Breaking: Amazon's digital freight brokerage platform goes live
https://www.freightwaves.com/news/breaking-amazons-digital-freight-brokerage-platform-goes-live
Today, freight brokers’ and carriers’ worst nightmare has come true: Amazon has quietly taken its digital freight brokerage platform live at freight.amazon.com, and it is undercutting market prices from 26 to 33 percent.
Early this morning, in a client note responding to Amazon’s (NASDAQ: AMZN) announcement that it would begin offering free one-day shipping to Prime members, Morgan Stanley equities analyst Brian Nowak made a cryptic prediction.
“We see AMZN’s 1-day Prime shipping raising consumer expectations and increasing the cost to compete in e-commerce. Over the long term, we also see this as a Trojan horse for Amazon to grow its next disruptive business… a third party logistics network,” Nowak wrote.
Amazon already moves an enormous amount of freight through its distribution and sortation centers and has an extensive network of trucking carriers. For many industry observers, it was only a matter of time before Amazon leveraged the implicit network effect — the total number of shippers and carriers who do business with Amazon — and connected both sides of its business.
Part of this business may be to hedge against the volatile price of trucking capacity: by building a large freight brokerage business, AMZN is turning part of its cost into revenue. After all, Amazon is already a top ten international freight forwarder for Asian ocean freight inbound to North America.
A few weeks ago, a former Amazon executive reached out to FreightWaves to explain the e-commerce giant’s disintermediation strategy.
“The advantages that then come from disintermediation and the monetization of those capabilities are secondary to the immediate need of self-preservation, but then serve to feed very critical needs of Amazon’s ability to continue to succeed,” the Amazon veteran wrote. “This innovation and growth then manifests as continuously evolving towards the ability to sell everything and anything that is or can be sold. That’s the true Amazon flywheel: disintermediate to survive; monetize to fund innovation; innovate to grow; disintermediate to survive…”
The entry of Amazon into freight brokerage is the ‘disintermediate to survive’ phase of the flywheel. AMZN is under pressure to re-accelerate its top line revenue, which has slowed from upward of 30 percent annually three years ago to less than 15 percent projected for this year. Amazon cannot allow trucking capacity to constrain its growth and is entering freight brokerage to lock that capacity up.
Notice how ‘monetize’ comes after ‘disintermediate’. From a cursory review of four lanes in Amazon Freight’s current offering, it’s clear that Amazon is not trying to realize fat gross margins on its brokerage. Instead, it is massively undercutting market prices. Amazon’s new portal is intended for shippers who want Amazon’s rates for full truckload dry van freight in Connecticut, Maryland, New Jersey, New York, and Pennsylvania.
As this table makes clear, Amazon quotes rates to shippers that are below even DAT’s broker-to-carrier spot rates. In other words, in its current form, Amazon Freight is a free, marginless brokerage.
Monetization will come later, but this is the digital freight brokerage startup model on ‘Georgia overdrive’: massive capital deployed to rapidly scale a network on thin or negative margins and take share. There is no telling how big Amazon wants this business to grow, but at a certain point, prices will creep up as Amazon monetizes the brokerage service to fund further innovation.
That day may be some time away. In the first quarter of 2019, Amazon spent $7.3 billion on transportation, which it lumps together with sortation and delivery centers for the line item “shipping costs.” Approximately annualized, AMZN’s “shipping costs” are $87.6 billion per year, and, crucially, purchased transportation is not formally broken out on its P&L. Amazon could grow its brokerage into a $10 billion operation — effectively a shadow C.H. Robinson — selling capacity at cost, add it to ‘shipping costs’, and it could be years before investors begin asking about margins.
We think that building a third-party logistics network will allow Amazon to blow out retail peak season. By taking no margin during soft freight seasons and keeping trucks running, AMZN will have capacity locked up and ready to move truly staggering e-commerce volumes in November and December.
Iliad chairman fined €600,000 for insider dealing
Maxime Lombardini punished for share sale before failed 2014 move for T-Mobile USA
The chairman of French telecoms company Iliad has been fined €600,000 for insider dealing over his sale of shares in the telecoms company weeks before they dropped during the failed 2014 takeover approach for T-Mobile USA.
