TheChek News Flow

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Macro :

- BC Partners Raises $1 Billion for its Debut Real Estate Fund

- China’s Property Sector Contraction Worsens in Blow to Economy

- Pudong Plans Bond Sale for Property M&A Loans: Evergrande Update

- Female-Backed VC Firm to Boost Crypto Bets With New Fundraise

Keep an eye on :

- ADP FP : ADP Dec. Passengers 5.22M

- ASPIRE SS : Aspire Bid Committee Recommends Owners to Accept NeoGames Offer

- ATL IM : Atlantia Agrees to Acquire Siemens Traffic Unit for $1.1 Billion

- AG1 GY : AUTO1 Says ‘Very Well Positioned’ for Ongoing Growth in 1Q 2022

- BB FP : BIC Agrees to Buy Inkbox, Upfront Payment EU57m

- CMBN SW : Cembra Money Bank General Counsel Hofacker to Leave End of June

- CFEB BB : CFE’s DEME Awarded 2GW in Scottisch Offshore Wind Leasing Round

- DNO NO : DNO 4Q Kurdistan Gross Operated Production 107,472 Boepd

- EDF FP : EDF Hit With Rating Warnings After France Acts on Energy Crisis

- EDF FP : EDF Halts Five French Oil and Gas Plants as Strike Continues

- ENGI FP : Belgian Agency Open to Keeping Two Nuclear Reactors Operating

- ENI IM : *SIXTH STREET CLOSE TO BUY MINORITY STAKE IN ENIPOWER: SOLE

- EVT GY : Evotec Enters up to $1B Value Drug Discovery Pact With Eli Lilly

- FLS DC : FLSmidth CEO Says Future Acquisitions Likely to Be Small: Borsen

- GAM SW : GAM Holding Prelim FY Underlying Pretax Loss CHF10M

- GSK LN : Glaxo Seeks Qatar, Singapore Wealth Funds as Investors:Telegraph

- HEI NA : Heineken May Sell S. Africa Strongbow Stake in Distell Deal: BD

- BOSS GY : Hugo Boss Prelim 4Q Sales Beat Estimates

- KIE LN : Kier in Advanced Talks to Buy Tilbury Douglas: Sky News

- LISN SW : Lindt & Spruengli FY Sales Meet Estimates

- MCPHY FP : McPhy Energy Signs Hydrogen Equipment Deal With Eiffage

- MOLN SW : Molecular Partners Agrees to In-License Ensovibep to Novartis

- NOBINA SS : Basalt Extends Nobina Offer Period; Holds 88.6% of Shares

- NDX1 GY : Nordex FY Orders 7.95 GW Vs. 6.02 Y/y

- PAT GY : Patrizia Buys EUR600m Barcelona Apartment Portfolio

- SIKA SW : N.Z. Regulator Says Sika Seeks Clearance to Buy MBCC Assets

- SW FP : Bain Capital Weighs Bid for Stake in Sodexo Benefits Unit: Rtrs

- STLA IM : Stellantis Sales in Japan Hit Record as Car Appreciation Climbs

- Technoprobe IPO : Technoprobe to List on Euronext Growth Milan by February: Sole

- UCB BB : UCB’s Bimekizumab Second Phase III Study Met Primary Endpoint

- DG FP : Vinci Airports Dec. Traffic +130% Y/Y

- VOW GY : Top Carmaker Shutdowns Hint More to Come in Covid-Zero China

Short sellers need not fear transparency

Don’t sell market transparency short

Short selling — selling borrowed shares in the hopes of profiting from a price decline — is good. It draws attention to overextended stocks, aids price discovery, and sniffs out the odd fraud. Short selling has gotten harder since the financial crisis, and it should be encouraged where possible.

The Securities and Exchange Commission wants to make short selling more transparent. It is proposing that securities lenders regularly disclose what securities they lend and what they charge borrowers. Lenders (eg big asset managers and investment banks) are understandably annoyed. The new rule would mean more paperwork for them. But some borrowers (eg hedge funds) are annoyed too, which took us by surprise. Don’t they stand to gain? More transparency ought to mean lower borrowing costs.

The SEC is hoping extra disclosure will eliminate information asymmetries in the $1.5tn securities-lending market. As it stands, securities lenders and big broker-dealers have good insight into which shares are in demand, and therefore good insight into the short side of the market. Everyone else has to settle for data that is patchy and expensive.

