FT : Gucci hits rough patch on Asia weakness

Gucci hits rough patch on Asia weakness
Blow for Kering as revenues at Italian fashion house fall short of expectations

Sales at Gucci slowed unexpectedly in the third quarter because of a resurgence of Covid-19 in Asia and the timing of a new collection, a setback for owner Kering as the French luxury group seeks to revitalise the Italian fashion house.

Gucci’s quarterly revenues rose 3.8 per cent on a comparable basis from a year earlier to €2.2bn, well short of analysts’ expectations for a 9.3 per cent increase, according to Bloomberg data. Overall group like-for-like sales were €4.2bn, ahead of analysts’ expectations for €4.1bn and up 12 per cent compared with a year earlier.

Jean-Marc Duplaix, Kering’s chief financial officer, said he expected a stronger performance at Gucci through the end of the year because designer Alessandro Michele’s new Aria collection only hit shelves in late September.

“If we look at overall drivers, Gucci is on the right track. There was clearly wait-and-see behaviour before the new collection, especially in China . . . [but] we expect a very intense end of the year,” he said, referring to marketing and launch events at stores.

Investors have been scrutinising the performance of Gucci, which accounts for more than half of group sales and the majority of profits, as its growth has slowed recently after years of very strong gains. Although Kering’s smaller brands Yves Saint Laurent and Bottega Veneta have been expanding strongly, some investors have questioned whether the group remains too reliant on Gucci, prompting some to call for it to diversify through acquisitions.

“The Gucci party has been postponed,” wrote Bernstein analyst Luca Solca in a note. The label “continues to be behind mega-brand peers, despite easier comparisons”, he added, referring to LVMH fashion and leather goods division’s 24 per cent year-on year comparable sales increase the quarter.

Kering’s larger rival LVMH last week reported forecast-beating sales for the third quarter driven by its all-important Louis Vuitton brand, and continued strong demand in the US and China.

Both groups are on track to exceed their pre-pandemic revenues this year as the biggest luxury brands recover faster than some smaller independent rivals. But Kering shares trade at a roughly 20 per cent discount to LVMH on a forward price-to-earnings basis, reflecting its slower growth rates.

Kering’s shares have lagged behind those of competitors this year rising nearly 10 per cent before the quarterly sales figures were released, compared with an increase of 26 per cent for LVMH shares, 35 per cent for Richemont and 45 per cent for Hermès.

After a strong start to the year, luxury stocks have sold off since mid-August as investors have worried that new curbs on conspicuous consumption in China could cast a pall over demand as during another anti-corruption campaign a decade ago.

Hermès is due to report quarterly sales on Thursday.

FT : Facebook/metaverse: investment in virtual realm is a beguiling distraction

Facebook/metaverse: investment in virtual realm is a beguiling distraction from reality
The more the tech group spends on staff now, the harder it will be for rivals to catch up

Facebook’s interest in the metaverse looks like a classic case of misdirection. While US regulators consider the merits of breaking the company apart and a whistleblower undermines its user metrics, the social network is busy talking about the next phase of the internet. This week it declared that a recruitment drive would create 10,000 new jobs in Europe over five years to bring it to life.

A quick primer: tech seers envisage the metaverse as a vast array of interconnected virtual worlds around which online avatars and digital goods can move seamlessly. It would be used for everything from work to school to entertainment.

None of this is new. The term itself is three decades old and describes something that does not exist yet. But producers of hardware, social media platforms, digital payment services and online entertainment are staking their claim as metaverse stocks anyway.

Microsoft and Epic Games both came out with metaverse plans this year. Venture capitalist Matthew Ball, who created the Ball Metaverse Index, has created a ruling council with Nvidia, Amazon, Facebook and others.

Facebook’s interest is focused on augmented reality gadgets such as its Oculus headsets. It hopes to reverse years of disappointing sales. Total headset shipments are predicted to hit just 11m this year, according to research company IDC. By comparison, global smartphone shipments are forecast to reach almost 1.4bn, though growth is slowing.

Metaverse descriptions are sufficiently woolly to encompass existing plans while making them sound more interesting. Facebook has been steadily bulking up its headcount since 2016. In June it reported more than 63,400 employees, a fifth higher than the previous year. The metaverse is an upbeat reason for hiring. In 2017, Facebook announced plans to add 3,000 moderators after a slew of videos of criminality streamed on Facebook Live.

Employee expansion could chip away at Facebook’s profit margin. But rising advertising prices provide a buffer. Net income doubled in the past quarter, taking the margin to 37 per cent. The more Facebook spends on staff now — for the metaverse or any other kind of content — the harder it will be for rivals to catch up.

FT : Wise: maverick fintech hero heads for zero fees

Wise: maverick fintech hero heads for zero fees
Investors are buying into a story of disruptive and rapid revenue growth

Payments business Wise joined the London market unconventionally via a direct listing in July. The group’s maverick journey continued with an update on Tuesday. Wise promised higher gross margins — defined as fees from customers minus fees from banks — even though it is charging clients less. The gains will be supported by speedier money transfers that should reduce costs, notably on hedging.