The Financial Markets Regulator’s enforcement committee said on Monday it had fined Maxime Lombardini, then chief executive, for “breaching insider dealing regulations”. Iliad must pay €100,000 “for breach of its disclosure requirements”.
The breaches relate to Iliad’s attempt to acquire the much larger US mobile network in July 2014. When Iliad surprised the market with its initial approach, its share price slipped 7 per cent, the French group’s sharpest drop in almost eight years.
Weeks earlier, Mr Lombardini had sold Iliad shares for himself and his partner, which the regulator said constituted insider dealing.
Iliad was fined for delaying by seven days its communication to the market of its interest in T-Mobile USA. The AMF statement said Iliad waited until “31 July 2014 to disclose that information, even though the company could not ignore that, on 24 July 2014 at the latest, it was no longer able to ensure its confidentiality, following which Iliad had failed in its obligation to communicate any inside information as soon as possible.”
The offer for T-Mobile USA, an attempt by Iliad’s largest shareholder Xavier Niel to establish an American foothold, was rebuffed by the US company’s majority shareholder Deutsche Telekom. An improved bid was also rejected before Iliad withdrew its offer in October 2014.
The fines are lower than the regulator was seeking — it recommended last month that the enforcement committee fine Mr Lombardini €1m and Iliad €500,000.
Mr Lombardini and Iliad, who have previously said the regulator’s grievances were “unfounded”, declined to comment on Monday.
The fines come at a difficult time for the company and its management. Its shares have dropped by more than a fifth this year, reflecting investor concerns about the highly competitive commercial environment in France and over the company’s ability to generate cash.
Iliad acknowledged last month that it would take longer than expected to hit its cash flow targets and said it might try to raise cash by selling part of its mobile network.
A foray into Italy, where Iliad is building a mobile network from scratch, has put further pressure on cash at the same time it has to invest in faster fibre broadband in France.
The Mystery Mogul Behind Off-White
The opaque Milanese holding company New Guards Group has birthed many of luxury streetwear’s most-hyped brands, including Off-White, Palm Angels, County of Milan and Heron Preston. In his first-ever interview, quiet mastermind Davide De Giglio reveals how he has built a business that will generate €420 million in sales this year.
NEW YORK, United States — “I started from scratch; no money, no knowledge,” recalls Davide De Giglio, the press-shy co-founder and mastermind of New Guards Group, the opaque Milanese holding company that has birthed many of luxury streetwear’s most-hyped and successful brands, including Off-White, Palm Angels and Heron Preston.
De Giglio — whose sleek navy track pants and fluorescent “volt” green, Virgil Abloh-designed Nike Air Force 1s set him apart from most executives — has come to New York for meetings and a big-budget Palm Angels show, staged for the first time outside of Milan in a raw performance space in West Chelsea. But 22 years ago, he was hustling at a much smaller scale. “I moved to New York to start a business with $700 in my pocket,” he says, gazing out the window at the grey and brown tones of the city that was his launchpad. “The word ‘vintage’ was everywhere, and I started buying used T-shirts and denim, then going back to Italy with a few bags and selling them to my friends.”
When he had accumulated $20,000, the Italian architecture graduate-turned-scrappy fashion entrepreneur started printing his own T-shirts and, at the age of 22, launched a streetwear label called Vintage 55, which he later sold to Italian private equity firm DGPA Capital.
“From the beginning, Davide had fire inside, that light,” says Marcelo Burlon, the polymath Argentinian immigrant who also came from small beginnings, before befriending designer Riccardo Tisci, becoming famous as a DJ on Milan’s party scene and teaming up with De Giglio and fashion retailing guru Claudio Antonioli to turn his then fledgling T-shirt label, inspired by his native Patagonia and ’90s club culture, into a booming streetwear business.
Marcelo Burlon County of Milan, launched in late 2012, was the first brand in what would become New Guards Group. But Burlon was anything but a traditional designer, and the practice of working with the likes of DJs and musicians who could assemble a community, instead of conventional fashion designers, was key to the group’s success.
“When you work in the club scene, you understand the audience because you are part of them,” explains Burlon. “I’m not a brand. I’m a person who became a brand. We are not looking to a scene for inspiration. We are part of the scene. We know what the kids want, because we are the kids.”
