Chinese were the industry’s most important consumers globally, accounting for one-third of all spending on such items in 2019, according to Bain & Company. Americans were next with a little more than one-fifth of the market. To most people’s surprise, this flipped in 2021 when Americans bought 32% of luxury goods by value and the Chinese just 23%. Luxury brands are therefore counting on U.S. shoppers to offset some of the pain caused by the latest shutdowns in Beijing and Shanghai.
Data from the early weeks of the second quarter in the U.S. are mixed. Spending on luxury in April did increase by 8% compared with the same month of 2021, based on credit and debit card transactions tracked by Bank of America. But this is a slowdown from the 16% increase recorded in the first quarter of 2022.
Some of the shoppers that drove last year’s boom are paring back. Purchases by consumers that earn less than $50,000 a year fell 9% in April compared with the same month of 2021. These shoppers gave luxury brands a boost in 2021, doubling their spending on designer goods compared with 2019. Spending by wealthy consumers was up a more modest 30% from prepandemic levels. Government stimulus checks, individual investors’ stock-market gains and excess savings are drying up. Higher food and gasoline prices are forcing less affluent consumers to make cutbacks.
Wealthier shoppers still look flush. Card transactions for luxury goods among consumers earning more than $125,000 a year increased 21% in April compared with a year earlier, only a slight slowdown on the 28% rate recorded in the first quarter. The overall trend suggests that although appetite for luxury goods remains enormous in the U.S., only brands’ core customers can still afford to splurge.
Back in China, major luxury labels are confident that sales will bounce back as restrictions lift. But a weak second quarter could continue to weigh on share prices in the near term. Europe’s largest luxury stocks are already down 32% on average since the beginning of the year, compared with an 18% decline for the MSCI Europe index. Hermès International RMS 2.77% and Kering have been hit particularly hard.
Wealthy Americans still offer some hope to luxury brands, but most U.S. consumers now have more important things to spend their money on than a $1,000 bag.
How Luxury Brands Court the 1 Percent
With luxury experiencing a post-Covid boom, brands have put VIP experiences into overdrive, courting wealthy shoppers in the US with sumptuous dinners and exotic trips.
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Dinner at a Mytheresa private client event in Palm Beach, Florida on February 28, 2022. (Shane Drummond/BFA.com)
KEY INSIGHTS
- The game of attracting very important clients, or VICs, has kicked into high gear for fashion brands, with wealthy shoppers hungry for both luxury products and elaborate experiences post-Covid.
- Brands are finding that big spenders can help fuel a business, with 3 percent of MyTheresa’s top customers making up 30 percent of its business.
- With the American luxury market experiencing a boom, many brands are keen for wealthy shoppers in the American South, and recruiting younger shoppers with tech or crypto-made fortunes.
Penny Pinar Karabey is used to being treated like royalty by luxury brands.
A resident of New York’s Upper East Side with a house in Southampton, Karabey lives a luxury-fueled lifestyle, constantly shopping for charity galas, board meetings and other events. Brands and retailers like Fendi, Dior and Saks Fifth Avenue work hard to keep her in their circles, inviting her to private parties, cocktail events and fashion shows in Europe.
But lately, even Karabey has been surprised by the attention. Jewellery, perfume and footwear companies — some of which she’s never shopped with — have been aggressively courting her with invites to private trunk shows and intimate cocktail parties.
“They see that I shop a lot, and am an important customer,” Karabey said. “They are finding me … and asking me to come to their party.”
With 125,000 followers on Instagram, Karabey has an audience but isn’t a celebrity. Still, her penchant for big fashion spending earns her the star treatment: brands lend her outfits and will even shut down a boutique so she can shop privately.
The elaborate, competitive and secretive world of courting private clients — where brands allocate enormous budgets for gifting, events and trips — is a decades-old practice and an important marketing tactic in fashion. Big and loyal spenders can fuel as much as 40 percent of sales, said Gary Wassner, chief executive of Hilldun Group, a retail consulting agency. At the luxury e-commerce company Mytheresa, 3 percent of its customers make up 30 percent of its business, chief customer experience officer Isabel May told BoF.
Lately, the game of attracting very important clients, or VICs, has kicked into high gear. Brands are acutely aware that wealthy shoppers are hungry for both luxury products and elaborate experiences post-Covid. Fashion is investing in its top shoppers accordingly — as well as finding new ones. With the American luxury market experiencing a boom, many brands are particularly keen to lure wealthy shoppers in the American South and in markets like Austin and Miami, as well as younger shoppers with tech or crypto-made fortunes.
“For European brands, the US was all about the West Coast, East Coast, but they’ve realised the US is large and there are wealthy customers everywhere,” said Federica Levato, the EMEA leader of fashion and luxury at Bain.
