(Bus. Of Fashion) Luxury Takes a Tumble, The Savigny Luxury Index suffers its wo

Luxury Takes a Tumble
The Savigny Luxury Index suffers its worst fall in over three years this month with global trade uncertainty playing a big part.

LONDON, United Kingdom — “Very ugly out there,” a trader’s comment on stock markets in general, applied doubly so to the SLI which suffered its biggest monthly fall since August 2015.

Wanda Ferragamo passed away on October 19. She took over her deceased husband’s shoe business in 1960 and, with the help of their six children, transformed it into a global luxury brand. One of the rules she established was that each child would receive the same salary. Another was that no in-laws were allowed to work for the company. She stepped down as chairman in 2006 but continued to go to the office every day until very recently.

Big News

The risk of being at the top was never so much highlighted as when luxury stocks took a plunge this month from their heady heights. LVMH’s better-than-expected third quarter results failed to quell fears of an impending slowdown in China notably due to tariff wars, a rumoured crackdown on high-end wares by Chinese customs officials and recent falls in the yuan. The company played down any signs of weaker demand, telling analysts it had observed "a little slowdown" among Vuitton's Chinese clientele in the July to September period, with sales growth around 15 percent rather than closer to 20 percent.

For their part, Estée Lauder and Tapestry’s quarterly earnings beat expectations and strong results came in from Moncler and Kering, both of which confirming that demand in China remained robust. Nevertheless this could not prevent a sell-off from which the SLI has not fully recovered.

Richemont and Alibaba Group announced a global strategic partnership to bring the retail offerings of Net-a-Porter and Mr Porter to Chinese consumers via dedicated mobile apps and through online stores on Alibaba’s Tmall Luxury Pavillion. Two Italian fashion brands received investment this month: womenswear label The Attico received investment from Archive, a company partly owned by Moncler chairman and chief executive Remo Ruffini’s Ruffini Partecipazioni Holding, whilst menswear label Slowear received investment from Italian fund NUO Capital.

French heritage fashion label Carven was bought out of insolvency by Shanghai ICICLE Fashion Industry, a China-based womenswear designer and retailer. ADA Cosmetics, which supplies hotels with personal care, cosmetics, spa products and accessories, was acquired by UK-based private equity firm Moonlake Capital in a management buy-out.

Last but not least, speculation is mounting as to who will buy Italian jeweller Buccellati. The company was taken over by China’s Gansu Gangtai in 2017, for an estimated valuation of €270 million; however the new owners have reportedly (according to Corriere della Sera) run into difficulties due to restrictions on investments abroad introduced by the Chinese government. At present, Richemont and Mayhoola are rumoured to be interested but neither company has confirmed or denied this.

The Savigny Luxury Index suffered its worst monthly fall in over three years this month, with a decline of 11 percent versus a decline of almost 6 percent for the MSCI. Both indices lost ground as a result of continued uncertainty over global trade (particularly between the USA and China), an interest rate hike and uncertainty over the mid-term elections in the USA, whilst in the EU Brexit and a looming debt crisis in Italy had their role to play.
Going up

Ferragamo was the only stock to gain ground this month in a rather twisted tale of investor pragmatism, with the death of matriarch Wanda Ferragamo freeing the stock up to bid speculation. The company’s shares ended the month just over 1 percent up.
Going down

17 companies representing 99 percent of the SLI’s market capitalisation experienced share price declines in this month’s sell-off, with the majority of the companies losing between 10 and 20 percent of their value.
Prada lost over a quarter of its market value in October as investors fretted over the impact of a slowdown in China and a potential debt crisis in Italy.
Highly leveraged Safilo fell almost 22 percent this month driven by continuing poor performance at the company.
What to watch

Burberry, which has all but said goodbye to “see now buy now”, is currently looking to release limited edition clothes and products on the 17th of every month in a business model popularised by US streetwear brand Supreme. The first release, which followed a similar one around Tisci's debut runway show in September, featured unisex white T-shirts and sweatshirts with the brand's new monogram, available for 24 hours on a handful of social media channels. The aim is to create hype around the brand and to encourage customers to revisit the brand on a regular basis.

Burberry will still produce two main catwalk collections as well as a series of in between ones. Whether this flash sale model will work for Burberry and whether other luxury peers will jump on the bandwagon remains to be seen. The danger with going down this route is that if too many adopt the flash sale model, consumers will get bored and the fashion industry will be back to chasing its own tail.