The same is true of Abloh, the civil engineer and architect-turned-Kanye West creative director with whom New Guards Group launched Off-White in December 2014. Ditto Francesco Ragazzi, who partnered with De Giglio and Antonioli to birth Palm Angels in January 2015; and Heron Preston, who created his namesake label with New Guards Group in January 2017.
“We are closer to our generation,” says Ragazzi. “There’s a person behind the brand that talks the way they talk. Nothing is filtered. They are texting and DMing me… It’s inspiring, it’s my fuel. It’s not just about beautiful clothes. It’s more than fashion. It’s a conversation.” It’s also smart business. “You understand the world from your followers,” adds Ragazzi, who is also Moncler’s artistic director. “You post a prototype and you know in one hour if it’s going to sell.”
Equally critical to the company’s success is its WhatsApp-powered workflow (Abloh says his primary tool is a “fully charged iPhone” and calls his creative process “legit conversational”) and a revolutionary production platform that unites high-quality Italian manufacturing with the ability to move goods from conception to delivery in three weeks. This at a time when digital media is reshaping consumer expectation and the luxury market is thirsting for newness. “It’s like luxury fast fashion,” explains De Giglio.
Then, there’s the company’s global vision. Tellingly, Off-White’s first store wasn’t in one of the main four fashion capitals, but in Hong Kong. Indeed, New Guards Group is more likely to launch outlets in Manila, where Off-White also has a store, than in New York, Paris, London or Milan. But New Guards Group isn’t just selling American and European brands to the rest of the world. It’s increasingly selling international brands to a global audience. Earlier this month, the company launched a label called Kirin with Berlin-based, Korean techno DJ Peggy Gou, and plans to start more brands with Asian creatives in the near future. “It’s one world already,” says De Giglio, “and there’s so much talent in Asia.”
In 2018, New Guards Group generated €235 million in revenue and a net profit of €60 million, according to the company. The group is projected to hit €420 million in sales this year and has no debt. (It was able to self-finance growth by requiring a 30 percent deposit on retail orders.) Add to that a powerful stake in the luxury streetwear boom that has captured the collective imagination and pocketbooks of a new generation of millennial consumers, who have cultural roots in hip-hop and skateboarding, and are already the main growth engine of the luxury goods market, driving 85 percent of luxury expansion in 2017, according to Bain & Company.
No wonder there is market speculation that investors are eyeing the company, the vast majority of which is still owned by De Giglio and Antonioli, who each have 46 percent stakes in the business, with seven percent controlled by Burlon and a small stake held by chief commercial officer Andrea Grilli.
“They are profitable, have reached a significant size and are growing fast, making them an attractive target,” said luxury advisor Mario Ortelli. “They clearly understand where the market is going and have been impeccable with their execution.”
New Guards Group owns a majority stake in each of its labels, with the exception of Nicolò Oddi and his sister Carlotta’s emerging knitwear label Alanui. The group acquired a 49 percent stake in Alanui in December 2017 and controls the label via a shareholder agreement.
BoF’s Vikram Alexei Kansara sits down with De Giglio to discuss his entrepreneurship journey, the secrets to the success of New Guards Group and his long-term ambition to build Italy’s first major fashion conglomerate, with a modern business model born from today’s global and digital world.
BoF: Why did you decide to launch New Guards Group?
Davide De Giglio: It began with Marcelo Burlon. He had become famous in Milan as a PR and a DJ. At the time, he was very close to Riccardo Tisci; they were like brothers. And Claudio came to me saying Marcelo had this idea for a T-shirt collection. But it wasn’t really about T-shirts; the way he wanted to communicate was with an iPhone, because, he said, “Kids in the future are going to use only this.” That was the time of Myspace, Facebook, the beginnings of Instagram.
He said, “This industry is changing.” I felt the same. I’m coming from sportswear, not the fashion industry with a capital F. And then, the prints he had in mind for the T-shirts were new: like trying to print 360 degrees. Because I have an industrial background, I said, “Ah, this is a challenge.” So, we began working and after three months, boom, it was a real company. We started by seeding a lot of T-shirts to celebrities, musicians and artists all over the world — Marcelo’s friends — and this helped a lot to build a community.