VICs represent enormous potential profits, and managing those relationships is extremely important, said Laurent Thoumine, managing director and retail lead at Accenture. These private experiences, he said, are “absolutely the key to generating revenue long-term.”
How Luxury Finds Its Big Spenders
The VIC strategy is similar to that of casinos treating “whales” to hotel suites and expensive champagne. At Mytheresa, VICs spend in the “high seven figures,” said May, while sources told BoF Dior private clients typically spend $100,000 minimum with the brand annually. (Dior did not respond for comment.)
“Brands don’t want someone going straight for shoes or handbags. They are looking for shoppers who buy into the whole brand… in every category,” said Gab Waller, a fashion stylist and luxury sourcer who works with VICs.
And while some VICs cross into celebrity-influencer territory, many of luxury’s biggest spenders prefer privacy.
“[Brands] keep this world very secretive because these people are extremely, extremely private,” said Nolan Meader, a fashion stylist who works with several VICs. “Their social media is usually private. They aren’t flaunting what they have.”
Sometimes, a VIC relationship begins in store, where the spend amount will catch a retail associate’s eye. Other times, existing VICs will refer family and friends. Nurturing the relatives of wealthy families is a high priority, noted Meader. Fashion brands also look for influence and visibility, seeking VICs who are “professionally active founders, lawyers, board members, and young entrepreneurs,” said May. Increasingly, brands are also eyeing young tech professionals and crypto wealth.
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(L-R) Nedas Butkevicius, Aqila Agha and Ozzy Gazali in Milan during fashion week in February 2022. (Imran Amed)
Previously, VICs were predominantly old-school spenders — “the Baby Boomer, the lady who lunches at Bergdorf,” said Levato. Increasingly, younger shoppers are also included. Gucci VIC Nedas Butkevicius, a 22-year-old pilot from Lithuania, believes he caught the brand’s attention because of his interest in its clothes. In February, Gucci flew him out to Milan for its Fall 2022 show and paid for his accommodations. (Gucci declined to comment for this story).
“Of course, Gen-Z is very young, but they are also inheriting the wealth of [their] Baby Boomer parents,” said Levato. “Then there’s a start-up [Millennial] who has tons of money and can spend. These new personas and new sources of wealth are super relevant, worldwide, but specifically in the US.”
Indeed, luxury brands are turning to the US to find their next crop of VICs, just as lockdowns send spending in China, long considered luxury’s top market, down. In shifting their focus to the US, brands hope to turn growth-driving, first-time buyers into repeat customers with lavish experiences. Last month, Givenchy flew some of its top American shoppers to the ritzy Save Venice charity gala masquerade in New York. In March, Alexander McQueen organised a multi-day experience in New York for its American VICs, including a separate runway show. Gucci brought VICs to Coachella, and in December, Brunello Cucinelli opened Casa Cucinelli in New York, a new boutique exclusively for top clients.
“The US is … my fastest-growing client market, not just for the amount of new clients, but also for the level of spend,” said Waller. Originally from Australia, Waller moved to the US to specifically be closer to her VIC clients.
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The interiors of Casa Cucinelli, a private client showroom in New York City. (Justin Bridges)
Since the pandemic, brands are also looking to regions beyond New York or Los Angeles for big American spenders. Mytheresa has hosted more private client events throughout Florida and Texas, recently hosting an event in Miami with Domenico Dolce. Saks Fifth Avenue is focusing on Dallas, Aspen, Miami and Naples, Fla., while Neiman Marcus, which has doubled its VIC experiences year over year, has thrown events in Miami and San Francisco. Specific vacation destinations that attract wealthy clientele, like Miami for Art Basel or Aspen during ski season, are also important.
“The brands know that this group of people go to Monaco for the Grand Prix, to St. Moritz in January to ski, to Miami for Art Basel, so the hosting in these places has just exploded,” said Meader. “They’re trying to get closer to the luxury client.”
Changing Experiences
Once they’ve found their VICs, fashion houses and major retailers work to nurture those relationships, and recently, VIC activations have gone into overdrive.
“When the lockdown lifted, every house just went to the walls, crazy, and VIP experiences have doubled or tripled,” said Christine Chiu, a star of the Netflix reality show “Bling Empire” who owns a successful Beverly Hills plastic surgery clinic with her husband. This week, Chiu, a VIC with Alexander McQueen and Balenciaga, among other brands, is attending the Cannes Film Festival with Chopard, where she’ll attend movie premieres, dine in the region’s best restaurants and stay in luxurious accommodations, on the jewellery brand’s dime.