The proposed SEC rule would ask securities lenders to report all their activity to Finra, finance’s self-regulatory body, within 15 minutes. Finra would then publish the granular but anonymised data with a delay. That would spell a big departure from the current reporting regime, in which not-very-granular data is published just twice a month, when it is already stale.

But the Managed Funds Association, a Washington-based lobbying group representing hedge funds, thinks the rule is “misguided”. It has two big gripes. First, the rule lumps together data about what funds pay their brokers to borrow shares (called the “retail” side of the market) with what those brokers pay big shareholders to borrow shares to lend in turn (“wholesale”). It says that retail pricing is governed by complex prime-broker relationships involving more than just securities lending, so that data is not informative and could be deceptive.

Second, the MFA thinks the rule exposes short sellers to the risk others will suss out their trading strategies. The result it fears is front-running or GameStop-style short squeezes. To make the data harder to game, the MFA would prefer only daily aggregated data on wholesale volumes and prices be disclosed, not data from both sides of the market several times an hour, as proposed.

The MFA could be right that segmenting retail from wholesale short data makes sense. But we are sceptical about the worry that more reporting would discourage short selling. As James Angel of Georgetown University explained to us:

What a lot of people don’t really appreciate is that the borrowing actually occurs on the settlement date [two days after the trade]. The short seller has to find someone willing to lend the shares [later], do the trade, then go back [at settlement] and say, hey, remember me? But at that point the trade has already been done, so there is no new information as to someone being short. Selling information already became available.

But there is a grain of plausibility [to the hedge funds’ worries]. If someone wants to put on a big position they can’t do it all at once. There are situations where it takes more than two days to put on a short position, so there could be information there.

So it seems unlikely that the broad swath of short sellers could be sniffed out by other traders looking to squeeze them. One notable short seller, Arnaud Vagner of Iceberg Research, told us this on Monday:

I am very much in favour of more short interest data [though] for granular transparency requirements, they should match long holding requirements. No reason for short sellers to be subject to more demanding requirements.

The problem with GameStop [was] that hedge funds should not have taken a position with so high short interest. The data were stale but short interest would have been very high anyway.

Updated market short interest data would not increase the risk of a short squeeze.

Muddy Waters Research’s Carson Block told the FT something similar previously:

The new reporting requirements would benefit all market participants by “making it easier to gauge scepticism about a company and its propensity to be driven upward in a short squeeze, GameStop being the modern day poster child”.

Trading tactics may have to adjust, but in general having more knowledge is bound to benefit short sellers even as it benefits the market. But for some hedge funds, who in the post-GameStop era seem to prefer a bit more quietude, perhaps less public knowledge is the point.

What could be the world’s most expensive house is about to go up for auction for more than half a billion dollars. But it’s not exactly for the house itself as it is for the rare paintings inside the home, including the only ceiling mural ever painted by the famous Michelangelo Merisi da Caravaggio.

Known as the Villa Aurora in Rome, it is the last existing building of a 16th-century country retreat built by Cardinal Francesco Maria del Monte and spans over 30,000 square feet, according to the listing handled by the Italian government.

If the villa sells for what it is asking for, it would be considered the “world’s most expensive” home ever sold.

The date of the auction has been set for Jan. 18, 2022.

So far that title falls to a 51,000-square-foot Hong Kong residence that sold for the equivalent of $361 million in 2017.

The Caravaggio mural, painted in about 1597 or 1598, is an oil-on-plaster painting that spans a massive 10 feet long and 6 feet wide. The painting depicts the gods Jupiter, Neptune and Pluto. Jupiter rides an eagle, while Neptune is mounted on a seahorse. A naked Pluto and a celestial sphere completes the painting.

While most of the paintings, including the murals, have been preserved throughout the centuries, the rest of the villa remains in a somewhat abandoned state and in need of much renovations.

In 1968, peeling paint revealed a face on the ceiling that looked much like the artist. It had apparently been painted over during a past renovation of the home, according to the New York Times. When it was uncovered, they found not only the mural, but they also discovered Caravaggio had used himself as a model for the faces of the three gods.

