TheChek News Flow

A year after launching, Amazon is taking Luxury Stores into the ultra-competitive European market.

LONDON — Amazon Luxury Stores is preparing to debut in Europe later this year, according to industry sources, although the competition for brands — and fashion customers’ wallets — will be more ferocious than ever.

Amazon is said to be readying a rollout for November, although the lineup of brands set to join remains in flux. According to sources, one of the brands that’s joining is Dundas, which is already selling on the U.S. Luxury Stores site.

An Amazon spokeswoman said the company cannot comment on rumors or speculation. Dundas declined to comment.

Luxury Stores rolled out a year ago in the U.S. as a by-invitation-only platform for Prime members located inside the Amazon app.

Although it was originally aimed at those Prime customers, it is now available to a wider U.S. audience on desktop, mobile and tablet browsers, in addition to the Amazon app.

Luxury Stores also boasts a growing roster of international names including Oscar de la Renta, Mark Cross, Christopher Kane, La Perla, Deveaux, Mira Mikati and Boglioli. It has added beauty brands including Clé de Peau Beauté and RéVive Skincare.

Amazon is understood to be happy with the interest it has drawn both from emerging and well-known brands, and from the fashion-loving segment of its consumer base.

It has also been hard at work promoting the platform with a “Smile! It’s Summer” campaign featuring Paloma Elsesser, Georgia May Jagger and Luka Sabbat, and a springtime initiative supporting Red Carpet Advocacy and its charities.

Some of the brands on the platform have been reporting robust sales, and remain transfixed by the potential of reaching even a fraction of Amazon’s customers. But there are those who believe the momentum might not transfer to Europe given all the homegrown, multibrand fashion and luxury sites such as Zalando, Farfetch, Mytheresa, Net-a-porter, Matchesfashion and the LVMH Moët Hennessy Louis Vuitton-owned 24 Sèvres.

Add the Tmall and JD.com dynamics to the punchbowl, and it makes for one potent cocktail of competition.

In the 12 months since Amazon Luxury Stores launched — and with online sales rocketing due to the pandemic — those European sites have been forging new, international alliances, raising money on the public markets and making further inroads in luxury.

According to one luxury chief executive officer, who requested anonymity, Zalando is fast becoming a formidable force in the fashion tech space and “putting luxury at the front of the agenda. They have become Europe’s version of Amazon luxury in what is now a very competitive market.”

Zalando, Europe’s largest online fashion platform which works with 4,500 international brands, already carries luxury names such as Roksanda, Victoria Beckham, Christopher Kane, Paul Smith, Bally and Moschino, some of which have stand-alone shops on the site.

Zalando also grants third parties access to its logistics network, enabling brands to sell their own inventory through the fashion store, and operates the Zalon style advice service, connecting freelance stylists with customers.

Those customers keep coming back for more: In August, the German e-commerce giant said that in the first six months of its fiscal year, it saw massive growth during the COVID-19 pandemic and the ensuing lockdown: revenues totaled 4.97 billion euros, an increase of 39.7 percent on the previous year.

Like Amazon, Zalando has also been embracing luxury beauty. In June, the German giant inked a long-term strategic partnership with Sephora to create a prestige beauty experience online. It will start in Germany in the fourth quarter of this year.

Principals of both companies have said their goal is to create a matchless customer experience for Zalando’s 42 million active customers, with “hyper-personalization” one of their priorities.

Zalando isn’t the only threat to Amazon Luxury’s ambitions in Europe.

Late last year, Farfetch signed a global strategic partnership that saw Compagnie Financière Richemont, its Chinese ally Alibaba and Artemis Group — owned by the Pinault family that owns Kering — pour hundreds of millions of dollars into Farfetch Ltd., and into a new joint venture called Farfetch China.

As part of the deal, Farfetch launched on Alibaba’s luxury platforms in China, and added thousands of fashion and luxury brands to the Chinese site.

In addition, Farfetch has been positioning itself as an environmentally aware destination, releasing its first Conscious Luxury Trends Report, and promoting circular fashion through its Second Life retail service. Separately, it has added fine jewelry to the mix and has partnered with Wishi to bring new product suggestions and styling tips to shoppers.

The retailer 24S may not have as big or broad as its European competitors, but it has LVMH muscle behind it, and has also been raising its luxury profile.

Earlier this month, it tapped Charles de Vilmorin, the French fashion scene’s hottest up-and-comer, the new creative director of Rochas and a finalist for this year’s edition of the LVMH Prize for Young Designers, for an exclusive unisex capsule collection set to launch online on Sept. 9.