Off-White has been your most successful brand. How did you first meet Virgil?
One of my friends, Andrea Grilli, who previously worked for Balmain and Dolce & Gabbana, and is now one of our partners, called me saying, “I’m working with Kanye West to build his first fashion brand.” So, I had a few appointments with Kanye, who’s a genius. But I also realised there was this guy Virgil next to him; always calm and very sweet. Marcelo was close to Virgil and I said, “Why don’t you ask Virgil if we can do something together, because I think he has a vision.” So, we had a coffee in New York. At the time, he was printing Ralph Lauren shirts with “Pyrex” and then the numbers “23” and “13” on the back. I said, “If you want to elevate your message and you don’t want to just be another streetwear brand, we need to choose the best cotton, the best print technique, the best Italian factories.” We started Off-White from scratch.
What’s the common thread that runs through your portfolio of brands?
The common thread is the individual, before anything else. I never use the word designer. I call them directors. Each of them has a vision. They are able to do a lot of things. Marcelo is going to be on tour with Loco Dice just because he wanted to play music for a while. Francesco Ragazzi of Palm Angels is involved with art; Heron Preston, too. How do we pick them? Sometimes it’s organic, like Heron was Virgil’s friend. Francesco is also Moncler’s art director and when we did a co-branding thing with Marcelo, he showed me his first book. He was comparing the angels of Giotto with the angels of Los Angeles, and the pictures had a fashion eye. So, I said, “Look, you have a vision. You have taste. You’ve got a nice name: Palm Angels. I like the logo. Let’s start a brand.” We started Palm Angels like that. We started like eight brands in less than three years.
I’m not against designers; I love designers. But these guys are good communicators. They’re not shy, they’re artists and they have the ability to build a community: a group of people that wants to be part of something. Virgil is there with the kids when there’s a store opening somewhere in the world. He’s signing sneakers, talking to the kids, taking pictures. This is very important.
Last night at the Palm Angels show, I met a guy from Costa Rica who is living in Italy. Francesco gave 20 invitations to the show through Instagram and this guy received one, took a plane just to see the show in New York and went back this morning. I was like, “How do you have this passion? Are you crazy?” And he said, “You don’t understand what this means to me. I had the possibility to be part of something that I love. I was blessed, so I got a plane.”
Some say the streetwear trend is waning.
I think streetwear is much deeper than a trend. This is our generation. Me, Francesco, Heron, Marcelo, Virgil… we were all skaters when we were kids. But it’s bigger than that. Today, you can be elegant and cool in a nice sneaker and sweater instead of a suit. This is just the new way of dressing, even for executives. I’m an executive and I’m wearing sneakers. I read something the other day about “the streetwear bubble.” I don’t think it’s a bubble.
But in any case, New Guards Group is not a streetwear group. The one label we acquired, Alanui, is a cashmere brand that’s pretty expensive and not streetwear. New Guards Group is about a new way of doing things: a new way of making, a new way of communicating, a new way of distributing. In the same way that none of our creative directors are really designers, we designed 200 collections in 2018. For this, you need a different machine. We move fast and think big.
Today’s consumers crave newness at the pace of Instagram.
Exactly. Nowadays, it’s not possible to wait a few months to get what you see. They want it now. So, we have to deliver. And to make that happen, we had to change the way we work. Look, I have 20,000 unread emails. But just now I got 12 WhatsApp messages. This is the way I work now. We all work through WhatsApp, because we work fast and we can’t wait five hours, eight hours for answers. It stops the flow, the process. We design collections through WhatsApp. Has Virgil showed you before? It’s the only way to work with Heron in New York, Ben in Los Angeles, Virgil in Paris and everywhere; Marcelo, everywhere. Francesco, everywhere; Peggy, everywhere. We have delivery tasks and our timelines are short. Most of our kids, they’re like 25 years old, so they’re having fun, they’re single, they’re working 24/7, they’re in the club answering WhatsApp. We create a chat for each topic, like sunglasses. I have 1,000 chats. It’s much faster. It’s real time.
And the back-end? How does it work?