The villa consists of nine other ceilings painted by prominent 16th-century artists, including one mural by Giovanni Francesco Barbieri, also known by Guercino. His fresco, titled “Aurora,” is what the villa is named after.

“To have a ceiling by Guercino and the only ceiling by Caravaggio makes it the most special residence of this kind in Italy,” Count Stefano Aluffi-Pentini, whose company, A Private View of Italy, organizes exclusive art tours in Rome, told the New York Times.

The artwork of the home is estimated to have had a “conservative” estimated value of €670 million in 2010. The art also includes statues dating to 500 B.C.

It is estimated that another $12.75 million is needed to restore the home to its original glory.

If the sale goes through, it would also beat out the $363 million asking price for a Los Angeles estate previously dubbed the highest ever on the market.

Former executives from Harry Winston and Cartier are betting on recycled gold and lab-grown diamonds to revive a 160 year-old Paris jeweller favoured by Empress Eugénie and Anna Wintour.

Can a 160-year old high jeweller be brought back to life for a new generation of conscious consumers? A team of former executives at the industry’s biggest names believes so.

Frédéric de Narp, the former CEO of Swatch Group’s Harry Winston, and Coralie de Fontenay, a longtime executive at Richemont’s Cartier, have teamed up to relaunch Oscar Massin, a 19th-century high jewellery maker known for his innovative diamond-setting techniques and intricate trompe-l’oeil creations.

While the Massin name has largely disappeared from view since its founder’s death in 1923, the new team is betting there’s space in the fast-growing luxury jewellery market to revive the heritage brand, this time with an emphasis on sustainability and ethics.

Launched in 1863, Oscar Massin won illustrious clients and the respect of the industry thanks to its founder’s unique techniques for setting diamonds in flexible surfaces. That allowed for designs that mimicked lace or ribbons, and tiaras where stones vibrated along with the wearer’s movements, generating unprecedented sparkle. Important pieces include the Fife Tiara housed in Britain’s Kensington Palace, and a crown designed for French Empress Eugénie to display the country’s 140 carat Regent diamond. At the 1867 World’s Fair, Massin cheekily displayed his signature lace and ribbon designs for sale by the metre, as if in a sewing shop.

More recently, Massin became an intriguing presence on the Met Gala red carpet, where Vogue editor-in-chief (and the party’s host) Anna Wintour wore a gleaming antique diamond necklace by the designer in both 2019 and 2021.

De Narp and De Fontenay founded the investment fund Luximpact last year with the aim of rebooting legacy jewellery brands with only lab-grown and non-virgin materials, adapting the codes and traditions of French luxury to a new generation’s values.

After discovering the dormant Massin, the duo searched for surviving heirs to the long-defunct trademark. Finding none, they registered it for themselves in key markets worldwide, and partnered with designer Sandrine de Laage, a former creative director of Harry Winston and studio director at Cartier, to create the brand’s first collection in a century.

De Laage paid homage to Massin’s prowess in constructing jewellery by highlighting the settings as a decorative element, rather than hiding them behind the stones. In her collection, beaded settings grip the stones from the outside, like a frog’s foot. In other pieces, she evokes Massin’s interest in imitating cloth, with recycled gold bracelets moulded to resemble circled ropes or spools of wrapped thread.

Luximpact’s Massin relaunch comes on the heels of an operation to revive Vever, a key player in Art Nouveau jewellery known for its fanciful organic shapes and intricate enamel work. LuxImpact’s team (including designer De Laage) partnered with the brand’s 7th generation heirs, Camille and Damien Vever, to create a high jewellery collection for the brand last summer.

After selling out that debut collection featuring enamel fairy motifs through one-to-one appointments with collectors, Vever launched an e-commerce platform for its fine jewellery and bridal ranges, and is currently is preparing to open its first physical location: a shop-in-shop at Paris’ Printemps department store.

“We want to give life to these precious brands, while redefining the codes of the industry,” De Narp said.

For Massin, Luximpact is opting to launch first in the US, the world’s biggest diamond market, and where demand for lab-grown stones is widespread. The brand partnered with a Washington, DC-based provider of lab-grown stones, Latitude Diamonds, and partnered with a New York jewellery workshop to produce the collection. An e-commerce launch is slated for mid-February, followed by physical activations planned later this spring in both New York and LA.