While Amazon may tower over Europe’s (and China’s) fashion platforms in terms of revenue and customer reach — according to a Kantar report, more than 50 percent of British households are Prime members, while worldwide, Amazon Prime counts 200 million members — Luxury Stores remains a work in progress.

Some brand managers interviewed for this story said they were disappointed both that Amazon had opened Luxury Stores to a broader audience (no longer restricting it to top Prime customers) and that the big-name luxury brands never arrived while in many cases they do sell on the likes of Net-a-porter, Mytheresa or Farfetch.

“There are no adjacencies to elevate the smaller brands that are already on the site,” said one manager who asked not to be named. Another one added: “We were expecting them to come up with the heavy hitting brands, but they haven’t so far.”

Expansion of blue-chip index is welcomed but some want operator Deutsche Börse to reform further

Wirecard harmed more than duped investors when it collapsed into insolvency in 2020. The former high-flying start-up was one of just 30 blue-chip companies on Germany’s Dax index, having replaced Commerzbank two years prior, and its spectacular downfall cast a pall on the remaining members of this elite club.

Partly in response to this public relations crisis, Deutsche Börse Group, the Dax’s operator, decided it was high time to give the 32-year-old index a makeover. It launched a consultation, asking hundreds of companies and financial institutions what they would like to see changed.

The suggestions ranged from adding environmental and governance criteria to allowing into the index certain weapons manufacturers which are currently banned.

Ultimately, Deutsche Börse decided on a less controversial path. From mid September 2021 the Dax will expand from 30 to 40 of the biggest public companies by market capitalisation.

A new profitability requirement will also be introduced: to be eligible, businesses will have to post two years of positive earnings before interest, taxes, depreciation and amortisation.

Lossmaking companies such as the Wirecard replacement Delivery Hero will consequently find it harder to ascend to the top flight, although the new rules will not apply to existing members.

Large shareholders have cheered the moves. “The new rules come as a long-awaited modernisation for Germany’s most influential equity index,” said Jürgen Hackenberg, head of equities at institutional investor Union.

The expansion, he added, would allow younger companies with more potential to grow into the Dax, and “as a result, the index will reflect Europe’s largest economy in a better way”.

The old Dax was hardly an underperformer. Investors who entered at the index’s inception in 1988 would have seen an average annual return of 8.6 per cent, excluding dividends. An initial investment of €1,000 would now be worth €15,887.

By comparison, investors in the S&P 500 over the same period would have benefited from an average 9 per cent return a year, excluding dividends. While those in the FTSE 100 would have only seen their stakes go up by 4.3 per cent a year.

But although the make-up of the index has evolved from being heavily weighted towards banks and chemicals companies, to a more broad mix of automakers, industrial groups and pharmaceuticals, there is only one pure software company on the Dax: SAP.

Newer, innovative businesses are among those seeking promotion when the market capital rankings of Dax 40 contenders are assessed on September 3.

Online clothing retailer Zalando looks likely to have booked its place in the revamped Dax, alongside meal-kit provider Hello Fresh.

Some age-old niche expertise — in the form of Symrise, which provides flavouring and scents for tens of thousands of everyday foods and products — will also bring colour and variety to the index.

But taken as a whole, the Dax 40 will not necessarily be a model of corporate diversity. Fourteen of the prospective constituents are essentially six companies that have split into fragments.

There are already two Fresenius arms on the index, both part of one healthcare group. Industrial business Siemens is likely to be joined by two of its recent spin-offs, Siemens Healthineers and Siemens Energy, while Infineon, a former Siemens company, will also remain.

Chemicals company Covestro, a spin-off of longstanding blue-chip Bayer, will avoid relegation for now. Daimler, which is splitting into Mercedes and Daimler Trucks companies later this year, will probably occupy two spaces in time, and Porsche SE, the investment vehicle that owns a majority of Volkswagen, is likely to sit alongside the carmaker in the Dax 40. Deutsche Post and Deutsche Telekom — already Dax constituents — were both created by the privatisation of Deutsche Bundespost in 1995.

“[The index] will hardly change its character due to the addition of 10 stocks,” said Joachim Schallmayer, the head of capital markets at institutional investor Deka. The more important alteration, he said, was a more regular review of Dax membership that will refresh the index twice rather than once a year.

Those promoted to Germany’s most prestigious index later this week — the new index will begin trading later in the month — can expect their share prices to benefit from increased investments, especially from funds set up to buy shares in the Dax as a whole. They will also enjoy more publicity and press coverage.

“Belonging to the Dax after 20 years . . . would be a fantastic booster for our employees, for the recognition of the brand,” said Thierry Bernard, the boss of diagnostics company Qiagen, which is among the contenders.