WWD : L Catterton Looks to the Japanese Eyewear Market

L Catterton Looks to the Japanese Eyewear Market
The private equity giant and Mitsui & Co. have invested in fast-growing Japanese eyewear retailer Owndays.

L Catterton has its eyes firmly on the Japanese glasses market.

The private equity giant’s Asian arm has teamed with Japan’s Mitsui & Co. to plow an unknown amount of cash into fast-growing Japanese eyewear retailer Owndays, whose specialty is own-brand prescription glasses. The terms of the deal were not disclosed, apart from that the current management team will continue to retain substantial equity interests and manage the company.

The investment will be used to help it increase its footprint in Asia and open 500 stores over the next five years, in addition to the 257 units it already has since starting the brand in 2013. About 115 of those are located in Japan, while the others are split between 10 Asian countries.

Shuji Tanaka, Owndays’ chief executive officer, said, “We are excited to welcome two world-class partners, L Catterton Asia and Mitsui & Co., as we enter the next exciting phase in Owndays’ growth in Japan and across Asia. Our ambition is to become Asia’s leading optical retailer.”

L Catterton’s Asia chairman and managing partner Ravi Thakran added that it was attracted to Owndays by its innovation, quality service and “boldly exceeding” consumer expectations.

While the news marked L Catterton’s inaugural investment in Japan, it was not its first foray into the Asian eyewear market, having inked a 2017 deal with quirky South Korean sunglasses firm Gentle Monster, becoming the brand’s second largest shareholder.

Beyond Asia, the consumer-focused private equity firm, which boasts $15 billion in dedicated capital, boosted Jessica Alba’s ethical beauty brand The Honest Co. to the tune of $200 million earlier this year and has also invested in British activewear brand Sweaty Betty and stationary bike start-up Peloton.

The firm expanded considerably in 2016 when it joined forces with Bernard Arnault’s L Capital. The French fashion tycoon’s LVMH Moët Hennessy Louis Vuitton and his family holding company, Groupe Arnault, own 40 percent of the investment house.

WWD : Farfetch Lays Out Big Ambitions, Swift Growth

Farfetch Lays Out Big Ambitions, Swift Growth
Ceo José Neves said the web could account for more than a quarter of the luxury market in a decade.

José Neves is surrounded by big numbers — and they’re getting even bigger.

The founder, chairman and chief executive officer of Farfetch took his company public in September, valuing his personal stake at more than $950 million. The luxury platform now has $1 billion in cash on hand. And the firm’s third-quarter revenues expand by 52 percent while the number of active consumers increased 42 percent to 1.2 million from a year earlier.

Clearly, that’s not enough.

Neves told analysts on a conference call that the $300 billion global luxury market would grow to $500 billion in the next decade and that online sales would make up “at least 25 percent of that, maybe 30 percent.”

The online luxury market represents an “incremental opportunity of $100 billion in new business,” he said. “We believe Farfetch is well positioned to take the lion’s share of that total addressable market.”

He said the company’s business model was designed to be self-reinforcing as brands come on the platform and attract more customers, which increases sales and in turn draws more sellers.

“This is a powerful fly wheel,” Neves said, referring to online luxury as a “winner takes most in the long run.”

Clearly Neves sees Farfetch as that winner — a point he underscored several times on the call.

The firm’s third-quarter report, its first as a public company, showed just how swiftly it is growing into that vision. Revenues rose to $132.2 million from $86.9 million.

With topline growth like that, Wall Street is generally willing to wait for the bottom line to catch up, which it still needs to do. Losses expanded to $77.3 million from $28.2 million as selling, general and administrative expenses nearly doubled to $144.2 million, particularly in the area of share-based payments.

The gross merchandise value of the goods sold through the platform for the quarter rose 53 percent, to $310 million, which Neves said was about twice the rate of the online luxury market.

Farfetch has drawn the interest of investors, including the likes of Kering and Chanel, by sitting at the lucrative point between brand and final consumer. And it’s doing everything to stay there. The business highlights for the quarter included:

• The addition of Moschino, Victoria Beckham and Tory Burch and a larger boutique network with new partners from Russia and Estonia.

• The launch of Harvey Nichols as the platform’s first department store partner.

• A partnership with Dover Street Market, which is known for its expertise in fine jewelry.

