Business Of Fashion : The Battle for China’s $100 Billion Jewellery Market

The Battle for China’s $100 Billion Jewellery Market
International brands, domestic giants and unbranded jewellers are vying for a slice of China’s jewellery market, which is poised for double-digit growth.

Hard luxury is emerging as an increasingly attractive category in China, but the jewellery consumer’s mindset, motivations and behaviour have all undergone a fundamental shift over the past five years.

Fine jewellery has traditionally been seen as an investment, rather than a fashion-led category. Long dominated by unbranded products, branded jewellery in China still accounts for a relatively low 15 percent of the overall market, compared to 20 percent globally.

“It’s not about wearing gold because everybody does; it’s wearing a branded product that fits with what I stand for,” said Daniel Zipser, a senior partner at McKinsey & Company who leads the firm’s consumer and retail practice in Greater China.

This means international brands have barely scratched the surface when it comes to penetrating the broader Chinese jewellery market, which was valued at 647 billion yuan ($100.13 billion) in 2020, according to Euromonitor International.

If ever there was a time to double-down on the mainland, experts say, it is now.

Though Euromonitor data indicates that the overall jewellery market in China declined 8.5 percent in 2020 year-over-year, some segments and price points outperformed in an otherwise challenging year marred by the pandemic. Domestic sales in the luxury jewellery category, for example, rose 39.3 percent and the luxury fine jewellery category saw sales rise 50.6 percent.

Though these gains are largely the result of domestic luxury spend that might otherwise have happened overseas if consumption were not trapped within China’s borders, Euromonitor’s estimates of future growth remain rosy. The overall jewellery market will bounce back to growth of 18.11 percent in 2021 and enjoy a compound annual growth rate (CAGR) of 8.1 percent through 2023. The luxury jewellery segment is tipped to grow 24.8 percent this year and see a CAGR of 18.5 percent through 2023; luxury fine jewellery, meanwhile, is set to grow 28.5 percent this year and enjoy a CAGR of 20.5 percent until 2023.

“I think the shift of the majority of sales happening domestically [in China] will not reverse,” said Cartier’s chief executive Cyrille Vigneron, in the inaugural edition of The State of Fashion: Watches and Jewellery report co-published by The Business of Fashion and McKinsey & Company.

“The market will grow by itself anyway, and faster domestically than overseas or in travel retail,” he added.

While there is little doubt that the overall size of the opportunity is huge, some players will be better placed than others to take advantage of the double-digit growth expected in the years ahead.

Domestic Market Leaders
China’s relatively underdeveloped branded jewellery market has always been dominated by jewellery giants from the mainland and Hong Kong.

Currently, the top four jewellery brands in China by market share, according to Euromonitor data, are the Hong Kong-headquartered Chow Tai Fook and Chow Sang Sang (number one and four respectively) and the Shanghai-headquartered Lao Feng Xiang and Lao Miao (number two and three respectively).

Though these brands are little known in the west, in China they are synonymous with jewellery, specifically the 24-carat gold jewellery and other materials and design elements with auspicious meanings in Chinese culture that have long been the focus of local consumers. With thousands of retail outlets across the country, these incumbents have the dual advantage of local knowledge and deep market penetration with which they can make the most of the coming jewellery boom.

Niche Chinese brands such as Hefang, Yvmin and Ooak are also beginning to gain traction, particularly among the post-90s and post-00s generations, taking share from affordable global brands and unbranded jewellers alike.

“This trend is particularly obvious in mainland China and the rest of Asia, where there is a mushrooming of micro brands from both ground-breaking new names — small and big — and spin-offs of well-known brands,” said Louis Chan, assistant principal economist of the global research team at HKTDC, which operates the Hong Kong International Jewellery Show, among other industry events.

To some extent, it is fair to say that most of China’s big heritage brands have struggled to adapt their businesses to the new era, with some lagging when it came to e-commerce adoption for example. But Chow Tai Fook has been able to leverage the pandemic period for better financial results than it has in years gone by.

In the first three months of this year, the group saw sales grow 152.6 percent year-on-year, albeit off a low base considering the restrictions on physical retail that were in place from late January to April 2020 in different parts of China, as the country worked to contain its first widespread outbreak of Covid-19. It also increased points of sale by 150 since the start of 2021, to 4,591 — giving it an enviable footprint across China’s vast and varied geography.

“To penetrate lower-tier cities [and capture consumers of unbranded jewellery in those markets], we have to work with a good partner — one who understands local knowledge, local economic situations and local relationships,” explained Kent Wong Siu-Kee, Chow Tai Fook Jewellery Group’s managing director for corporate and Hong Kong, Macau and Overseas.

Approximately 90 percent of Chow Tai Fook’s franchise partners are local jewellery operators who have operated their own store in their respective cities for a significant period, Wong added, which means they already have a relationship with local customers.