The initial fine jewellery range has an average price of around $4,500. A top-end haute joaillerie range aimed at collectors is set to follow in June.

As the luxury industry boomed in recent years, attempts to relaunch defunct houses have become commonplace in the fashion and leather goods space, where the likes of Schiaparelli, Carven, Poiret, Poitou and Moynat have all been revived at great expense with limited success, sparking intrigue but often struggling to commercialise their glamorous legacies in the crowded fashion space.

Luximpact is hoping the odds in jewellery will be more favourable than in the intensely competitive fashion sector, where global names dominate the market. By contrast, the majority of jewellery sales remain unbranded, with even industry-leader Cartier accounting for just a tiny fraction of the overall market, leaving brands with plenty of virgin territory in which to grow.

What’s more, for clients, the relative scarcity of globally-recognised jewellery players means those who are looking for a unique piece often have to try something new (or in this case, very old).

Luxury jewellery sales grew 24 percent to €22 billion ($25 billion) last year, recovering rapidly to close the year at 7 percent above 2019′s pre-pandemic levels according to estimates by Bain Capital.

And it’s true there are signs of sustainability and ethics becoming increasingly important selling points for clients. A survey for De Beers’ 2021 Diamond Insight Report found 60 percent of consumers say they would choose diamond jewellery based on brands’ sustainability commitments, with 85 percent of those customers saying they would be open to paying a premium for sustainable stones.

While major jewellery players have ramped up efforts on the traceability of their materials, they have yet to embrace lab-grown stones, which promise to eliminate rather than mitigate concerns about the environmental and social impact of mining.

A sustainable niche and a market largely untapped by luxury brands aside, Vever and Massin will still be competing with major brands like Cartier and Van Cleef & Arpels which have been investing in name recognition, design and craftsmanship consistently for over a century.

“These brands have an absolutely unique angle,” De Narp said, referring to Vever and Massin. “We’re confident there’s a new clientele for rediscovering brands from the past who are acting at the highest level in terms of responsibility.”

The Luximpact team has a third brand in the pipeline slated to relaunch later in 2022.

Beijing’s orchestrated collapse of the indebted property developer is an attempt to limit contagion

The crisis at Evergrande, the world’s most indebted property company, reached a milestone last month when it officially defaulted on offshore bonds. But the rest of the saga could take years to unfold.

The builder, a symbol of China’s heavily leveraged property sector, shook world markets when it started missing offshore bond payments in September.

It took three months for Evergrande, weighed down by construction delays, litigation and its vast liabilities of more than $300bn, to formally default, by which time liquidity troubles had engulfed the sector.

The company launched a risk committee, with the majority of seats held by representatives of state-owned companies in the southern province of Guangdong, where it is based. Meanwhile, there are signs Evergrande’s billionaire chair Hui Ka Yan has come under pressure to draw on his own resources to support the company.

While last month brought some clarity over Evergrande’s default status, the developer’s fate and that of many of its peers remains uncertain. Here is what we know about the anticipated restructuring process:

Beijing’s priority is to ensure that apartments are delivered to customers, many of whom paid for properties prior to their completion.

The government and Evergrande have been working to resume activity at construction sites which could generate cash flows to service the company’s debts.

In late December, Evergrande said in a social media post that work at 92 per cent of its projects, which number in the hundreds across China, had resumed. But separate data showed its housing sales had slumped 99 per cent year on year in the same month.

Even before its default in December, there were signs that the government, especially regional authorities, were pushing for work to continue on projects. Those local government bodies could come under financial pressure themselves if projects prove unprofitable.

“We felt strongly that the government was going to play a role and that it would probably provide capital to protect the consumer to finish projects for peoples’ primary residences,” said one former investor who has sold their position.

“Then they would turn to local [contractors] and local banks and then eventually they would get to offshore bonds.” The investor estimated the process could take five years.

For international investors in Evergrande, which have included asset managers such as BlackRock and distressed debt buyers in the US, the orchestrated, slow-burn collapse could mean it is a long time before any clarity emerges on their positions.

Offshore investors, who are the main link between international financial markets and China’s real estate troubles, have found themselves largely in the dark since the missed payments began.

Evergrande has borrowed about $19bn internationally, which is more than any other developer but still a fraction of its total liabilities.