Farfetch’s growth has not been absolute. As the number of orders increased 54.9 percent, to 662.5 million in the third quarter, the third-quarter average order value slipped to $584.60 from $605.20 a year earlier.

For the fourth quarter, Farfetch boosted its projected gross merchandise value to a range of $435 million to $445 million, higher than previous estimates.

Neves said Farfetch with the IPO closed chapter one of its story and is now moving on to a very ambitious chapter two.

Recode : John Skipper, ESPN’s former president, is back ... at a rival sports me

John Skipper, ESPN’s former president, is back ... at a rival sports media company.
Skipper’s new goal is to make watching sports online a big business, starting in the U.S. with boxing.

The rumors of sports’ death have been greatly exaggerated, says former ESPN President John Skipper.

“I don’t think interest in sports has declined at all,” he said on the latest episode of Recode Media with Peter Kafka. “What you just have is a dramatic increase in the amount of content overall that’s available, the places you can watch it. And so consequently, the peaks of everything are smaller, right?

And Skipper is contributing to that content bounty in his new role as chairman of DAZN (pronounced like “da zone”), an online sports streaming service that launched in the U.S. in September. Already an established carrier of multiple sports in Japan, Germany and Italy, DAZN is focusing on boxing in the U.S. for now, with an eye on the rights to other sports that are currently locked up by companies like ESPN.

“Just in terms of buying the most popular live events in this country, those rights are tied up for a long time,” he said. “I do run into my own deals very often in this new job ... I have no regrets. They were the right deals to do, and we’ll do the right deals to do now for a new service.”

Although he declined to share specific numbers, Skipper said DAZN already has more paying subscribers worldwide than any other streaming service, including ESPN+, which announced in September that it had one million. And he’s skeptical that, when the NFL broadcast rights next become available, tech monoliths like Google or Amazon will necessarily be the ones to scoop them up.

“Every time I hear that they’re inevitably coming, I believe that I hear some commissioner of some big league in the United States whispering into a reporter’s ear that they’re coming,” he said. “... To have only bidders, broadcast and pay and cable television companies — who are facing very, very significant issues with their two streams of revenue — to have them as your only bidders, I don’t think is a comfortable position for them to be in. They’d like new bidders. I think they would like DAZN to be a bidder.”

Digitimes : Global server shipments to fall 9% in 4Q18, says Digitimes Research

Global server shipments are forecast to fall 9% sequentially in the fourth quarter of 2018 due partly to the impact of the US-China trade war, Digitimes Research estimates.

Shipments rose only slightly to four million units in the traditional peak season in the third quarter, as buyers already had made significant purchases in the second quarter, and were less eager to place orders during the industry's transition to new platforms. The transition factor is seen to keep playing a role in affecting shipment performance in the fourth quarter, Digitimes Research's latest server tracker report shows.

The world's three major server vendors Dell, HPE and Super Micro all saw their shipments for the third quarter stay flat or decline slightly on quarter. But server shipments to large-size datacenters remained the major growth driver, posting a sequential increase of 11% in the quarter.

Shipments for the fourth quarter were originally estimated to see a significant sequential growth, but most major customers are expected to reduce their purchases in the fourth quarter to minimize the impact of the fast escalating US-China trade conflicts, which will result in a sequential drop of 9% in global server shipments, Digitimes Research indicates.

Nevertheless, global server shipments for the whole of 2018 will continue to grow, but at a lower-than-expected annual pace of 10.5%. Shipments are expected to remain in a low gear in the first quarter of 2019, but are likely to regain growth momentum in the second quarter.

WSJ : Saudi Arabia, OPEC’s Anchor, Ponders a Future Without the Cartel

Saudi Arabia, OPEC’s Anchor, Ponders a Future Without the Cartel
Kingdom, under pressure from U.S. and investors, researches possible impact of a breakup of oil producers’ group

Saudi Arabia’s top government-funded think tank is studying the possible effects on oil markets of a breakup of OPEC, a remarkable research effort for a country that has dominated the oil cartel for nearly 60 years.

The effort coincides with new pressures on the Saudi government, including from the U.S., where President Trump has accused the cartel of pushing up oil prices, and from investors who distanced themselves from the kingdom after the brutal killing of a U.S.-based Saudi journalist.

While the think tank’s president, Adam Sieminski, said the study hadn’t been triggered by Mr. Trump’s statements, a senior adviser familiar with the project said it provided an opportunity to take into account the criticism from Washington. Depending on the findings, the study could offer a defense of the cartel and the Saudi role in it.