“We bring in our brand — our operation model and our management system, including the IT system — and they can also share in our CRM ecosystem,” he said.

There is no international brand currently operating in China that can compete with these domestic giants when it comes to scale, but in an environment increasingly focused on celebrity-based marketing, brand stories and fashion credentials, international jewellery interlopers might have a different edge.

International Challenger Brands
To give an idea of just how fragmented China’s jewellery market remains, Chow Tai Fook and Lao Feng Xiang, with only 7.6 and 7.5 percent of China’s jewellery market each according to Euromonitor data, are far ahead of their next competitors, Lao Miao has 3.5 percent and Chow Sang Sang 1.3 percent.

The only international jewellery brand to make the top five by market share is Cartier, with 1.1 percent, though other international players are rising. Tiffany & Co., for example, at number seven on the list, has grown its market penetration considerably over the past year, reaching 1 percent market share in 2020, up from 0.6 percent in 2019.

With so much room left for brands to convert consumers of unbranded jewellery, the ability of these international brands, and others, including Van Cleef and Arpels, Bulgari, Swarovski and Pandora, who also feature in China’s top 15 selling brands, to win over new customers will hinge on a number of factors. Chief among them will be the localisation of high-quality, compelling brand stories and the online environment will increasingly be where the battle is won.

Last year saw a slew of hard luxury brands embrace storytelling-based e-commerce with newfound enthusiasm.

Globally, Cartier’s parent-company Richemont went all in on e-commerce, partnering with Alibaba to invest in Farfetch as part of a $1.1 billion deal. Only days after the deal was announced, Cartier hosted its first jewellery livestreaming show on Alibaba’s Taobao Live during Alibaba’s Double 11 shopping festival, featuring more than 400 watches and jewellery items, including a necklace valued at $28.3 million.

“In China, e-commerce in the jewellery industry [has traditionally been] very, very transactional [but] there’s a lot more storytelling happening on Tmall today because, at the end of the day, it’s the biggest store window in the world,” said Jacques Roizen, Pandora’s senior vice president and China general manager.

“To treat it just purely as a transaction is a huge missed opportunity and that’s why we’ve made a lot of changes in upgrading our homepage [there],” he added.

Those changes seem to have paid off. Earlier this month, during China’s major mid-year sales period known as 618, Pandora was catapulted into the top three of Tmall’s ranking of top-selling jewellery brands for the sales event.

Beyond branding, digital storytelling and sales festivals, there is another driver for China’s jewellery boom: the unquenchable desire for design-led jewellery that consumers can use to symbolise their own personal style.

Leading by Design
When Alice Xu founded Ooak in 2012, it became one of China’s first multi-brand stores. Her focus was working with niche independent jewellery brands from around the world, introducing them to the China market, where a growing segment of consumers was beginning to treat the category more like fashion — a vehicle for self-expression — rather than purely as an investment commodity.

Over the years, Ooak has worked with more than 1,000 brands in this way, but in 2017 the focus of the business changed significantly, to building her own in-house brand.

The vision was to be a brand, designed by a team of top international design school graduates, priced somewhere in between the Taobao brands flooding the mass market fashion jewellery space, and the niche designers and luxury brands that consumers buy for a special occasion.

As more Chinese consumers, particular younger and more fashion-forward men and women, convert to brands, it’s likely that this design-led niche between the entry level and premium jewellery markets will see explosive growth (Ooak’s price point sits between 300 and 3,000 yuan, $46.42 and $464.35). Xu believes that this segment’s growth need not be at the expense of the growth of luxury jewellery or luxury fashion brands with jewellery as part of their offering (worldwide, luxury fashion brands are expected to make up 10 percent of growth in the branded market by 2025).

In her telling, the young women who make up Ooak’s customer base at their 20-odd stores around China’s first tier cities (as well as online, where 40 percent of Ooak’s sales are made) are not choosing between buying luxury branded jewellery and more affordable, design-led niche players like Ooak. They are buying both, to serve different needs.

“They are willing to try all types of stuff. They will buy Tiffany, Cartier, and also designer brands; it’s becoming more of a mix,” Xu said. “When they buy from the luxury brands, [they’re looking for] the signature style [and they might buy] once or twice a year, but when they buy Ooak or other fashion jewellery, it’s to match their outfits, so they buy much more frequently.”

With this change in mindset comes a host of new opportunities, but Chinese consumers still need more than a brand name, easy access and a pleasing aesthetic to win them over. In many categories, but especially one associated with a sense of occasion as closely as jewellery is, there is also the emotional element to consider.

Much like the motivations for buying jewellery, the reasons people feel a personal attachment to jewellery is broadening in China — especially in the wake of the pandemic.