The fast-growing fintech, like several rivals, is grabbing retail payment flows from costly banking incumbents. Investors are buying into a story of disruptive and rapid revenue growth. Yet Wise’s overarching goal of “Mission Zero” eventually aims to make such payments free, eliminating its core revenue source. Ancillary services would have to take up the slack. No wonder some investors are scratching their heads as to how to value this business.

Average transaction fees were 0.62 basis points in the three months to September — 5bp lower than the previous quarter. Fee declines mean slower growth. Wise expects revenue increases of “low-to-mid 20s” for the full year. That compares with 39 per cent for the previous year.

Such metrics hardly add to the appeal of the stock. Investors seem to have only recently realised that Wise is not understating its growth forecasts. Pre-listing growth rates are a thing of the past. The shares have declined by a fifth since the highs of late September. They are now trading below their first-day closing price.

Volumes of cash going through the company’s payment system remain a better indicator of long-term growth. These rose 36 per cent to £18bn in the latest quarter. Momentum here should be easier to maintain. Gross margins are now expected to be 3-5 percentage points above last year’s figure of 62 per cent. That means greater investment in engineers and marketing, which should reduce costs and push up volumes. 

Wise hopes to reach a tipping point at which rising volumes and falling fees become a virtuous circle. To invest, you must believe the business plan is boldly disruptive — not just an exercise in buying market share.

WSJ : Kushner Cos. Goes Outside the Family to Replace Jared as CEO

Kushner Cos. Goes Outside the Family to Replace Jared as CEO
Laurent Morali, president of the real-estate company, will take over as chief executive

Jared Kushner’s family real-estate company is for the first time turning to a nonfamily member to lead the business, after the former senior White House adviser said that he wouldn’t be returning.

Laurent Morali, president of Kushner Cos., will take over as chief executive effective immediately, the firm said. The CEO post has essentially been vacant since 2016, when Mr. Kushner began working full time on Donald Trump’s presidential campaign. After Mr. Trump won, Mr. Kushner took a senior position in the administration.

Nicole Meyer, Mr. Kushner’s younger sister who has been working for the family business since 2015, is becoming president. Charles Kushner, the chairman of the Kushner family board and Jared and Nicole’s father, will continue to play a role in management and investment decisions, the firm said.

Kushner Cos. is a midsize real-estate company by New York standards. It owns apartments, office buildings and other property that the firm values at more than $15 billion.

But the family and its activity have received outsize attention, especially after Jared Kushner, Mr. Trump’s son-in-law, became one of Mr. Trump’s closest aides.

“So much about our company is growth through adversity,” said Ms. Meyer in a recent interview in the company’s new headquarters in the General Motors building overlooking Central Park. “We have been putting our heads down and really moving.”

Mr. Morali, a native of France, was working for the real-estate investment banking unit of French bank Credit Agricole SA when he was hired by Kushner Cos. to run its finance operation in 2008. He was made president in 2016.

His ascent to the top job is the latest sign that Kushner Cos. is shifting from a family business to one with a more institutional structure. Its management team has come from large real-estate firms such as Blackstone Group Inc., Cedar Realty Trust Inc. and GFI Capital Resources Group.

Since Jared Kushner stepped down, Kushner Cos. has also largely shifted away from the flashier Manhattan office building acquisitions made when Jared led the company to buying rental apartments in mid-Atlantic and Southeastern states.

Since 2019, Kushner Cos. has mostly acquired units in states such as Alabama, Kentucky, Louisiana, North Carolina and Texas, where soaring housing prices have forced many would-be buyers to keep renting.

“With jobs comes demand for apartments and in general more people want to be renters,” said Mr. Morali. “You end up with extraordinary rent growth.”

Jared Kushner, who married Ivanka Trump in 2009, divested himself of all his family-business management responsibilities and many of his owner stakes in properties when he joined the Trump White House.

After Mr. Trump left the White House, Mr. Kushner and Ms. Trump moved to South Florida, where Mr. Kushner plans to launch a Miami-based investment firm named Affinity Partners as soon as this fall, according to a person familiar with the matter.

During the first year of the Trump administration, Charles Kushner was negotiating a sale of a Manhattan office building at 666 Fifth Avenue to China’s Anbang Insurance Group Co., which had close ties to Chinese officials. The firm’s critics said that such a sale of the money-losing building would represent a conflict of interest because of Jared’s role in the administration.

Kushner Cos. said that Jared played no part in the talks and that he had divested himself of any sensitive connections to the firm. The firm eventually sold a long-term lease of 666 Fifth Avenue to Brookfield Asset Management.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • PACW -6.5% DLO -6.4% (guides Q3 revs above consensus but also announces 16 mln share offering by selling shareholders) MAN -3.2% ZION -2.7% PG -1.6% HXL -1.5% EVER -1.1% (issues downside guidance for Q3) ERIC -1% SI -0.7% JNJ -0.6% HAL -0.5%

Other news:

  • TASK -5.4% (stock offering)
  • KRG -3.3% (to join S&P MidCap 400)
  • CSTL -1.1% (has signed a definitive agreement to acquire Cernostics an Illumina Ventures company)
  • WTI -0.5% (provides operational update for Q3)