As I said, we designed 200 collections in 2018. How could it be possible to design so many collections? Well, you need to have someone next to you that is fast as well, so we asked our industrial partners to build something just for us. We have some companies now working with us 24/7 in fours shifts, delivering stuff overnight. We can go from design to delivery within three weeks for T-shirts, but also for sneakers and leather goods. It’s like luxury fast-fashion.
Of course, you can’t do absolutely anything. I give the creative directors certain ingredients, they are the chefs. We give them fabrics, prints, embroideries, buttons, zips and product managers who are very close to the creative directors — and they cook. If I give you tomatoes, basil, onion, oil and spaghetti — even if we have the same ingredients — my dish is going to be different.
How is the company structured? And how do you manage the brands?
There is a holding level called New Guards Group and then we have the brands and every creative director has a stake in their label, so Virgil is part of Off-White, Marcelo is part of County of Milan, Francesco is part of Palm Angels. They’re all partners. And I’m like 50 percent therapist, 50 percent personal assistant. I just try to make things happen. If Virgil wants fragrances, I’ll find the team, I’ll find the network. If Francesco wants to show in New York, okay, let’s talk to producers, scout the location, send the team. This is my job.
Claudio was taking care of sales. Now, we have Andrea, also our partner, in charge of retail and wholesale. It’s very organic, we’re all friends. We all have a tattoo. We’re part of a group. But the brands are run 100 percent separately. They have different teams, different companies, but they share some logistics, administration, finance — and then the production side.
How do you plan to grow?
We’re planning to grow in different ways. We’re very, very curious to explore new ways of retail. But you know what’s my dream? I would like to expand my business in Africa. This is something that I’m obsessed with. It’s a niche market but it can be a big market. You know, talking to Virgil, talking to [South African DJ] Black Coffee, listening to what’s happening there. I’m more into opening stores somewhere like Africa than Milan. Look at what’s happening in Manila or in Kuala Lumpur or in Melbourne. It’s such a big, big opportunity.
Most of your brands are still European and American. Is that set to shift?
We’re launching Peggy Gou, who’s Korean. We’re also about to start a Japanese brand and a Chinese brand. So, this is very, very important for us. It’s about thinking big and differently. In a classic fashion brand, if you wanted to start eyewear or fragrance or cosmetics, you had to wait until after your brand was established. You know, then you opened a retail store, and if you’re from Milan, then you opened the store in Milan, or you opened in Paris, London, New York. Forget it. This is not our way. You have an idea, like Heron had this big idea of making a new fragrance and I backed him. We opened the first store for Off-White after six months — and it was in Hong Kong, not in Milan or New York or Chicago, Virgil’s hometown.
Today, I was talking to Andrea and he was saying, “I have to go to Hanoi in Vietnam, because we studied social media and it’s telling us we have a chance to open a store there.” I’ve got eight brands and not one store in Milan. Instead, it’s Manila, Jakarta, Kuala Lumpur, Melbourne. I’m currently developing two small factories: one in Indonesia, one in China for sneakers. And it is not because China and Indonesia are cheaper than Italy; it’s because the best technology is there and it’s no longer in my country. We have people working with us in New Zealand. Marcelo had a graphic designer in Sydney. Our shoe designers are in Amsterdam.
Do you plan to sell some of the brands you have birthed?
I’m not planning to sell. This is what I’m doing. I’m forty-something, I would love to do this for the rest of my life, I’m having fun. But probably, if we want to go to the next step, we would need a partner. This company, next year, is going to be a €500 million business. So, we’re not small anymore. To build a group, we might probably need someone. Having said that, we’re one hundred percent independent. This is a wealthy company.
What are you looking for in a partner?
If you’re not looking for money, you’re looking for expertise, support, someone that can help you to grow, someone that is able to tell you, “Oh we did it that way, or maybe it’s better to do it in another way.” Someone that is smart enough to understand that we have something that they don’t have, and that they have something that we don’t have. We need the right partner that can complete what we’re doing. I would love to have offices and factories all over the world. It’s easy for me to open a T-shirt factory. But to open a headquarters in Africa, it’s different.
There is speculation that you are in talks with LVMH.