Whereas once jewellery gifting would be associated with major life events — a wedding or graduation — today younger women and men also more commonly self-gift as a reward for hard work and achievement. A jewellery purchase these days can also be a kind of compensation, a way of treating oneself to something nice when missing out on other pleasurable activities — like an overseas trip, for example.

“That intangible value is also important,” Chow Tai Fook Jewellery Group’s Wong said. “So, we have to not only give the right product, authenticity and top quality, but also give something that the customer believes fulfils that emotional need.”

>>> (US) Weekend Papers Summary NEW YORK TIMESPresident Biden has sent “dueling

(US) Weekend Papers Summary
NEW YORK TIMES
- President Biden has sent “dueling messages” on Afghanistan, on one hand the administration has sought to reassure Americans that it is ending “forever wars”. On the other, it is signaling to Afghans that the U.S. is not abandoning the country to a chaotic fate.
- On Friday, U.S. officials effectively closed Bagram Air Base, the nerve center of 20 years of American military operations in Afghanistan. As the last US troops and equipment trickle out of Afghanistan, “an atmosphere of unreality has settled over” the Afghan government and Kabul.
- The question about when to end the search for survivors at the site of the Florida condo is approaching as no survivors have been found since the collapse. After a week long search and rescue effort, the death toll has risen to 22.
- The case against Donald Trump’s family business resonates with “echoes of his father’s tactics on taxes.” Last week’s criminal prosecution involving the former president’s business “hearkens back to Fred Trump’s $16,135 purchase of boilers in the 1990s.”
- The term that just ended showed “two very different Supreme Courts.” For much of the last nine months, the court seems to have defied expectations that the conservative majority of six Republican appointees “would regularly steamroll their three liberal colleagues.”
- Former President Trump will hold a Fourth of July-themed rally on Saturday night in Sarasota, Florida, fueling controversy due to the ongoing search and rescue effort at the site of the collapsed residential tower near Miami.
- Hundreds of businesses around the world, including a major Swedish grocery chain, confronted potential cybersecurity vulnerabilities after software provider, Kaseya, said it had been the victim of a “sophisticated cyberattack.” Predictably, the New York Times blamed the Russians: “the attack may have been carried out by REvil, a Russian cybercriminal group that the F.B.I. has said was behind the hacking of the world’s largest meat processor, JBS, in May.”

WALL STREET JOURNAL
Weekend
- Amazon’s CEO Jeff Bezos is about to blast off to space later this month. He has left his post to Andy Jassy, who has inherited the task of managing a $1.7 trillion dollar enterprise.
- Miami officials have decided to demolish what’s left of the Champlain Towers South with explosives on Sunday, due to an approaching tropical storm.
- The Biden administration may extend the ‘pandemic freeze’ on Americans’ student-loan payments beyond its expected expiration in September while adopting some piecemeal measures to lower student-debt bills.
- Videogame companies such as Electronic Arts Inc., Take-Two Interactive Software Inc. and Zynga Inc. are snatching up mobile-gaming studios and creating new mobile titles, in some cases, adapting popular console and personal computer based games.
- As Big Tech’s power comes under scrutiny and antitrust attention, “Beltway pundits and the companies themselves are all competing to explain to the public what it might mean to…the everyday consumers of goods and services from those in the crosshairs.”India’s Bharat Biotech claims that “late-stage clinical trials of its Covid-19 vaccine showed it was effective against the coronavirus and provided significant protection against the Delta variant.”

FINANCIAL TIMES
Weekend
- OPEC and its partners did not reach an agreement to increase oil production on Friday. Talks became deadlocked as the UAE was “opposed to a deal that does not address concerns over its own output target.”
- London is once again Europe’s largest share trading center “after it was dethroned by Amsterdam in the wake of Brexit,” thanks to the resumption of UK trading in Swiss stocks.
- The 37-year old North Korean leader Kim Jong-Un’s weight loss has raised some questions about his health. Kim appeared on state television after a long absence and looked noticeably thinner, sparking speculation among North Korea watchers about a potential power struggle.
- July 4 celebrations in the US could accelerate “the spread of the Delta variant of Covid-19, particularly in parts of the country where vaccination rates have lagged.”
- Three private investment groups led by SoftBank-owned Fortress have agreed to buy Wm Morrison, the UK’s fourth largest supermarket chain, for £9.5bn.
- The new Amazon executive Andy Jassy is expected to get more than $200m in Amazon shares when he takes over from Jeff Bezos on Monday.
- Citigroup is raising junior investment bankers’ salaries in an effort to improve terms for younger staff after some Goldman Sachs bankers “complained publicly about the industry’s arduous working conditions.”
- China’s cyber security regulators are investigating Didi, prompting the ride-hailing group’s shares to fall by the end of its third morning of trading in New York.