The research project doesn’t reflect an active debate inside the government over whether to leave the Organization of the Petroleum Exporting Countries in the near term, according to people familiar with the matter.

Senior Saudi officials see the study as a high priority economic-policy inquiry, according to these people. Mr. Sieminski said he ordered the study, and that the analysis isn’t unusual and explores topics his researchers normally delve into.

The report is part of a wider rethinking among senior government officials in Saudi Arabia about OPEC, according to the people familiar with the matter. Officials are grappling with the assumption—shared increasingly in the oil industry—that oil demand will one day peak, the senior Saudi adviser said.

In this context, the study is seen among senior officials as an exercise in gaming out how markets might react if demand falls so much that OPEC loses sway and disbands, the adviser said.

For decades, Saudi Arabia and its fellow members have insisted the Organization of the Petroleum Exporting Countries is a crucial global economic institution—a forum by which big producers can mete out oil production to keep prices from getting too low or too high.

Critics have accused OPEC of manipulating oil prices at the expense of big oil-consuming economies such as the U.S., and Mr. Trump has been outspoken in his condemnation. A group of U.S. lawmakers has pushed legislation that would effectively label OPEC an illegal cartel.
The proposed legislation, dubbed NOPEC, has withered during several U.S. administrations. Backers have said they think it might fare better under Mr. Trump.

“The kingdom knows demand for oil won’t last forever…so you need to think past OPEC,” the senior adviser said. “You also have a NOPEC act being considered” in Washington.

While there is no debate in the Saudi government about disbanding OPEC soon, senior government officials have recently started to question the longer-term rationale for the cartel because of the clout that Saudi Arabia and Russia alone can have on markets, according to another senior Saudi adviser.

Those questions have grown as Russia has worked more closely with Saudi Arabia in recent years. Russia and a group of allied oil producers joined OPEC in a deal about two years ago to rein in oil production amid superlow prices. The combined group’s leverage over global production succeeded in lifting prices—so much so that the group more recently agreed to open the taps again to cool them off. The two sides are slated to meet again this weekend in Abu Dhabi.

Despite the impact on global markets, the closer coordination has upset some OPEC members, who have complained they are being sidelined by decision makers in Riyadh and Moscow.

Spokesmen for the Saudi government and energy ministry didn’t answer requests for comment.

The think tank, Riyadh-based King Abdullah Petroleum Studies and Research Center, or Kapsarc, bills itself as an independent research institution. Its staff advises dominant Saudi agencies such as Saudi Aramco and the Saudi energy ministry.

Mr. Sieminski said the study was building on previous research that looked at the role of OPEC’s spare capacity in stabilizing oil markets. The earlier work concluded that the absence of such a cushion “would lead to a more volatile price environment and be negative for the global economy,” he said.

The research project comes as Crown Prince Mohammed bin Salman, who has broad control running the kingdom, has pushed in several directions to reshape his country’s economy, society and its wider role in the world. Prince Mohammed pushed an initial public offering of a slice of Saudi Aramco, the country’s state owned oil company—an effort that people familiar with the matter say has since stalled.

The IPO plan was a pillar in what the crown prince has called a bigger plan to modernize the Saudi economy. He has pushed big investments in global technology and finance, while the country has tried hard to lure foreign investors into the kingdom.

Those plans have been complicated after Turkey reported the killing of dissident Jamal Khashoggi at the Saudi consulate in Istanbul, and later said Saudi officials “at the highest levels” were behind it. Saudi Arabia has claimed rogue elements killed Mr. Khashoggi, without the knowledge of the crown prince.

The OPEC study aims to “assess the short/medium-term consequences of a dissolution of OPEC,” according to an overview reviewed by The Wall Street Journal. It is intended to determine how the global oil market, and Saudi finances, would look “if coordination between oil producing countries disappear,” according to the overview.

The overview describes two scenarios to investigate, if OPEC isn’t in the picture: 1. All big oil producers, including Saudi Arabia, act competitively—fighting each other for market share; 2. Saudi Arabia, instead, attempts to leverage its massive oil output alone to help balance global supply and demand in an attempt to keep oil prices steady—similar to the role that members say OPEC plays today.

Two prominent Saudi government advisers, both central to the formation of the kingdom’s oil policy, are scheduled to meet researchers on the project weekly, according to the overview. Mr. Sieminski said contacts with the Saudi energy ministry were to provide data for the study.