I was amazed by this. I was talking to them. We have a very good relationship. When I’m going there, I’m learning. And this is very important. We have a very good relationship with Louis Vuitton because of Virgil. But we were both amazed by the [speculation] … Because you know, the leaking was also in numbers and things and so on. And I don’t really know how.
What are the biggest lessons you’ve learned along the way?
With my first brand, after a few years, I opened 22 stores in China. I said, “Okay, things are up and running, let’s conquer the world.” But I had to sell the company to a private equity firm because I needed the cash injection; the company was growing too fast. I’m still obsessed with that story. At New Guards Group, we have zero debt, cash positive in every brand, no banks, our money, very healthy. But the lesson isn’t about going slow. You can go fast. You just can’t go fast with a Fiat Panda. You need to build a Ferrari. It’s all about experience. And then you push yourself to the limit. You know I still receive messages at 3am, 4am. I know what it means to travel 320 days per year, not being next to your friends, your family. It’s hard. It’s stressful because you are multitasking. But it’s also fun. It’s not a sacrifice.
What’s next for New Guards Group?
Look at the French: they have big fashion groups. There is not one Italian company like this. This is something that I see: to be an Italian company capable of building something. Italians have a thousand years of experience in making clothes. It’s in our DNA. And being in Milan is very helpful because we have factories. If you’re a kid in Saint Petersburg and you want to start your own fashion label, it’s hard. The infrastructure is not there. We have the infrastructure. So, thinking about an upcoming Korean brand like Peggy Gou. She puts what she has — her culture — with our culture. New Guards Group is not a maison or something. It’s a platform.
Starbucks CEO says Chinese rival Luckin’s ‘heavy discount’ strategy isn’t sustainable
A war of words in the coffee world is brewing after the CEO of Starbucks claimed Chinese upstart Luckin can’t last just days after it filed for a U.S IPO.
Kevin Johnson, who leads the American coffee giant, told CNBC that competitors in China including Luckin have adopted a strategy of building market share using “heavy, heavy discounts” that he believes is not sustainable.
“We’re deploying capital and building 600 new stores per year,” he said. We’re “generating the return on invested capital that we believe is sustainable to continue to build new stores at this rate for many years to come.”
Starbucks claims 30,000 stores worldwide. It has been in China for 20 years and it is aiming to reach 6,000 stores in the country by 2022. Luckin, fuelled by over $550 million in VC money, has quickly scaled to reach 2,370 locations in under two years with plans to add a further 2,500 this year. That would see it overtake Starbucks — which has 3,600 stores across 150 Chinese cities — although that a metric gives a distorted view since Luckin specializes in digital orders and on-demand delivery. That’s in contrast to the retail model operated by Starbucks.
Still, Starbucks has moved to close any perceived gap on service. The U.S. firm struck a partnership with Alibaba last year to tap its Ele.me service for coffee delivery and it is integrating with Alibaba’s e-commerce services.
Despite the competition, Starbuck said in its a quarterly report last week that same-store comparable sales — revenue from existing stores — rose by three percent year-on-year while it grew its new store base by 17 percent. In a further boost, it said its rewards membership program reached 8.3 million with the addition of one million additional customers.
“We’ve set a very good strategic foundation and we’ll continue to drive on the things that differentiate in China,” Johnson added.
Despite that promising progress, the competition is sure to reach boiling point when Luckin does go public.
Valued at $2.9 billion by a set of investors that include Starbucks-backer Blackrock, Luckin’s filing has a placeholder raise of $100 million which could increase as the listing process progresses. The company posted a $475 million loss in 2018, its only full year of business to date, with $125 million in revenue. For the first quarter of 2019, it carded an $85 million loss with total sales of $71 million.
Starbucks doesn’t break out figures for China, but across ‘China/Asia Pacific’ in Q1, it recorded $232 million in operating income on total revenue of $1.29 billion from nearly 9,000 stores.
With a strategy of growth at all cost, Luckin’s numbers are mind-boggling for a listing, let alone for an 18-month-old business.
To quote Alex Wilhelm, former TechCrunch reporter and current editor of our sister publication Crunchbase: “What an amazing F-1 [filing]. I have no idea what this company is worth, how big it will get, or what it’s current health is.”