NEW YORK POST
- Nine armed people dressed in combat gear who do “not recognize our laws” belonging to the group said to be named ‘Rise of the Moors’ were arrested early Saturday after a standoff with police in Massachusetts, forcing a shutdown of I-95 near the communities of Wakefield and Reading, just north of Boston.
- Rep. Alexandria Ocasio-Cortez (D) and her so-called “Squad” colleagues in the House of Representatives “have a history of branding opponents and policies they disagree with as racist or white supremacist.”
- NY City Upper East Side residents are concerned that Hilda Barrion, known for spitting on people and duly nicknamed ‘The spitting lady of 77th Street,’ has returned to the neighborhood. The residents fear she may be ready to resume screaming at pedestrians and targeting them with her saliva. “At least she waited for the pandemic to subside.”

>>> Barron’s Weekend Summary: Global investors should re-consider Europe

Barron’s Weekend Summary: Global investors should re-consider Europe, which after a decade of anemic economic growth and equity underperformance with respect to the technology-led U.S. market as well as markets in China and other dynamic emerging economies, may be ready for a post-pandemic rebound. “The near-term case for relative outperformance by Europe now is the strongest in years

* Cover story
Global investors should re-consider Europe, which after a decade of anemic economic growth and equity underperformance with respect to the technology-led U.S. market as well as markets in China and other dynamic emerging economies, may be ready for a post-pandemic rebound. “The near-term case for relative outperformance by Europe now is the strongest in years.” Some suggested stocks to consider are BAE Systems (BA.UK), BNP Paribas (BNP.France), Booking Holdings (BKNG), Fraport Frankfurt Airport Services Worldwide (FRA.Germany), Groupe Bruxelles Lambert (GBLB.Belgium), ING Groep (ING)

* Tech Trader
Amazon.com founder Jeff Bezos will step down as the company’s CEO on July 5. He will be replaced at the helm by close Andy Jassy, “a 24-year Amazon veteran who built and ran Amazon Web Services (AWS), the company’s dominant cloud-computing business.” Wall Street analysts say that Jassy faces a “tough compare.” Meanwhile, Amazon “sparkled during the pandemic.” And in the first quarter of this year, sales spiked 44% from a year earlier—the company’s best quarterly growth rate since 2011—and net income was $8.1 billion, its largest quarterly profit ever.

* The Trader
There’s growing demand for business jets. And “it’s not a surprise that the demand for new jets has been driven by the ultrawealthy—apparently, interest from first-time buyers is particularly strong—who seem to prefer traveling on their own than sharing a seat with the hoi polloi.” And the demand surge has room to grow. One of the best companies to consider in this context is General Dynamics (GD), which owns the Gulfstream line of jets and deliveries of its Gulfstream 500 and 600s are picking up, even as its defense business is growing.

U.S. consumer demand is set to rise as shown by Friday’s personal-consumption expenditure data, “which showed consumers were still spending, even if the number didn’t grow from a month ago. But we didn’t really need that data to know that people are feeling more than a little flush. They have more cash than ever—the savings rate was 12.4% in May—and are likely to spend it.” One stock to consider in this context is Olive Garden parent Darden Restaurants (DRI).

* Profile
Investors may be over-invested in five megacap technology stocks, which have risen to new highs, while “some strategists see a potential turn ahead in the markets.” The five stocks in question are Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Facebook (FB), and Alphabet’s Google (GOOGL). Together these stocks have gained of 125% to 245% since the beginning of 2019. This is not a new pattern: “the Nifty Fifty stocks dominated the 1970s, and blue-chip stalwarts such as IBM (IBM) and AT&T (T) ruled the 1980s.” But, “the level of market concentration is higher now, and the Big Five’s impact on the broad market is much greater because of their size.”

* Interview
“Black families have one-eighth the wealth of white families, and Malik Lee is trying to close that gap.” Atlanta based financial advisor Malik Lee caters to a 90% African-American clientele. He suggests that the “Black wealth gap is largely the product of institutional racism that limits opportunities for African-Americans.” But Lee also observes that many African Americans are held back by their conservative approach to investment. And Malik notes that he founded his firm “to help close the wealth gap. We purposely don’t have any account size minimum. You don’t have to have $1 million to work with us. We have clients with $40,000.”

* Features
Matt Patsky, CEO of Trillium Asset Management, the $4.3 billion sustainable-investing (or ESG) firm, “noticed rising inflows into the Trillium ESG Global Equity (ticker: PORTX) and John Hancock ESG Large Cap Core (JHJAX) funds, both managed by Trillium.” Morningstar rates both as five stars and “five globes, the highest sustainability rating that the fund-research firm offers.” And there is a new impetus toward retirement plans moving more toward sustainable investing according to a survey by investment manager Schroders, which “found that 69% of retirement-plan participants said they would or might increase their overall contribution rate if their plan offered ESG options.”