The study comes at a time of particularly acute tensions inside OPEC, a fractious group on the best of days. Relations between longtime regional rivals Saudi Arabia and Iran, two of the group’s most important members, have spilled into oil-policy deliberations at the Vienna-based cartel.

Saudi Arabia is by far the most important OPEC member, accounting for more than 10 million barrels a day of the group’s collective 33 million barrels a day of output. Saudi Arabia’s oil minister has long presided over the group as its de facto head.

The kingdom has tended to play down publicly its leadership role, emphasizing what it and fellow members say is the group’s consensus-driven decision making process. That has given individual members, including Saudi Arabia, some degree of cover from critics.

U.S. sanctions targeting Iranian oil exports have inflamed recent OPEC debates, with Iran’s delegation accusing Riyadh of doing America’s bidding inside the cartel. Saudi Arabian officials have expressed exasperation at times at what they call Iran’s intransigence during what is supposed to be nonpolitical, oil-market debates.

>>> In Major Defeat For Trump, Judge Blocks Construction Of Keystone XL Pipeline

In Major Defeat For Trump, Judge Blocks Construction Of Keystone XL Pipeline
n a setback for the Trump administration, a federal judge in Montana temporarily halted construction of the Keystone XL oil pipeline late on Thursday on the grounds that the U.S. government did not complete a full analysis of the environmental impact of the TransCanada Corp project and failed to justify its decision granting a permit for the 1,200-mile long project designed to connect Canada’s tar sands crude oil with refineries on the Texas Gulf Coast. The ruling came in a lawsuit that several environmental groups filed against the U.S. government in 2017, soon after President Donald Trump announced a presidential permit for the project.
The judge, Brian Morris of the U.S. District Court in Montana, said President Trump’s State Department ignored crucial issues of climate change in order to further the president’s goal of letting the pipeline be built. In doing so, the administration ran afoul of the Administrative Procedure Act, which requires “reasoned” explanations for government decisions, particularly when they represent reversals of well-studied actions.
Morris wrote that a U.S. State Department environmental analysis “fell short of a ‘hard look’” at the cumulative effects of greenhouse gas emissions and the impact on Native American land resources. He also ruled the analysis failed to fully review the effects of the current oil price on the pipeline’s viability and did not fully model potential oil spills and offer mitigations measures.
However, the decision does not permanently block a pipeline permit. It requires the administration to conduct a more thorough review of potential adverse impacts related to climate change, cultural resources and endangered species. The court essentially ordered a do-over.
Morris, a former clerk to the late Chief Justice William Rehnquist, was appointed to the bench by President Obama.
* * *
The ruling is a victory for environmentalists, tribal groups and ranchers who have spent more than a decade fighting against construction of the pipeline that will carry heavy crude to Steele City, Nebraska, from Canada’s oilsands in Alberta.
“The Trump administration tried to force this dirty pipeline project on the American people, but they can’t ignore the threats it would pose to our clean water, our climate, and our communities,” said the Sierra Club, one of the environmental groups involved in the lawsuit, adding that “today’s ruling makes it clear once and for all that it’s time for TransCanada to give up on their Keystone XL pipe dream." The lawsuit prompting Thursday’s order was brought by a collection of opponents, including the indigenous Environmental Network and the Northern Plains Resource Council, a conservation coalition based in Montana.
On the other hand, the ruling was a major defeat for Trump, who attacked the Obama administration for stopping the project in the face of protests and an environmental impact study. Trump signed an executive order two days into his presidency setting in motion a course reversal on the Keystone XL pipeline as well as the Dakota Access pipeline.
In addition to the president, the ruling deals a major setback for TransCanada and could possibly delay the construction of the $8 billion, 1,180 mile (1,900 km) pipeline. It’s intended to be an extension of TransCanada’s existing Keystone pipeline, which was completed in 2013. Keystone XL (the initials stand for “export limited”) would transport up to 830,000 barrels of crude oil per day from Alberta, Canada, and Montana to Oklahoma and the Gulf Coast. In the U.S., the pipeline would stretch 875 miles through Montana, South Dakota and Nebraska, with the rest continuing into Canada.
Trump supported building the pipeline, which was rejected by former President Barack Obama in 2015 on environmental concerns relating to emissions that cause climate change. Trump said the project would lower consumer fuel prices, create jobs and reduce U.S. dependence on foreign oil.