“It feels like a slow-motion car crash that, because it’s so high profile for the government, may never actually fully crash,” said one investor who has been following the situation closely. “The ongoing issue with this entity is the black-box nature of it.”

In October, law firm Kirkland & Ellis and investment bank Moelis & Company, which are advising a group of international bondholders, complained of little meaningful engagement from the company.

“Onshore and offshore are really two different animals — we’re trying to focus on having a clear picture on all of the offshore liabilities,” said another person with knowledge of the Evergrande saga.

The government “are the ones who can make a call to a bank and say extend that loan, they are the ones who can make a call . . . to the contractors, suppliers”.

“This is a huge complicated machine that came to a brutal halt over late summer and September,” the investor added. “Potentially, there is value left.”

The developer has provided little concrete information about the restructuring in its official statements. This month, it held a call with investors in its renminbi-denominated bonds in a successful attempt to postpone repayments by six months, echoing a series of delays in offshore payments over recent months.

Its attempts to raise cash through asset sales, which it had been pursuing long before the liquidity crisis burst into the open last year, have also been delayed.

One Shanghai-based person familiar with the process noted that the risk management group set up last month still needed to work out the size of Evergrande’s off-balance-sheet assets and liabilities.

The person said the developer was unlikely to be allowed by Beijing to make big asset sales until authorities had a clear view of its true financial situation.

While the prospect of a drawn-out and closeted resolution contrasts with messy bankruptcies playing out in the media in the US and Europe, the Evergrande saga resembles other examples in China’s corporate history.

HNA Group, the acquisitive conglomerate that hoovered up a range of overseas assets including a large stake in Deutsche Bank, faced debt issues years before it was finally declared bankrupt last year.

By then, the shockwaves from its collapse had been dulled by widespread interventions behind the scenes that culminated in a deal to revamp more than 300 group companies into four new entities.

But no corporate failure has been as closely watched as Evergrande’s, which along with its developer peers has played an outsized role in building China’s cities and driving its economic growth. Its struggles pose difficult longer-term questions for the country’s growth model.

“It’s not clear that there is a holistic centralised legal framework for what’s happening in Evergrande, it’s all ad hoc fiat,” said an industry veteran.

The crisis has triggered a sector-wide cash crunch that has threatened the Chinese economy and raised questions about President Xi Jinping’s push to constrain the highly leveraged property sector.

In international markets, effective yields on Chinese high-yield bonds are about 24 per cent, according to an ICE index. That number is below decade-highs of almost 30 per cent in November but remains at a level indicating severe distress, with turbulence at Evergrande playing a central role in driving the original market sell-off.

Onshore, developers have also faced issues with renewing financing, especially for wealth management products, which in September led to protests outside Evergrande’s headquarters in Shenzhen.

Struggling to refinance, a number of developers including Kaisa Group, Fantasia Holdings and Modern Land China have defaulted, and property activity and sales have slowed sharply. Last week, Guangzhou R&F, another developer, was placed in restrictive default by Fitch after extending maturities on its debts.

Defaults are expected to continue this year. Goldman Sachs in January forecast that 19 per cent of high-yield property debt would default, after defaults of 28 per cent last year, warning that “stresses are picking up”.

French executive Christophe Cuvillier has been appointed to the position, following last week’s dismissal of Shandong Ruyi board members.

PARIS — SMCP revealed Monday that Christophe Cuvillier has been appointed chairman of the company’s board, following the dismissal of five members representing former majority owner European TopSoho on Friday.

Three new independent directors were appointed to the board at last week’s shareholder meeting, which went ahead after the Paris Commercial Court ruled against a request by European TopSoho, the Luxembourg-based subsidiary of Shandong Ruyi, which previously owned 53 percent of the French accessible luxury group, to have it postponed.

Cuvillier, a seasoned executive and former chief executive officer of Unibail Rodamco Westfield, was named to the SMCP board last June as an independent administrator.

His appointment comes as GLAS is expected to sell its 29 percent stake in SMCP, which it acquired in September after European TopSoho defaulted on bonds worth 250 million euros.

The CEO says Omicron has had no material effect on the company and that diversifying sourcing around the world has helped the brand navigate the health crisis and global supply chain issues.

At the Ralph Lauren Corp., brand elevation is at the core of the strategy.