* Follow-up
Facebook secured a significant legal victory last week, “when a federal judge tossed out a Federal Trade Commission complaint arguing that the company violated antitrust laws, and dismissed a parallel complaint from a group of state attorneys general making similar claims.”

* European Trader
European tourism could resume as “countries relax restrictions on the back of successful Covid-19 vaccination programs and declining rates of infection.” The recovery should be stronger in northern Europe and Barron’s suggests the following two stocks: Scandic Hotels Group (SHOT) and Frankfurt based FRAPORT (FRA).

* Emerging Markets
China’s Didi Global, a ride-hailing company, saw its shares climb 18% in its first two sessions after launching an IPO last week. “That success could usher in a next wave of tech IPOs from emerging markets. But the best ones may be outside China.” One of these is GoTo, “the Indonesian unicorn formed when ride-hailer Gojek merged with e-commerce player Tokopedia; Indian digital payments leader Paytm; and Nu Pagamentos, whose Brazil-based Nubank has quietly become the world’s largest digital bank.”

* Commodities
“A blistering drought across vital U.S. farmland looks set to destroy the crop of spring wheat this year if rain doesn’t arrive in the next few weeks. Without that much-needed moisture, prices for the grain could easily rally by more than 30%, experts say.”

* Streetwise
Robinhood released plans to go public last Thursday, “a day after the Financial Industry Regulatory Authority, or Finra, issued its largest fine ever against Robinhood for giving false or misleading information to customers and operating a platform so unreliable that it repeatedly falters at key moments, costing its clients money. (The company did not admit to or deny the allegations.)” But there are many risks associated with the company and what it may trigger in the markets.

WSJ : Ransomware Group’s Attack Likely Hits Thousands of New Targets

Ransomware Group’s Attack Likely Hits Thousands of New Targets
REvil is said to have focused on Kaseya VSA, a software used by large companies and technology-service providers to manage and distribute updates

The ransomware group that collected an $11 million payment from meat producer JBS SA about a month ago has begun a widespread attack that has likely infected hundreds of organizations world-wide and tens of thousands of computers, according to cybersecurity experts.

The group, known as REvil, has focused its attack on Kaseya VSA, software used by large companies and technology-service providers to manage and distribute software updates to systems on computer networks, according to security researchers and VSA’s maker, Kaseya Ltd.

REvil is a well-known purveyor of ransomware—malicious software that locks up a victim’s computer until a digital ransom is paid, typically in the form of bitcoin. This latest attack appears to be its largest ever. The incident may have infected as many as 40,000 computers world-wide, according to cybersecurity experts.

The use of trusted partners like software makers or service providers to identify and compromise new victims, often called a supply-chain attack, is unusual in cases of ransomware, in which hackers shut down the systems of institutions and demand payment to allow them to regain control. The Kaseya incident appears to be the largest and most significant such attack to date, said Brett Callow, a threat analyst for cybersecurity company Emsisoft.

Among those affected was a supermarket chain in Sweden. The company said that in some cases its cash registers were hit in the attack, prompting many of its stores to remain shut Saturday.

Upon learning of the attack Friday, Kaseya immediately shut down its servers and began warning customers, the company said. Friday evening it said only customers running the software on their own servers, rather than users of Kaseya’s online service, appeared to have been affected. In an update Saturday morning, the company recommended that users of its software keep those products offline until further notice. The company also is keeping its own cloud-based services offline until it determines that it can safely restart them, Kaseya said.

The Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency advised Kaseya users to shut down their VSA servers immediately. “CISA is closely monitoring this situation and we are working with the FBI to gather information about its impact,” said Eric Goldstein, the agency’s executive assistant director for cybersecurity.

Kaseya says that fewer than 40 of its more than 36,000 customers were affected by the incident. However, more than 30 of these customers were service providers, a company spokeswoman said Saturday. Those providers, in turn, have many more customers that could have potentially been hit.

Most of the customers of these providers are small and midsize organizations, said Kyle Hanslovan, chief executive of the security firm Huntress.

While the cause of the attack is still being investigated, it is “very likely there is some vulnerability or a flaw that is being mass-exploited in VSA,” Mr. Hanslovan said.

Ransomware groups, including REvil, have targeted service providers in the past, including with a 2019 attack that hit at least 22 municipalities in Texas, said Emsisoft’s Mr. Callow.

“I’ve never seen a ransomware attack impact so many companies at one time,” said Al Saikali, a partner at law firm Shook, Hardy & Bacon LLP, which was brought in to consult on six ransomware attacks related to the VSA incident Friday. On his busiest previous day, he said, he had signed up two clients. Ransom demands in the six attacks ranged from $25,000 to $150,000, he said.