Starbucks, though, is betting the fad won’t last and that its own business will continue to stand the test of time in China.
Interestingly enough, other companies are already emerging to undercut Luckin — our China-based partner Technode reported that Coffee Box raised $30 million last week — while the model is being replicated in Southeast Asia. For example, in Indonesia, a startup called Fore Coffee has already raised close to $10 million for a digital-first service that uses on-demand partners for delivery.
Gapping down
In reaction to disappointing earnings/guidance:
- VNE -17.6%, OPB -3.9%, ON -3.7%, QSR -3.7%, DORM -1.8%
Other news:
- MOMO -8.2% (says it has become aware that certain mobile app stores in China have removed the Tantan mobile app on direction of governmental authorities in China)
- OXY -2.8% (Anadarko Petroleum (APC) to begin deal talks with OXY despite Chevron (CVX) bid, according to Reuters)
- DB -1% (Chairman says bank does not need strategic overhaul)
Analyst comments:
- CTSH -2.3% (downgraded to Underweight from Equal-Weight at Morgan Stanley)
- ALRM -1.9% (downgraded to Neutral from Buy at ROTH Capital)
- AXP -0.9% (downgraded to Neutral from Buy at UBS)
- OLED -0.7% (downgraded to Neutral from Positive at Susquehanna)
- INTC -0.4% (downgraded to Hold from Buy at Argus)
Gapping up
In reaction to strong earnings/guidance:
- CYOU +8.1%, ARLP +5.5%, MDR +5.4%, SOHU +3.5%, L +3.4%, SPOT +3.4%, NSP +1.4%, CADE +1.2%, SOGO +0.7%
Other news:
- LXRX +9.1% (Lexicon Pharma and Sanofi (SNY) confirm Zynquista approval in European Union for treatment of adults with type 1 diabetes)
- IR +3.7% (Gardner Denver (GDI) near deal to merge with IR unit, according to WSJ)
- VGR +2.3% (files to withdraw Registration Statement on Form S-3 due to error; re-files as shelf offering)
- DIS +2% (Following record breaking weekend for Avengers movie)
- LEN +1.8% (acquires control of 1,602 homesites across seven Raleigh communities from Level Homes)
- AVCO +1.4% (entered into placement agency agreement and securities purchase agreement)
- IMMU +1.3% (announced an exclusive license agreement to develop, register, and commercialize sacituzumab govitecan in Greater China, South Korea and certain Southeast Asian countries)
- IRBT +1.2% (modestly rebounding following last weeks's decline)
- AZN +1.2% (Lynparza receives positive EU CHMP opinion for 1st-line maintenance treatment of BRCA-mutated advanced ovarian cancer)
Analyst comments:
- TGT +3.1% (upgraded to Overweight from Equal Weight at Barclays)
- SFM +2.3% (upgraded to Buy from Hold at Deutsche Bank)
- AAL +1.5% (upgraded to Buy from Hold at Deutsche Bank)
- ADBE +1.5% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- VC +0.9% (upgraded to Hold from Underperform at Jefferies)
- ANGI +0.9% (initiated with an Overweight at JP Morgan)
- THS +0.8% (upgraded to Outperform from Market Perform at Wells Fargo)
To Make a Comeback, Europe’s Center-Left Is Leaning More…Left
Move paid dividends in Spanish elections, where Socialists trounced conservative rivals in fragmented field
Europe’s center-left parties, faced with falling support, are shifting left to win back working-class voters lost to hard-left and populist movements—a move that paid off in Spain’s national elections on Sunday, where the Socialists trounced their conservative rivals.
The Socialists, who have governed since last summer, came first in a fragmented field after pitching a platform of workers’ rights, higher taxes on the wealthy and environmental protection—issues central to the party’s social-democratic roots. The party will need to form a coalition with smaller allies to reach a majority, however.
“People don’t make ends meet,” said Antonio Benítez, a 57-year-old employee of Spain’s health service, who lives in Andalusia. “It’s about time they speak about the fundamental pillars of the left, of being socialist, with none of these deviations to the center.”
Center-left parties in Germany, Italy and the U.K. are similarly attempting to lure back voters who, feeling betrayed by centrist moves that they feel have made them poorer and threatened their job security, have defected to upstart parties on the left and the right.