“When people ask me what’s your strategy, I give them two words — brand elevation. We have the desire to be a leading luxury lifestyle company,” said Patrice Louvet, president and chief executive officer of Ralph Lauren Corp.

Speaking at the National Retail Federation’s “Big Show” convention at the Javits Center in New York on Monday, during his conversation with Sara Eisen, co-anchor of CNN’s “Closing Bell,” Louvet said, “We have an opportunity to further elevate the way the brand is perceived. It’s very interesting to see how more and more we are selling cashmere sweaters and less T-shirts. Right now there is a whole return to occasion wear. If you are looking for a tuxedo right now, we are going to struggle to make one available, or an evening gown.” They’ve both been selling “successfully” at Ralph Lauren, Louvet said, though pent-up demand has been exceeding product availability.

“The consumer is looking for aspirational products and stories. We have a unique opportunity to continue to serve them in that space. If you look back at the history of this company, it has been a continuous journey of elevation…,” Louvet said.

“When you look at the recent stores we opened, in Beijing, Shanghai, and a few weeks ago in Milan, they are very elevated experiences. They have hospitality in them. And you look at our products available across the different selling points, they’re certainly more elevated than what we had three or four years ago.

“We still believe in the role of stores.” During the pandemic, “As soon as people were able to go back into stores, we saw traffic go up significantly.”

Louvet also said his company still believes in department stores, despite some reduction in the distribution. “In the past couple of years we have gone through a significant reset of our department store presence,” Louvet said. “Wherever we show up we want to make sure the brand is portrayed in a way that is consistent with the image. We’ve exited mid-tier department stores. We focused our brick-and-mortar presence in more elevated doors, and wholesale digital. As I look at the total ecosystem that we are building around consumers, department stores clearly have a role to play and we are very grateful for the strong partnerships we have our with department stores in the U.S. and around the world.”

Addressing how Ralph Lauren has fared during the pandemic, Louvet, who has been running the company for four and a half years, said, “We actually feel really good about where the Ralph Lauren company stands. We certainly feel as if we are in a position of strength. We have the resources to invest in our momentum. We are opening stores around the world. We opened 80 over the past year — a combination of Polo boutiques and flagship stores. We are investing in marketing. We are investing in new digital spaces. We are investing in new categories — footwear, outerwear and home. We feel good about the energy that the company has at this point.

“The crisis has really been an opportunity for all of us to rethink our lives, what we aspire to and what we dream about. We often talk about our business as not being a fashion business. We like to say we are actually in the dreams business. As consumers rethink what living looks like and means to them, I think we are particularly relevant at this time based on what we are able to offer to consumers around the world.”

Being a company with “heritage, innovation, resources to sustain momentum” and “pretty unique relevance at this point in time” has helped Lauren navigate the pandemic, Louvet said.

The corporation bounced back in its fiscal second quarter. ended Sept. 25. Profits tallied $193.3 million, up from losses of $39.1 million a year ago when the pandemic kept shoppers close to home. Revenues for the quarter jumped 26 percent to $1.5 billion from $1.2 billion. The topline growth was supported by the efforts to elevate the positioning and increase prices where the average unit retail prices rose 14 percent.

“This company has over 50 years of heritage all driven by Ralph’s vision,” said Louvet. “It’s been driven by a very clear purpose and a very clear set of values. That has served as a foundation for us during the health crisis and also the North Star to help us on what to focus on, and on what to prioritize.

“We all know heritage by itself is not enough, and as we reflect on almost 24 months [of the pandemic] it’s really been innovating on how we engage with the consumer, innovating on products, innovating on go to market and constantly reimagining. The reason this brand has stayed so vibrant for so long is because of this muscle that has been built over time, the ability to reimagine, reinvent and innovate.”

Omicron, he said, “has not materially had an impact on our business.”

He also said Ralph Lauren was prepared to meet supply chain headwinds caused by COVID-19 and increased consumer demand because it diversified its supply chain, from being dependent on a couple of markets to sourcing much more widely through Latin America, Europe and Asia, with “dual sourcing, back-up options, and the ability to move production from market A to market B very quickly.”

In addition, the company has built “strategic supplier partnerships with a limited number of suppliers,” Louvet said. “We are not just operating one-year, long-term relationships. Rather than a supplier-client relationship, it’s more about partnerships with common agendas.”