For service providers themselves, the demands are higher—in one case, $5 million, Mr. Hanslovan said.

Ransomware has emerged as one of the country’s most serious security problems in recent years, as hackers have targeted businesses, hospitals, schools and other institutions. Attackers have grown bolder as millions of people began using less-secure home internet connections for work and school during pandemic lockdowns.

The ransomware phenomenon shot into the spotlight in May when an attack forced Colonial Pipeline Co., a major shipper of gasoline to the U.S. East Coast, to shut down a pipeline, drying up supplies at gas stations across the Southeast. Intelligence officials have linked this attack and others to Russia, a charge officials there denied.

President Biden, traveling in Michigan, told reporters he had been briefed on the attack and that U.S. officials were trying to determine the extent of the Russian government’s involvement.

“First of all we’re not sure who it is for certain,” Mr. Biden said when asked about the attack. “The initial thinking was it was not the Russian government. But we’re not sure yet.”

He added that he has warned Russian President Vladimir Putin that the U.S. would respond to Russian government-sponsored cyberattacks. At a recent summit with Mr. Putin, the president addressed cybersecurity and said critical infrastructure should be off-limits to attacks.

About a month ago, a REvil attack temporarily knocked out plants that process one-fifth of the U.S. meat supply. JBS’s U.S. unit paid $11 million in ransom to the attackers, according to a company executive.

WSJ : Kushner Family Expands Investments in Southern Midsize-City Apartment Comp

Kushner Family Expands Investments in Southern Midsize-City Apartment Complexes
Jared Kushner, former President Donald Trump’s son-in-law, wasn’t involved in deals, company says

The New York region’s Kushner real-estate family is expanding its investments in Southeastern states as it waits for the local commercial property sales market to reopen from the pandemic.

The family, which gained global attention during the Trump administration because of the senior White House role played by Jared Kushner, has either purchased or signed contracts to buy 2,500 apartments in Mississippi, Tennessee and Virginia in the past month. The total price was about $400 million, according to Laurent Morali, the president of New York-based Kushner Cos.

Mr. Kushner, the son of family patriarch Charles Kushner as well as former President Donald Trump’s son-in-law, has played no role in the southeastern acquisition strategy, which Kushner Cos. launched before the Trump presidency ended, Mr. Morali said. The company was run by Charles Kushner, his daughter, Nicole Kushner Meyer, and Mr. Morali during the Trump years, and Jared Kushner’s role in the family business since he moved to Florida in January hasn’t been announced.

Kushner Cos., which has a total real-estate portfolio valued at $15 billion, has been investing in suburban apartment buildings for decades. It began focusing on small to midsize cities in Southeastern cities, such as Memphis, Tenn., and Williamsburg, Va., last fall, partly because big investors have been driving up prices in larger cities.

The family’s recent deals included its purchase of 1,200 units in Jackson, Miss., for $160 million. Average rents are $1,000 a month for a two-bedroom unit and $900 for a one-bedroom unit, Mr. Morali said. Kushner Cos. found Jackson attractive because its economy has been strong thanks to stable local employers, including the state government and a Nissan assembly plant that opened in 2003, he said.

Mr. Morali said that Kushner Cos. continues to look for deals in New York but the market has been quiet, partly because of the pandemic and uncertainty about such things as the mayoral election and the rate at which office space will be repopulated as the pandemic fades. He predicted that commercial property sales would increase in a few months as these questions are resolved.

“We are looking for opportunities in New York,” he said. “It’s just that there are few opportunities.”

Suburban apartment buildings have been one of the most favored commercial property types by investors as the country has emerged from the pandemic. This has been especially true for apartments in states in the Southeast and other regions where landlords have faced fewer pandemic-related eviction restrictions than those in states like New York and Connecticut.

Investors purchased $62.9 billion worth of U.S. multifamily property in the first five months of 2021, compared with an average of $58 billion for the same period between 2015 and 2019, according to data firm Real Capital Analytics. “The apartment market has mostly recovered from the challenges of the Covid-19 pandemic,” the firm said in a May research report.

Kushner Cos. began as an investor in suburban apartments, mostly in New Jersey. It made a high-profile push into the Manhattan market in 2007 with its ill-fated purchase of the office building at 666 Fifth Ave., which suffered steep losses after the global financial crisis.

During the Trump presidency, Kushner Cos. increasingly focused on the suburbs, because many of its New York investments came under scrutiny by the news media and critics of Mr. Trump. But the family remained active in the New York region.

For example, Kushner Cos. later this year is planning to break ground on a $1 billion apartment project in Jersey City. Mr. Morali also noted that Kushner Cos. moved its headquarters to the General Motors building overlooking Central Park just a few months after the pandemic hit.