Nearly every VIC receives early access to collections and brand party invites, but trips and seats at fashion shows are the most exciting ways to draw in top shoppers. Saks Fifth Avenue has taken some of its VICs to the Oscars and Wimbledon. Gucci has hosted movie screenings in the Savoy’s Royal Suite in London, as well as dinner parties with Gucci chief executive Marco Bizzarri and parent company Kering’s chief François-Henri Pinault.
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A Mytheresa dinner with Dries Van Noten in Antwerp on April 27, 2022. (Virgile Guinard)
“It’s what money can’t buy,” said May of Mytheresa. “These people have … a lot, they travel the world, but we offer special access to a setting, to people, to designers, that they would not have by themselves.”
Brands also treat VICs with small gestures. Aqila Agha, a 54-year-old private client of Gucci in London who is an avid collector of Gucci capes, said she appreciates the brand sending her birthday flowers and extending VIC invites to her two daughters.
“Gucci feels like my family,” Agha said.
Remembering a shopper’s birthday or adding family to a party list are also ways to reward heavy spenders outside of the top tier, and are initiatives that can scale, in comparison to trips that are typically reserved for the highest level of VICs.
But every VIC experience, from flying to a fashion show to attending an intimate dinner, comes with unspoken spending expectations. While VICs are often offered line sheets for pre-ordering collections at fashion shows, or wake up the morning after a dinner party to a text from a sales associate, the ask must be handled delicately.
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A Neiman Marcus Prada brunch for private clients in Dallas in May 2022. (Beckley)
“It’s a dance,” said Chiu. “Whoever the brand [is] designating to building these relationships has to be a great communicator. When one particular brand’s sales associate was so frank, it was very off-putting.”
Brands often hire entire teams to look after these relationships, and the job is constantly evolving, as VIC ambassadors move from one social media channel to the next. Presently, companies like Louis Vuitton, Farfetch, Stadium Goods and Dior are all hiring for private client managers.
It’s a heavy effort, but when the job is done right, a VIC experience can unlock major brand loyalty. Once Gucci started giving a shopper like Ozzy Gazali, a 26-year-old Qatar-based financial consultant, its VIC experience some five years ago, Gazali said he stopped buying brands like Dolce & Gabbana and Givenchy and started spending exclusively with Gucci.
“I just really found myself in this brand,” said Gazali. “I love their ideas of gender fluidity and how they express that philosophy in a very contemporary way. It’s become a second home for me.”
New Teams: Jacquemus and Nike, Vuitton and Kusama, Fendi and Istituto Marangoni
Jacquemus teased a collaboration this summer with Nike, Louis Vuitton is again working with artist Yayoi Kusama and Fendi is teaming with Istituto Marangoni and artist Sarah Coleman.
RUN HIS WAY: Simon Porte Jacquemus, who spent the weekend hanging out with pal Dua Lipa, has hit the week running by teasing his upcoming collaboration with Nike on Instagram on Monday.
“For this collaboration with Nike, I wanted to create a collection that reinterprets athletic women’s sportswear in a minimal way. I have always been inspired by vintage ACG pieces and Nike campaigns from the 1990s,” the French designer said in a statement.
Porte Jacquemus said he imagined “a world where outdoor pursuits and court sports co-mingle within a new, integrated aesthetic” for this collaboration, which spans apparel and footwear along with “a variety of hallmark Nike designs with unisex footwear and accessories.” The items will drop on his brand’s e-commerce on June 28 and will be rolled out globally across Nike’s retail network throughout the summer.
“Having this imagery in mind, we designed women’s athleticwear with sensuous details and neutral colors, along with my own interpretation of the Humara — my favorite Nike shoe. It was important for the collection to be accessible, for all bodies, and to be a natural blend of Jacquemus style and Nike performance,” he continued.
No further details on the designs have been revealed but Jarrett Reynolds, vice president of catalyst apparel design at Nike, stated the collaboration had involved “[drawing] from vintage ACG inspiration, the interweaving of Nike Dri-Fit fabric, and [considering] footwear like the Humara, to create a nexus of sport and style that could only be done through the shared lens of Nike x Jacquemus.”
The Nike x Jacquemus collection, described as redefining summer ready-to-wear as “comfortable anywhere, anytime,” comes as Whitney Malkiel, vice president and general manager of Nike Global Women’s, told WWD in an interview on the brand’s 50th anniversary that it would continue to experiment with collaborations as consumers continue to look for comfort and versatility in the post-pandemic world.
“Women are still loving the idea of comfort and versatility. What we’re seeing them do is start to mix it up with something more tailored and structured as they head back into the world and back to work. We’re excited to play into that as we move forward,” she said. — LILY TEMPLETON