Asked about inflation, the CEO replied, “We have demonstrated pricing power for around 19 quarters in a row with average unit retail increases. It means the brand elevation strategy is working and consumers are responding to it.

“There is transitory inflation driven more by logistics challenges and access to raw materials which will resolve over time because there has been this huge pent-up demand. There is also long-term [inflationary] pressures related to wage increases. We will see within those two extremes which ones have the greatest impact, but certainly we are prepared for an environment that will be inflationary through both the pricing power we have demonstrated for the past four years, and through the supply chain capabilities we have built around the world which drives efficiency…We have a very brand range of consumers. We have around 50 million around the world.” Segments of the company’s consumer base, he said, are impacted by inflation.

Discussing the metaverse, Louvet said, “We believe in the opportunities around these new digital worlds and the metaverse. I would be misleading you if I told you exactly where all this is going to land. But there are a few things that are striking to us. One is there is a growing interest from the consumer. One of our strategies is to win over a new generation and the new generation is there. So we have to be there.

“There are parallels between the metaverse and Ralph’s vision, because we are not a fashion company. We are in the dreams business. Ralph has created different worlds. You can be projected in Colorado. You can be projected in Montauk. We think there is great consistency between our philosophy and what the metaverse brings.”

He said the company has yet to offer NFTs, though “we have a lot of conversations on how to do that well in a way that ties back to what matters to us and how we are going to project it and how we want to engage with consumers. We don’t just want to follow the trend. We want to do it in a way that’s meaningful and ties back to our strategy and brand building.”

Looking ahead, “I continue to be optimistic about where the consumer is. I know there continues to be puts and calls here and there. We are going to see omnichannel becoming more and more central to how companies need to operate and frankly historical silos go away. You are going to see increased focus on citizenship and sustainability for the consumer, across the board.”

Regarding the big changes with consumers, Louvet said there’s comfort with digital platforms, and a desire to leverage all the dimensions of omnichannel setups, and that consumers are responding to how Ralph Lauren and other companies have “pivoted” the messaging toward more purposeful communications. “We ramped down on product and focused more on optimism and family. It’s been exciting to see consumers respond to that,” said Louvet.

He also cited his company’s efforts at “playing a leadership role in the industry on sustainability,” and it launched at the Australian Open a recycled cotton polo shirt, called the Clarus, treated to be performance-oriented with breathability and wicking characteristics.

Louvet also mentioned the partnership with Dow, called “Color on Demand,” which he described as a new way to color products that dramatically reduces water use. Ralph Lauren is also part of the Fashion Pact, the industry organization that identifies areas to work together to reduce environmental impact.

The conversation closed with some brief comments on Ralph Lauren, the man. “My relationship with Ralph is wonderful. We spent a lot time before we both signed on the dotted line on the bottom of the contract getting to know each other five years ago, making sure we had a common vision.”

He said Ralph tried to recruit him seven or eight years earlier when the company was seeking someone to head up the international business, but he already made a commitment to run Gillette. But when former Ralph Lauren vice chairman Roger Farah retired and other leadership changes occurred at the corporation, Louvet was approached once again for the top job and accepted it.

With Ralph Lauren himself, “It’s been a fantastic partnership,” Louvet said. “He is still involved. He is still fully engaged.”

Luxury car sales boom as auto makers direct scarce chips toward their most profitable models

BERLIN—Luxury car brands such as Rolls-Royce, Bentley, Porsche and BMW BMW -0.30% have reported record sales, thanks to customers who have craved them and manufacturers that have directed scarce chips toward their most profitable models.

With international travel stalled during the pandemic and many avenues of flashy spending closed to them, a young generation of luxury-car consumers went on a shopping spree last year.

Meanwhile, manufacturers facing shortages of semiconductors prioritized certain models.

“We are hardly affected by the chip shortage,” said Alain Favey, sales chief at Bentley Motors Ltd., which is owned by German auto maker Volkswagen AG .

“The process in the VW group is very centralized. One of the elements to decide on allocation is the margin of profitability. From that perspective we are prioritized, so we managed to get all of the chips we needed,” Mr. Favey said.