“We love it here,” he said.

FT : Didi shares tumble as Chinese regulators launch data investigation

Didi shares tumble as Chinese regulators launch data investigation
Cyber security agency orders ride-hailing app to stop registering users two days after New York IPO

China’s cyber security regulators have launched an investigation into Didi, sending the ride-hailing group’s shares sharply lower on its third morning of trading in New York.

The Cyberspace Administration of China made the sudden announcement on Friday evening, Beijing time, two days after Didi raised at least $4bn in the year’s biggest initial public offering.

Despite the record fundraising, Didi kept the occasion low-key, without celebrating on its domestic Weibo social media channel, organising a press conference, or taking part in a bell-ringing ceremony in New York.

The CAC said the investigation was in order to “safeguard national data security and protect national security”, and that Didi must stop registering new users for the duration of the probe in order to “comply with the cyber security investigation work and prevent risks from spreading”.

Didi told the Financial Times that it would “actively comply” with the investigation and “completely inspect our cyber security risks under the guidance and supervision” of the authorities. Its shares opened 11 per cent lower on Friday in New York before stabilising to end down 5.3 per cent on the session, at $15.52. The stock was priced at $14 in its IPO.

“This is a signal for big tech companies, warning them of the importance of data security and personal data protection,” said Wang Congwei, a partner at Beijing Jingshi law firm.

China’s cyber security reviews are new measures launched last year in order to protect what it sees as “critical information infrastructure”, a broad category that includes transport providers and large-scale database systems. One of its aims is to prevent data leaks of critical information.

According to Chinese regulations, an ordinary investigation can last up to 30 business days, with extensions of 15 additional business days for complex cases.

Didi has more than 377m users and 13m drivers annually active in China, meaning it stores a significant amount of user data that could lead it to be considered a critical information infrastructure by Chinese regulators.

The platform not only gathers data on trips and user locations but, following a passenger safety scandal in 2018, also records audio during every ride.

The company has not yet faced a major publicly known data leak. Following passenger murders in 2018, Didi was reprimanded by police and traffic regulators for not sharing more data, a debacle that underlines the tensions within China’s government departments between demands for more data-sharing and calls for higher data security.

Along with other ride-hailing peers, Didi was called in by market regulators in May and told to address high costs for drivers and arbitrary price changes.

FT : Fears Burberry revamp will be left on the shelf when CEO dons new robes

Fears Burberry revamp will be left on the shelf when CEO dons new robes
Investors fret work started by Marco Gobbetti to reinvigorate the luxury fashion brand will lose momentum when he leaves

Burberry launched its new Olympia handbag in May with an ad campaign that cast Kardashian clan star Kylie Jenner and British musician FKA twigs as modern Greek goddesses and opened 45 sleek pop-up stores from Shanghai to Houston.

The saddle-shaped bag that costs £1,150 to £1,890 is a symbol of what chief executive Marco Gobbetti has aimed for in his turnround of the British luxury goods company: injecting youth and glamour into the brand, moving it upmarket, and improving product quality.

But the surprise announcement on Monday that the Italian executive will leave for the top job at smaller Italian rival Salvatore Ferragamo by the end of the year has cast uncertainty over the group and left investors worried that the turnround will go unfinished. Burberry has shed roughly £1bn in market capitalisation since the news, or almost 10 per cent of its value.

“Marco’s efforts were bearing fruit but there is still a lot of work to do,” said Mario Ortelli, who advises luxury groups on strategy and mergers and acquisitions. “Elevating a brand the size of Burberry is like lifting an elephant.” 

One top 20 shareholder told the Financial Times that Gobbetti’s departure could disrupt the creative side, where Burberry’s star designer Riccardo Tisci has brought “buzziness” to the brand best known for trenchcoats and tartan. Gobbetti hired Tisci in 2018 and the pair are said to be close having previously worked together at Givenchy, prompting analysts to point the risk that he too could leave or not work as well with the next chief executive.

“Unplanned departures of CEOs are always disruptive but this is particularly challenging at Burberry where success and failure is inextricably linked to the chemistry and alignment between its commercial and creative leaders,” said the shareholder. 

“Uncertainty will remain until the new CEO is selected, in post and delivering.”

Stalled repositioning
Tisci’s vision has been to give Burberry’s traditional Britishness a modern twist by incorporating elements of streetwear — all with the aim of appealing to young Chinese customers who drive most of the luxury sector’s growth. One of his first moves was to create a new logo featuring the founder Thomas Burberry’s initials, which was soon splashed all over clothes and bags, similar to the LV of Louis Vuitton.