Analyst comments:

  • ACI -0.7% (downgraded to Neutral from Buy at Citigroup)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • DOV +3.7%, TRV +3.3%, FNB +3.1%, STLD +2.4%, SNV +1.1%, IRDM +1%

Other news:

  • ETTX +14.1% (announces positive topline results for Phase 3 ATTACK trial)
  • HRMY +13.8% (to join S&P SmallCap 600)
  • WVE +8% (amends collaboration with TAK)
  • BMRA +6.5% (Biomerica announces that Walmart (WMT) has begun in-store sales and rollout of the Company's EZ Detect colorectal disease screening test within the nationwide Walmart retail system)
  • UAVS +4.7% (acquires Parrot for $23 mln)
  • DRNA +3.4% (announces results for PHYOX4 single-dose study of nedosiran in primary hyperoxaluria type 3)
  • VERO +3% (has received 510(k) clearance from the FDA to market the Venus Freedom device)
  • UPST +2.2% (BHLB announces partnership with UPST)
  • SAGE +2.1% (SAGE Therapeutics and Biogen (BIIB) announce plans to submit a new drug application for Zuranolone to the FDA in the second half of 2022)
  • TREE +2% (to move to the S&P SmallCap 600 from S&P MidCap 400)
  • BTG +2% (reports Q3 production)
  • PRTK +1.7% (first patient has been enrolled in its Phase 2b study of NUZYRA)
  • CELC +1.2% (PBYI CELC and Univ of Rochester announce trial collaboration to study patients with breast cancer brain metastases)
  • ENTA +1.1% (reports new preclinical data for EDP-235 its recently announced lead oral protease inhibitor specifically designed for the treatment of COVID-19)
  • FTI +1% (FTI announces strategic alliance with TALO to provide carbon capture and storage)

Analyst comments:

  • ALB +1.9% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
  • CCI +1.1% (upgraded to Outperform from Neutral at Credit Suisse)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • ETTX +21.9%, HRMY +11.6%, UAVS +11.6%, WVE +8%, BTG +3.8%, ACMR +3.4%, FNB +3.1%, TREE +2.7%, CALA +2.5%, FTI +1.7%, PRTK +1.7%, STLD +1.7%, CELC +1.2%, TAK +0.9%, UPST +0.8%, BHP +0.8%, BHLB +0.6%
  • Gapping down:
    • PACW -6.5%, DLO -6%, TASK -5.8%, EVER -4.6%, KRG -3.7%, ZION -2.7%, HXL -1.5%, SYF -1%, WTI -0.5%

(ZH) The Nuclear ESG Push Is On: UK Aims To Put Reactors "At The Heart" Of Its D

The Nuclear ESG Push Is On: UK Aims To Put Reactors "At The Heart" Of Its Decarbonization Strategy

The United Kingdom could be ready to officially put nuclear power back on the map.
That's because UK ministers are planning on putting nuclear power "at the heart of Britain’s strategy to reach net zero carbon emissions by 2050," a new report from the Financial Times reveals.
In what is one of the boldest statements about the future of nuclear in a major geographic area, government documents will lay out a "net zero" strategy for the UK as well as a cost assessment of implementing the strategy to meet the 2050 goal.
Then, Prime Minister Boris Johnson is expected to give the documents a "go ahead".
The FT reported on how the project would be funded:
The creation of a “regulated asset base” (RAB) model will be key to delivering a future fleet of large atomic power stations. The RAB funding model is already used for other infrastructure projects, such as London’s Thames Tideway super sewer.
Under the scheme, households will be charged for the cost of the plant via an energy levy long before it begins generating electricity, which could take a decade or more from when the final investment decision is taken.
The mechanism is designed to encourage investment by institutional investors, such as pension funds, by guaranteeing steady returns from early on. Legislation on the nuclear RAB model will be published later this month.
Westinghouse is already taking well to the news, planning to revive plans for a nuclear power plant that was abandoned by Hitachi in 2019, the report says.
Ministers will also be advocating for small modular reactors, which we noted days ago were also key to France's plans to meet net zero carbon emissions goals.
A combination of "nuclear power, renewables and 'carbon capture and storage'" is being targeted for UK's 2035 net zero goal.
The government will also produce costs analyses and broader environmental plans ahead of the upcoming COP26 climate conference in Glasgow at the end of October.
Four days ago we noted that France was also adopting nuclear as part of President Macron's strategy for decarbonization.
Recall, Germany is also trying to stop the decommissioning of its nuclear reactors. A newly penned letter to the FT, signed by professors from Oxford, Harvard and American University alongside a group of environmentalists, is urging that Germany postpone its exit from nuclear energy for benefit of the environment.
Noting that many Germans aren't happy with the job politicians are doing addressing climate change, the letter notes that Germany's "emissions are rising sharply again, at a time when they need to be falling fast".
Recall, just days prior to that we wrote about Poland's second largest energy consumer considering a move to small modular reactors to help generate energy.
Earlier in the summer we posted about how crypto miners were starting to forge partnerships with nuclear power plants to combat the "bitcoin is not good for the environment" argument.