Other types of manufacturers dealing with a shortage of chips and other components have given priority to big-ticket products for similar reasons, making it harder for consumers to find cheaper alternatives.

Bentley sold 14,659 cars last year, an increase of 31% from the year before and a record for the company. Porsche, also owned by VW, sold 301,915 cars, an increase of 11% world-wide. Both brands posted growth in the U.S., Europe, and China.

By comparison, VW’s namesake brand, its biggest business by unit sales, struggled throughout the year to keep its factories operating because of the chip shortage. The main plant in Wolfsburg worked under capacity and had to scrap shifts throughout the year.

As a result, sales took a hit, falling 8.1% to 4.9 million vehicles world-wide. Sales in China, the brand’s largest single market, dropped 14.8%.

VW’s mixed performance reflects that of other mass-market manufacturers: While conventional sedans, hatchbacks and station wagons languished, sport-utility vehicles and new electric vehicles made big gains.

In the U.S., BMW grew sales by 21% as the top-selling luxury brand for the third year in a row, selling 336,644 vehicles. Toyota Motor Corp.’s Lexus came in second, selling 304,476 vehicles, or 11% more than the previous year.

Tesla Inc. TSLA 1.75% was able to sidestep some of the chip shortage’s impacts, and a full year of sales for its most recent Model Y SUV helped to increase global deliveries by 87%. In the U.S., Tesla outsold Mercedes-Benz, which reported U.S. sales of 276,102 vehicles in 2021. Tesla doesn’t break out its sales by region, but Ward’s Intelligence, a consulting firm, estimates that Tesla sold around 299,000 vehicles in the U.S. last year.

Rolls-Royce, owned by Bayerische Motoren Werke AG BMW -0.30% , whose tailor-made superluxury cars have starting prices of more than $300,000, sold a record 5,586 cars last year, up 49% from the year before.

Martin Fritsches, president of Rolls-Royce Motor Cars Americas, said that buyers of superluxury cars like Rolls-Royce are younger today. The average age of a customer is about 43 years old, which means many of their clientele are in their 30s.

In part, Mr. Fritsches said, Rolls-Royce’s wealthy customers have been sheltered from the hardships felt by many during the pandemic. They benefited more from the economic recovery, the cryptocurrency boom and soaring stock prices. And many of the buyers are first-time Rolls owners, he said, including young entrepreneurs who got rich on the stock market and cryptocurrencies.

New electric vehicles were another driver of growth. BMW, which fared better than many of its rivals in the chip squeeze, sold 2.5 million vehicles last year, an increase of 8.4%. Of the total, the company sold 103,855 fully electric vehicles.

“Our target for 2022 is to more than double the sales of fully electric vehicles,” said Pieter Nota, BMW’s sales chief. He said BMW was well supplied with chips throughout 2021 and through new direct relationships with chip makers he expected to get through 2022.

Mr. Nota said the effects of the chip shortage would likely continue to be felt in the first half of this year, but added that BMW’s efforts to mitigate the crisis through orders and direct relationships with chip suppliers should help ease the impact again this year.

Porsche said its electric sporty sedan, the Taycan, outsold the company’s iconic 911 sports car last year, marking a symbolic shift as even Porsche customers begin to embrace electric cars.

IHS Markit, a global industry consultant, is forecasting new light vehicle sales will rise 3.7% this year to 82.4 million vehicles, up from 2.9% in 2021 when growth was constrained by supply-chain disruptions. It expects new light vehicle sales in the U.S. will increase about 2.6% this year to 15.5 million vehicles.

With the onset of the pandemic and widespread factory shutdowns in 2020, auto production dropped about 16% from 2019 to 74.6 million vehicles, according to Wards Intelligence and LMC Automotive, consulting firm groups. They said the auto industry clawed back some of this last year, with global output rising about 2% to 76.2 million vehicles. They forecast that global output will rebound 13% to 85.8 million vehicles this year, still below pre-pandemic levels.

Despite record sales, Mr. Fritsches said that Rolls-Royce will remain a small, intimate luxury brand focused on creating experiences for its customers. To appeal to younger customers, Rolls-Royce is connecting owners through an app called Whispers, which you can only access if you actually own a Rolls-Royce.

“Our customers look for the bespoke experience,” Mr. Fritsches said. “I can guarantee you that volume is not and will never be a focus topic for us.”