Gobetti’s efforts to reposition Burberry were delayed by the coronavirus pandemic. But even before then, other steps he had taken, such as phasing out discounts and cutting reliance on department stores, had caused revenues to stagnate even as sector leaders were enjoying record high sales. Tisci’s designs have met with success among consumers in China, but at times struggled to stand out in the US or Europe. 

Burberry’s looming leadership change comes as the fallout from the pandemic has widened the gap between the haves and have-nots of the luxury industry. 

Demand for the biggest brands like LVMH’s Louis Vuitton and Dior and Hermès has rebounded strongly since late last year, helping them take market share even as the pandemic shut down the flow international tourism that underpins the sector. 


With affluent customers in the US and China splashing out at home instead, the top brands have grown rapidly again. Analysts predict that LVMH, Hermès, and Gucci-owner Kering will bring in more revenue this year than before the pandemic, according to Refinitiv data. 

In contrast, smaller brands like Burberry have struggled to regain momentum and some including Ferragamo and fellow Italian group Tod’s are forecast to take another year or two to recover, prompting some analysts to point to them as potential takeover targets.

Burberry has grown in line with the sector in recent quarters and is not losing share against the market overall, said HSBC analyst Erwan Rambourg of HSBC. But its pace of growth is slower than top brands like Dior and Louis Vuitton.

Revenue growth “remains muted at a crucial point in the turnround story”, wrote UBS analyst Zuzanna Pusz, adding that Burberry may need to “spend significantly more in order to reignite” sales as well as reset margins. 


Margins on Burberry’s earnings before interest and tax hovered around 16 per cent before the pandemic, compared with the high 20s for Kering and above 30 per cent for Hermès and LVMH’s fashion and leather goods division that is home to Louis Vuitton.

Creative overhaul
Some of the gap can be explained by product mix: Burberry relies more on sales of ready-to-wear clothing than its rivals which earn most of their revenues from higher-margin leather goods. That makes it more exposed to the whims of trends and vulnerable to discounting. 

“With fashion, there is complexity to manage, you need different sizes, deal with stock and outlets, and the wholesale component,” said HSBC’s Rambourg. “If something doesn’t sell you can’t just hold it and try again to sell it later as you can with a handbag or a wallet.”

Since he joined in 2017, Gobetti has made expanding in leather goods a key focus to boost growth and profits. Creative director Tisci has overhauled the brand’s handbags, totes, and clutches to focus on five key designs, including the Olympia. Burberry also improved product quality by bringing more manufacturing in-house after it took over one of its leather goods suppliers in Italy in 2018. 

During his tenure, Burberry’s share price has risen by roughly 25 per cent, outpacing a 3 per cent decline for the FTSE 100 but lagging sector leader the 200 per cent rise for LVMH.

But Burberry still has some way to go to be seen by consumers as a top-tier luxury brand given that its prices are often lower than competitors’, analysts say. More work is needed to clean up distribution, eliminate discounting, and improve product quality, while the designs need to appeal to new customers, especially in China.

Those tasks will fall to Burberry’s next leader. 

Burberry formally began the search on Monday. As part of its usual succession planning, the board had already identified potential candidates and aims to nominate a new CEO within the next six months, according to a person familiar with the matter.

Another top 20 shareholder told the FT that they did not anticipate any trouble recruiting. “Given the good fundamentals and momentum in the business, we would see Burberry as representing a highly attractive hand of cards for any incoming CEO,” the person said.

FT : Fortress-led investment group strikes £9.5bn deal to buy Morrisons

Fortress-led investment group strikes £9.5bn deal to buy Morrisons
Deal comes two weeks after Britain’s fourth-largest grocer rejected unsolicited approach from CD&R

A trio of private investment groups led by SoftBank-owned Fortress have struck a £9.5bn deal to acquire Wm Morrison, Britain’s fourth-largest supermarket chain.

Under the terms of a deal unveiled on Saturday morning, Fortress along with Canadian pension fund CPPIB and a unit of Koch Industries will pay 252p a share along with backing a 2p special dividend to buy the grocer. It values the equity of Morrisons at £6.3bn before the inclusion of £3.2bn of net debt.

The deal comes two weeks after the Bradford-based group said it had rejected an unsolicited 230p-per-share approach from private equity group Clayton, Dubilier & Rice.

The Fortress-led bid values Morrisons shares at a 42 per cent premium to their price before the company disclosed the approach from CD&R. The deal marks the latest and largest example this year of the feverish pace that private equity funds are snapping up publicly-traded UK companies.

Andrew Higginson, Morrisons chair, said: “We have looked very carefully at Fortress’ approach, their plans for the business and their overall suitability as an owner of a unique British food-maker and shopkeeper with over 110,000 colleagues and an important role in British food production and farming.”

He added: “It’s clear to us that Fortress has a full understanding and appreciation of the fundamental character of Morrisons.”