Joachim Kreuzburg, the chief executive of another candidate, Sartorius, said that being listed on the Dax would “not affect our business”, but “would demonstrate the increasing relevance of the biotech and life science industries and put Sartorius even more in the public eye”.

However, some feel Deutsche Börse should have required more from new members, especially in regard to corporate governance rules.

Dax entrants will not have to endure any boardroom upheaval, according to Christian Strenger, the former chief of German asset manager DWS who has become a prominent corporate governance advocate.

“A simple audit committee is now required by law in any case,” he said of one of the only new governance requirements. “They should have at least upgraded this, and said the majority of the supervisory board should be independent, and particularly the chair of the audit committee.”

The mandate that companies in consideration for the Dax 40 post two consecutive years of positive ebitda “is too far away from real profitability”, Strenger said.

“It is a missed opportunity in many ways.”

Spread betting and online trading company benefited from market volatility earlier in the pandemic

Spread betting and online trading company CMC Markets has warned on profits after a summer lull in trading activity.

The company, which benefited from market volatility earlier in the pandemic as clients traded more, said on Thursday that this had been “subdued” in July and August resulting in less activity from both new and existing clients.

As a result, the FTSE 250 group warned that “should current market conditions prevail for the remainder of the year”, it expects net operating income for the 12 months to March 2022 to be between £250m and £280m. That is down from a figure of “in excess of £330m” that CMC pointed to in a trading update in late July.

The company recorded net operating income of almost £410m in the year to March 2021 as market volatility encouraged clients to trade more.

CMC said on Thursday: “Beyond the recent moderation in market activity, the group continues to have confidence in the long-term growth opportunities of the business.”

Last month, online investment group Hargreaves Lansdown also cautioned that the pandemic surge in trading would not last, sending its shares down 11 per cent on the day.

Ride-hailing and delivery groups summoned over labour reform and data security in tech crackdown

Chinese regulators have instructed ride-hailing groups including Didi Chuxing to produce plans to overhaul their treatment of consumers and workers within four months as pressure builds on the tech sector from a deepening crackdown.

The transport ministry said in a statement on Thursday that it had summoned representatives from 11 of the country’s biggest ride-hailing platforms, including Didi, food delivery group Meituan and Caocao, a unit of carmaker Geely, and warned the companies over issues including unfair competition, data security and illegal labour.

Regulators told the companies at the meeting on Wednesday to investigate their business practices, immediately improve compliance and come up with detailed plans for “rectification” by the end of the year.

The latest warning followed a series of recent regulatory crackdowns and interventions that have entangled many of China’s biggest technology companies and their founders.

Xi Jinping, China’s president, has in recent weeks signalled a broad shift towards “common prosperity”, interpreted by experts as encompassing not only wealth redistribution but also improved rights of workers and consumers.

Didi, China’s biggest ride-hailing group, is separately bracing for the results of an unprecedented investigation into its data security. The probe was launched days after its $4.4bn initial public offering in New York in June, wiping billions of dollars off its value.

Meituan, a Beijing-based food delivery group, is meanwhile waiting for the outcome of China’s second-ever antitrust investigation. Alibaba, the ecommerce company founded by Jack Ma and the subject of the first such inquiry, was handed a record $2.8bn fine in April for abusing its market dominance.

According to the transport ministry, the companies said they would immediately comply with the rectification orders. The companies did not immediately respond to requests for comment.

China’s top court and the Ministry of Human Resources and Social Security last week took aim at workers’ rights, outlawing the controversial “996” overtime policy, under which many tech sector employees work from 9am to 9pm, six days a week.

In response to the escalating regulatory scrutiny, companies including Didi and Meituan have in recent weeks begun allowing the establishment of worker unions, according to people familiar with the matter.

While the labour groups will have ties to the government-linked All-China Federation of Trade Unions, experts said their formation could herald advances in labour rights in China.

Jenny Chan, a professor of sociology at Hong Kong Polytechnic University, said that while China’s tech behemoths would be “feeling the heat” to make quick improvements, labour protections remained ambiguous.

“For their corporate image and profitability, the senior management pledge to protect labour rights. Yet we all know that from day one, these companies have outsourced or crowdsourced workers on the frontline, who are not recognised as employees,” Chan said.

The tentative steps to allow unions could mark “a significant breakthrough” if organised workers were able to bargain collectively with the internet companies, she added.

“However, will the worker union leaders be protected from retaliation in or after the negotiations? The critical question is still workers’ power, which is severely restrained by both the state and [companies].”