“We have clearly turned to the left,” said Pau Marí-Klose, a Socialist who won election to Spain’s parliament on Sunday. “Our rhetoric is highly charged with left-wing messages, adding new themes, such as precariousness and climate change. We did it to get close to the sectors who dropped us, like young people.”
The Socialists won 123 seats in Spain’s 350-seat parliament, up from 85 in the last elections in 2016, while the conservative People’s Party crashed to only 66 seats, from 137 last time. The People’s Party lost many voters to far-right movement Vox, which won 24 seats, compared with none in 2016, thanks mainly to anger among Spanish nationalists about secessionist ambitions in the region of Catalonia.
Socialist Prime Minister Pedro Sánchez will need to build a possibly unwieldy coalition to have a parliamentary majority, however. Talks on forming a government could take many weeks.
The existential angst afflicting Europe’s center-left parties echoes the debate within the U.S. Democratic Party over how best to respond to the challenge of President Trump: Move left to win some voters at the risk of losing others, or aim for the center? In the midterm elections, Democrats brought fresh, left-wing representatives to Washington such as Alexandria Ocasio-Cortez.
When big government fell out of favor in the Cold War’s aftermath, center-left parties in the West increasingly accepted free-market economic thinking, while seeking to smooth the rough edges of capitalism rather than radically changing it.
In Europe, leaders such as the U.K.’s Tony Blair and Germany’s Gerhard Schröder led a shift away from generous welfare states and state intervention toward deregulation, privatization and competition. Center-left leaders in France, Italy, Spain and other Western countries followed.
Over time, working-class voters in Europe saw the parties they traditionally supported as increasingly out of touch with common people. Supporters felt betrayed when some, such as Spain’s Socialists and Italy’s Democrats, supported welfare cuts to shore up government finances in the wake of the financial crisis.
Populists of the far left and the far right have made inroads among disillusioned voters with attacks on the establishment, accelerating the collapse of the traditional European center-left.
“It’s like these parties received a blow to their heads and got disoriented,” said Catherine De Vries, a political scientist at the Free University of Amsterdam. “Some of them decided to shift back to their core values to win back voters.”
The U.K. Labour Party, bruised by its unexpected defeat in the 2015 general election, was among the first to move left. Its leader, Jeremy Corbyn drew thousands of young party members with his antiausterity and antiwar messages. He also has embraced the re-nationalization of the water and rail industries. In the U.K. general elections in 2017, Labour won 40% of the vote, up from 30% in 2015, but still came in second to the ruling Conservative Party.
“Socialism has come back onto the agenda,” said John McDonnell, a Labour Party politician.
Germany’s center-left Social Democrats, or SPD, and Italy’s Democratic Party are turning away from pro-business economic policies they steadily implemented in the past two decades, after losing a string of elections.
In 2017, the SPD scored its worst postwar result in a general election, after losing many voters who had grown disillusioned with its centrist course on economics. The left-leaning Greens and the far-right Alternative for Germany, or AfD, both made significant gains.
In Italy, the Democratic Party has lost votes since 2013 to the antiestablishment 5 Star Movement and the hard-right League, who together now lead a coalition government. Among the Democrats’ policies that alienated longtime voters were pension overhauls that raised the retirement age. The Democratic Party’s popular support has halved since Spring 2014, when it garnered 41% in European elections, compared with a 21% showing in an average of recent surveys by pollsofpolls.eu.
Nicola Zingaretti, the newly elected leader of the Democrats, said he is considering an electoral alliance with lawmakers who left his party over policies they found too centrist, such as rules that made firing workers easier. Italy’s youth unemployment is more than 30%.
“Populist forces have done better than progressives due to a desire for greater fairness,” Mr. Zingaretti said in mid-April. “We need to go back, and talk to these people, to these workers, whose votes we lost.”
Mr. Sánchez raised Spain’s minimum wage by 22% around Christmas, in a move that resonated with lower-income Spaniards. His campaign themes of workers’ rights and higher taxes on corporations marked a contrast with Spain’s previous Socialist premier, José Luis Rodriguez Zapatero, who said more than a decade ago that “cutting taxes is left-wing.”