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Nervousness over rising crime and potential unrest encourages some to pay for security escorts

New York City businesses have prepared for potential unrest following the presidential election, boarding up windows and bulking up security. Some private citizens, concerned about rising crime rates and the potential for unrest after the presidential election, are seeking out their own protection.

Pasquale Cosenzo, a 48-year-old computer programmer who works in Midtown Manhattan, has become more anxious about his safety on his daily commute. To help ease his concerns, he recently hired a personal security guard to escort him on the 15-minute walk between Penn Station and his office, or stand with him outside when he needs to hail a cab.

“It’s been peace of mind, which is all we’re asking for pretty much,” said Mr. Cosenzo, who commutes from Lindenhurst on Long Island and splits the security with two of his co-workers.

Patrick McCall, who provides security for Mr. Cosenzo through his private investigation and security firm, McCall Risk Group, said his clients are typically operators of retail and office buildings, as well as some corporate executives and celebrities. As inquiries increased leading up to the election, Mr. McCall said, most were from individuals.

“We’ve gotten a significant amount of calls in the past week,” he said. “Seventy percent of those calls now are from regular, average citizens.”

Mr. Cosenzo said he pays about $50 an hour for the service and will generally give McCall Risk Group a half-hour’s notice before he requires their discreet presence. With uncertainty surrounding the presidential election and elevated crime rates in the city, he said, he currently doesn’t have any plans to stop using personal security.

“This is something that might have to factor into the cost of doing business,” Mr. Cosenzo said. “They’re great guys. I hope we never have to use them again in a couple weeks.”

Mr. McCall said that with Democratic candidate Joe Biden currently in the lead with electoral votes, fears of turbulence are easing, though some clients have retained his company’s services through the weekend or even into the following week.

According to the New York Police Department, which has been preparing for weeks to deal with the possibility of unrest during the election, at least 85 people have been arrested at demonstrations since Tuesday. NYPD Commissioner Dermot Shea, however, said that protests so far have been overwhelmingly peaceful.

During the summer there were large-scale protests against police brutality in the city, with violence and looting sometimes following the demonstrations. NYPD officers arrested hundreds of protesters, and hundreds of businesses were damaged and looted during the unrest.

David Yorio, co-owner of Citadel Security Agency, said his firm has fielded more requests from high-net-worth individuals and business travelers who believe their safety may be at risk.

“We’ve seen an uptick in calls from people saying, ‘I’m flying to New York for a meeting, and I want to get picked up at the airport and escorted to the meeting and back,’ ” Mr. Yorio said.

Others are seeking protection in the execution of their daily routines, he said.

“Some of it has been as simple as, ‘I want someone to escort me to the grocery store and back,’ ” Mr. Yorio said.

The city saw a surge in violent crime over the summer as it eased lockdown restrictions.

According to the NYPD, homicides in the city during the first 10 months of the year were up 30% compared with the same period in 2019. Shooting incidents in October more than doubled year over year, and burglaries increased 32%, according to the NYPD.

“I don’t feel safe being in the city,” said JoAnn Rivera, a licensed real-estate associate broker who lives in Staten Island and hires security whenever she goes into Midtown for work or leisure. “We’ve paid quite a penny, but it’s worth it because security means a lot.”

New York City Mayor Bill de Blasio has acknowledged that rising crime rates pose a challenge in the city, but pointed to progress such as a large number of gun arrests and an overall year-over-year decline in homicides in October.

Transit officials in New York have said the subway is safe despite major crimes not falling in proportion to ridership declines during the pandemic and last month called on the NYPD to deploy more officers throughout the system.

Christopher Herrmann, an assistant professor at John Jay College of Criminal Justice, said that while crime rates have risen significantly, instances of random assault are still rare. Other areas of concern, such as homicides or homelessness or protest violence, tend to be confined to specific locations around the city, he added.

“The numbers are going up, obviously, so people have that on their mind,” Mr. Herrmann said, adding that hiring personal security was an unconventional solution. “To me, it just doesn’t make sense. I guess if you have money to spend and it makes you feel better, then do it to it.”

Kristian Murphy, a music executive who lives in Miami, said he often hires security when he visits New York City, both for the artists that he works with and for himself.

“With everything else going on, unfortunately, with all the looting, it’s not safe anymore,” Mr. Murphy said. “I want to know that if I’m coming to New York, I’m going to be able to get to where I need to be.”

Mr. Murphy, 36, said he plans to use McCall Risk Group when he visits the city later this month to get around.

“It’s scary these days,” said Mr. Murphy, who grew up in the New York City area. “I’ve seen where it’s come and where it’s gone, and it’s not fun anymore.”

Berkshire Hathaway’s Profit Rises, Boosted by Investment Returns

Despite the improved bottom line, operating earnings fell as insurance underwriting results swung to a loss

Berkshire Hathaway Inc.’s BRK.B 0.67% third-quarter profit rose as investments rallied, though a loss for the company’s insurance underwriting pinched its operating profit.

Berkshire reported third-quarter net earnings of $30.1 billion, or $18,994 per Class A share equivalent, up from $16.5 billion, or $10,119 per Class A share equivalent, in the year-earlier period.

Operating earnings, which exclude some investment results, fell to $5.5 billion from $8.1 billion the year prior.

Warren Buffett’s sprawling Omaha, Neb., conglomerate owns a large insurance business as well as railroads, utilities, manufacturers and well-known American retail brands such as Fruit of the Loom, Dairy Queen and Oscar Meyer.

The company’s quarterly results were boosted by its vast investment portfolio.

An accounting-rule change in recent years has meant that Berkshire’s earnings often reflect the larger performance of the stock market. Stocks rallied in the third quarter, with the S&P 500 up 8.5%.

Despite the improved bottom line, operating earnings fell at Berkshire as its insurance underwriting results swung to a loss from a profit. Several insurance companies posted their quarterly earnings this week with largely mixed results.

In some ways, the coronavirus pandemic has helped insurers as fewer miles driven has led to a significant decline in claims. Berkshire notably owns one of the largest car insurers in the country, Geico. In April, the car insurer announced $2.5 billion in policy credits, joining several other large insurers in issuing customer rebates.

On the other hand, Covid-19 has upended so many parts of daily life beyond miles driven that have led to increased claims, from canceled events to travel insurance. Moreover, insurers have also felt a rush of claims thanks to hurricane season and wildfires on the West Coast.

The company, which for years shunned stock buybacks, bought back $9 billion in shares, bringing the total of stock buybacks to $16 billion for the year so far.

The 90-year-old Mr. Buffett continues to practice restraint in spending the company’s large cash pile. For years he has said he is waiting for the right big deal at the right price. He has faced competition from aggressive private-equity firms.

Berkshire held $145.7 billion in cash at the end of the third quarter, down from about $146.6 billion in cash at the end of the second quarter.

“I still hold out the view that they are waiting for that big fat elephant to walk by,” said David Marcus, co-founder and chief executive of Evermore Global Advisors, as Mr. Buffett calls large acquisitions. Mr. Marcus has personally held Berkshire stock since the mid-1990s.

“I just think it’s a matter of time. It could happen next week or next year,” he said, adding that recent big company spinoffs could create an opportunity for Berkshire.

Nevertheless, Berkshire had hardly been standing still over the last few months, investing $6 billion in five Japanese trading companies, buying midstream energy business Dominion Energy Inc. for $9.7 billion and disclosing a $565 million stake in gold mining company Barrick Gold Corp.

In a surprise to many investors, Berkshire put $250 million into cloud-based software company Snowflake Inc. as it went public in September. Berkshire has long been careful with its investments in technology.

Berkshire holds a vast investment portfolio, the largest of which is Apple Inc.

This summer, Berkshire dumped some of its bank stocks but added to its Bank of America holdings. The conglomerate will update its quarterly investment filings later this month.

The Bank of America investment may also have been partly about technology. Bank of America has been a leader in consumer digital engagement, said Mac Sykes, portfolio manager and member of the global research team at Gabelli Funds.

“I don’t think he is abandoning the bank space. But I think he just kind of narrowed his focus on more specific institutions,” he said.

Mr. Sykes said Bank of America’s growing deposits, conservative lending and senior leadership also fit into Berkshire’s wheelhouse.

Berkshire’s Class A shares closed Friday at $313,885, down 7.6% for the year. The S&P 500 index increased 8.6% year to date.

Returns soften blow of net loss for insurance business, which weighed on operating earnings

Berkshire Hathaway reported a jump in profits for the third quarter as Warren Buffett’s business started to deploy the billions of dollars it has accumulated over the past decades.

The conglomerate that owns insurers including Geico, fast-food chain Dairy Queen, and railroad giant BNSF reported an 82 per cent increase in profits from a year ago to $30bn for the quarter, or $18,994 for each of the company’s class A shares.

The increase in profits was driven by Berkshire’s investment portfolio, which includes big stakes in Apple, American Express and Bank of America. It swelled by $25bn for the period as the US stock market continued to rally.

A modest increase in profits for its railroads, utilities and energy businesses helped to offset a net loss for its insurance business that dragged operating earnings down by a third, to $5.5bn. 

Berkshire also spent $9bn on share repurchases for the period, setting a new quarterly record for stock buybacks after easily eclipsing the $5.1bn spent in the second quarter. The buybacks did little to alter the company’s massive cash pile, which dropped slightly from a record high of $146.6bn in the second quarter to $145.7bn.

Mr Buffett has shown his dealmaking bona fides remain intact in recent months, after going years without clinching one of the megadeals for which he is known.

Berkshire closed its $8bn takeover of Dominion Energy’s natural gas transmission and storage business at the start of November. In August he placed a $6bn bet on Japan’s five biggest trading houses, including Mitsubishi Corp and Sumitomo Corp.

The company also invested in the initial public offering of cloud database company Snowflake, a wager that was led by Todd Combs, one of Mr Buffett’s top lieutenants. 

However, investors have not rewarded his sprawling conglomerate. Shares of Berkshire are down 7.6 per cent so far this year, trailing the S&P 500 by more than 18 percentage points. It is one of the company’s worst years compared to the benchmark index since the financial crisis, although Berkshire is well ahead of the broader insurance industry.

House of Lords peers join retailers to warn of ‘blow’ to business if VAT refunds are scrapped

Members of the House of Lords have joined several luxury watchmakers and retailers in voicing their concern over the UK government’s plans to end value-added tax relief for overseas visitors.

In reviewing the proposal to withdraw the VAT refunds for non-EU visitors starting next year, Lord Ed Vaizey cited analysis by the Centre for Economics and Business Research showing that the reform would put 128,000 jobs under threat and could see a fall of £6bn in retail sales, as well as cost the Treasury £3.5bn. “If the scheme is kept and extended to EU visitors it could create 20,000 jobs and generate £1bn of retail sales,” he said at a House of Lords session last month.

Lord Darryl Leigh in turn observed that “the highest 1 per cent of spenders spend an average of £60,000, saving themselves £12,000. Those people will choose to go to cities other than London, such as Paris.” Lord Denis Tunnicliffe pointed out that if the reform goes ahead, the UK will be “the only country in Europe not to offer tax-free shopping to international visitors”.

Since September’s announcement of the withdrawal of what the Treasury calls a “costly relief” scheme, Value Retail — which runs the Bicester Village retail outlet in Oxfordshire — has reported an increasing number of calls from tour operators asking which other countries the company does business in. “Global travel and tour operators have made it clear to large retailers that they are already looking for alternative destinations for their customers where they can shop more economically,” says James Lambert, vice-chairman of Value Retail. “Paris, Italy and Germany, for example, all offer VAT returns on purchases. Bicester Village, the West End of London and luxury stores like Selfridges and Harrods will be affected, but so too will the regions. Between them, Edinburgh, Glasgow, Manchester, Leeds and Liverpool attract £225m in spending from tourists.”

Moreover, according to Peter Harrison, chief executive of Emea at Richard Mille, the effect on those West End businesses will be felt across the nation in ways that are not immediately apparent. “It’s like saying the end of coal mining affected just a few towns in Wales and Yorkshire,” he says. “That is a myopic view. A lot of the properties up and down Bond Street and around Mayfair are owned by British pension funds and what’s going to happen next is people like me are going to say ‘London is not so important anymore, so that triple-A address is not as valuable anymore, so I’m going to pay, say 40 per cent less rent, because that is how much my business has dropped’. Less rental income means the building is less valuable and that will affect the much broader population in the UK when they find that the pension funds don’t have as much money to pay out.”

Brian Duffy, chief executive of the Watches of Switzerland Group, agrees. “Rents in London are among the highest in the world but worth it because of the incredible tourist traffic,” he says. “The government at a stroke will trap retailers in rents that are totally unjustifiable without tourist sales.”

The planned withdrawal of VAT-free sales from next January came as a totally unexpected shock for Mr Duffy. “Our experience and further evidence from recent surveys confirms that with no VAT-free shopping, fewer tourists will come and of those who do will have a significantly reduced expenditure,” he says, adding that such a measure would be a further blow to the retail, hospitality and entertainment sectors already reeling from the effects of the pandemic.

Nor does he see the problem as confined to the West End of London. Watches of Switzerland sells to visitors to such centres as Edinburgh and York as well as to Asian students studying in Manchester.

Moreover, there are the smaller regional retailers to be considered. Charlie Pragnell, managing director of the eponymous third-generation watch retailer and sixth-generation jewellery manufacturer based in Stratford-upon-Avon, has expanded his business to include a Mayfair showroom.

He makes half of the business’s £60m turnover in Stratford, much with repeat visitors who come from overseas for the Shakespeare season. Last year in London, he made two sales of jewellery crafted in Leicestershire workshops worth over £1m each, both to clients living overseas. “If the UK becomes less attractive to shoppers, top customers like that may go elsewhere.”

He feels that the Treasury’s shop-and-ship proposal — which would retain VAT-free sales for goods posted to overseas addresses — demonstrates the government’s naivete when it comes to the high-end watch and jewellery business, for which Pragnell received a Queen’s Award for Enterprise in 2018. “It is very expensive to ship high-value goods and there are insurance issues,” he says. “You could always charge the customer, but that’s not competitive with other places that don’t need to do that. The other issue is that most people who spend a lot of money want to leave with the goods there and then; there’s a feeling of comfort and security.”

The Treasury said that “around 92 per cent of visitors to the UK do not use the VAT retail export scheme and extending it to the EU [as the UK leaves the bloc] could increase total costs up to £1.4bn a year.” It perceives the scheme as “a costly relief which does not benefit the whole of GB equally, with current use of the scheme largely centred in London”.

It added that VAT-free shopping would still be available for goods sent directly to overseas addresses — including ones in the EU — although retailers argued this meant that in practice there would be no need to travel to the UK.

Scrapping the VAT refund scheme is not expected to affect the overall business of the larger global brands, however. “It does not make a huge brand difference,” says Jean Christophe Babin, chief executive of Bulgari. “But it penalizes UK economy and it makes the UK less attractive as a destination when we think about the global market for attracting tourist revenue. The fact that London will become less competitive against Paris or Milan is not good news for British retail. The disadvantage is clear but I don’t see so many advantages.”

He says the UK government is “mistaken” if it reckons it will receive more tax revenue. “Many of the foreign tourists buy [when travelling] because it is cheaper. If they compare with tax-free prices [in Paris] at Galeries Lafayette or Charles de Gaulle [airport] they will prefer to shop there; it will not be a gain for the UK government as they will shop less.”

Michael Ward, chief executive of Harrods, fears that Mr Babin will be proved right. “Pricing is very sensitive across Europe and people choose where they shop,” he says. “Our sweet point in watches is in the £10-25,000 range and making a saving of £2000 is a relatively straightforward choice.” He also fears for the impact on other luxury goods, from Scottish cashmere to Northampton-made shoes. Mr Ward says a previous consultation on the VAT refund scheme did not make any mention that it was to be withdrawn. “We all thought that it would be around how we put an electronic system in place,” he says. “I think that, if I am being generous, the consultation process took place while most businesses were closed down during Covid and I don’t think the government understands the elasticity of demand in the luxury goods sector.” But however generous Mr Ward is being, he is plain-spoken about the consequences. “We have been told by the major luxury brands that if this goes through, they will not invest in London.”

But Mr Duffy feels there is still time to act. “It will push many over the edge of financial viability and result in store closures and increased unemployment. There will be knock-on effects on construction as retailers pull back on investment. It will have repercussions throughout the UK, particularly in tourist destinations like London and Edinburgh but honestly all cities. We are hopeful that the government are listening to the tsunami of feedback.”

According to Lord Vaizey, the chancellor is currently receiving feedback from worried MPs. “It is a surprising own goal from a remarkably sure-footed chancellor. I know there are lots of MPs concerned about this, not just in London, and I hope that we can have a dialogue with the Treasury.”

Swiss luxury group Richemont is investing in U.S.-listed fashion platform Farfetch alongside Alibaba

An investment by the owner of the Cartier jewelry brand in luxury fashion website Farfetch is a smart move. It might also be an indirect admission of weaknesses at the rival online business it owns, Yoox Net-a-Porter.

On Thursday, Swiss luxury goods giant Compagnie Financière Richemont CFRUY 10.18% said it would invest $550 million in New York-listed Farfetch, made up of $250 million in a new joint venture in China and the balance in notes that can be converted into Farfetch stock. Tech giant Alibaba will contribute the same amount. Richemont and Alibaba have the option to up their stakes in the Chinese JV from 25% now to 49% after three years.

Richemont’s shares rose 7% in morning trading Friday. First-half results that showed booming sales in mainland China and a recovery in lucrative jewelry sales certainly helped. But there is also speculation that some kind of future tie-up with Farfetch, which operates a fast-growing online marketplace, could allow it to unload digital retailer Yoox Net-a-Porter.

“The market’s hope is that this will be an opportunity for Richemont to find a way out of the online distribution business,” says Luca Solca, luxury -goods analyst at Bernstein.

This wouldn’t be out of character. The Swiss company has switched in and out of full control of its fashion website over the years. Richemont merged its Net-a-Porter business with Italian competitor Yoox five years ago before taking over the combined group in 2018. Farfetch—which appears to have approached Richemont rather than the other way around—may have good reason to bulk up now that Amazon has launched a rival platform called Luxury Stores. And YNAP’s close relationships with the best brands, built up over two decades, has to be appealing to its competitor.

Selling YNAP to Farfetch, if the possibility arises, could address an eyesore at Richemont. Sales at the company’s online distributors, including luxury watch reseller Watchfinder, fell 21% in the half. The weak performance does reflect warehouse closures during the height of the pandemic. And the Swiss company gave priority to its bottom line by not slashing prices on YNAP’s sites, which nonetheless made a loss.

YNAP’s problem is that luxury brands are cooling on independent retailers, even online ones. Increasingly, they prefer platforms like Alibaba’s Luxury Pavillion or Farfetch, which give them full control over pricing and how their goods are presented. Quality digital department stores like YNAP are still in demand, but momentum is moving toward the marketplace model.

The business of selling luxury goods online remains at a relatively early stage of development, and brands are still trying to work out the right approach. Richemont’s latest digital bet makes sense for investors—but it also highlights the costs of being an early mover.