But the alleged detention of a mainland Chinese PhD student who was researching labour activism in China at the University of Hong Kong could raise doubts about Beijing’s seriousness in tackling labour reform.

Fang Ran was detained by security agents last month in the southern Chinese city of Nanning, according to a social media post on Wednesday by a man who identified himself as the student’s father.

“The university is aware of the matter and is actively looking into it. We will provide assistance to Mr Fang and his family where appropriate,” the University of Hong Kong said.

A class-action suit claims the bank bears responsibility for a $110 million fraud an ex-employee started while working for the bank

A class-action lawsuit claims investment bank Oppenheimer & Co. Inc. was at fault for an alleged Ponzi scheme run by a former employee, which authorities say collected $110 million from unwitting investors.

A suit filed Tuesday in the United States District Court for the Northern District of Georgia in Atlanta alleges that from 2008 through 2016, a group of former Oppenheimer investment advisers, led by Marietta, Ga., resident John J. Woods, funneled the money of Oppenheimer customers into a fraudulent scheme.

Last week, the Securities and Exchange Commission accused Mr. Woods of raising millions for a fund called Horizon Private Equity III LLC, which the agency said was in fact a Ponzi scheme. The SEC alleged that during the time Mr. Woods was an Oppenheimer adviser, and after, he raised money for his scheme through a separate investment advisory firm he controlled, called Southport Capital.

The latest lawsuit alleges Oppenheimer ignored warning signs of Mr. Woods’ activities, enabled the transfer of millions of dollars of its customers’ money to the scheme, and finally, when red flags became too clear to ignore, allowed Mr. Woods to quietly resign at the end of 2016, without alerting authorities to his scheme.

Oppenheimer did not respond to requests seeking comment. In response to the earlier SEC complaint last month, an Oppenheimer spokesman wrote by email, “Oppenheimer ceased doing business with Southport Capital many years ago. Shortly thereafter Mr. Woods resigned from Oppenheimer.”

The SEC filed its suit on Aug. 20 against Mr. Woods, Horizon Private Equity and Livingston Group Asset Management, the legal name of Southport Capital. On Aug. 24, a federal court froze the assets of Mr. Woods and the Horizon fund.

In its complaint, the SEC said Mr. Woods lured more than 400 investors, many of them elderly retirees, into the purported private-equity fund by promising to make low-risk investments that would secure an annual return of 6% to 7%. Instead, the SEC alleged, Mr. Woods invested a small fraction of the money in real-estate projects, while paying out earlier investors with money raised from later ones.

The SEC said the fund now holds less than $16 million in liquid assets of the $110 million total raised.

In response to the SEC complaint, an attorney for Mr. Woods and Horizon said, “We were pleased with the Court’s decision not to place Southport into receivership or restrain its assets, and per the Court’s directive, we are working with the SEC on a proposed order.”

The attorney, David Chaiken of ChaikenLaw, didn’t reply to a request for comment Wednesday on the class-action suit.

Mr. Woods couldn't be reached for comment.

The SEC’s civil-fraud complaint didn’t name Oppenheimer, referring only to an “institutional investment adviser” for which Mr. Woods worked through 2016. Mr. Woods’ investment-adviser registration shows he worked for Oppenheimer during this period.

The SEC complaint said Mr. Woods took steps to conceal his fraudulent activities, and didn’t disclose to Oppenheimer his financial interests in Horizon or Southport. In 2016, when Oppenheimer became concerned about Mr. Woods’ outside business interests, it asked him to resign, the SEC complaint stated.

The class-action suit, however, claims that on the contrary, Mr. Woods “made no effort to hide the scheme from Oppenheimer’s management.” He rented office space for Southport Capital next door to Oppenheimer’s Atlanta office, the suit claims, and for years he and other Oppenheimer employees moved freely between the two offices, and transferred client money into the Horizon fund.

In addition to the class-action suit, on Tuesday investors also filed arbitration claims against Oppenheimer with the Financial Industry Regulatory Authority, Wall Street’s self-regulatory arm. These claims ask that investors be compensated for a cumulative $1.4 million in invested principal that they say they lost.

An attorney for Southport Capital, the Chattanooga, Tenn.-based advisory firm owned by Mr. Woods, said the firm has changed its leadership and intends to defend itself against the SEC’s allegations.

“We remain deeply concerned about the allegations of concealment and wrongdoing at the hands of our former CEO and Horizon Private Equity, a company Southport has never engaged to provide asset management services for its valued advisory clients,” wrote an attorney for the firm, which managed about $824 million at the end of last year.

DAX:

MDAX:

SDAX: