WWD : Is the Gucci Formula the Way Forward for Big Brands?

Is the Gucci Formula the Way Forward for Big Brands?
The luxury power couple is back, although it's hard to find hot combinations of commercial and creative chiefs.

To Gucci, or not to Gucci?

There is much change in store for the fashion world in 2018, and still so many questions: Burberry and Céline are on the hunt for new creative chiefs, and it’s still unclear whether Kim Jones will leave Louis Vuitton to join Versace. Sources speculate that Hedi Slimane could take the top job at Dior, but only if he can control 100 percent of the product, including beauty and fragrance.

Pucci, Moncler and Courrèges are all still designer-less, while the fate of maison Alaïa remains unclear following the designer’s death in November. The brand’s next ready-to-wear and accessories collections will be presented in January and March, although the question marks continue to hover. Does the house of Alaïa even need a new designer, or can it streak ahead on the powerful engines of its archives?


There is one overarching question, though, that luxury group principals will increasingly be asking themselves in the year ahead, and that’s the Gucci one: Can they — or should they — replicate the power couple magic of Marco Bizzarri, the brand’s chief executive officer, and Alessandro Michele, its creative director?

“It’s all about couples,” said Davide Dallomo, founder and president of the creative talent and management agency Lagente. “It is really important nowadays to have a creative director who is practical, and a ceo who is creative.”

Given Gucci’s skyrocketing growth over the last few years, financial analysts would argue the same (some say that professional threesomes work even better, with the addition of a chief merchant to the mix) in a moment when the market is flooded with merch and populated by shrewd consumers.

“There was a time when supply was low, you could be a creative director in your ivory tower, invent something and enjoy great success. You thought this was because you were a genius. Maybe,” said Exane BNP Paribas in an October report called “The Strategic Perspective on Luxury Goods.”

“In a crowded market and a faster innovation environment, there is a smaller space for isolated genius and top-down dictators. Genius has to be nurtured by market intelligence and empowered by execution. The creative director, the chief merchandising officer and the ceo have to be on the same page and work toward the same goal.”

That’s one reason why rumors have been churning for so long about Phoebe Philo going to Burberry, where Marco Gobbetti has just taken up the role of ceo. Philo and Gobbetti have already proven themselves a powerful team, having catapulted Céline’s sales to nearly a billion euros when Gobbetti was ceo and Philo creative chief of the buzzy brand.

Despite the ongoing speculation, however, it’s unclear whether that dream will come true since sources have said that Philo has no intention of jumping to Burberry.

Mary Gallagher, European associate for New York-based search firm Martens & Heads, said of the Gobbetti/Philo team that the combination of “an extremely strong ceo and an extremely creative and powerful female designer was just an incredible match. The kind of match that in future years will be benchmarked, in the way people talk today about Tom Ford and [former president and ceo of Gucci Group] Domenico De Sole.”

The idea of the powerhouse fashion couple isn’t a new one; it just fell out of fashion for a while when a generation of lone-wolf designers took over at some of the big houses. Imitating Gucci’s strategies isn’t a new concept, either. In the Nineties, when dusty old Gucci was owned by Investcorp, Dawn Mello, Ford and later, De Sole were so successful in reviving the house that other heritage brands — like Burberry — aspired to “do a Gucci” and reclaim their cool.

While the new Gucci may be going from strength to strength — third-quarter sales were up 49.4 percent versus analysts’ estimates of 30 percent — not every company is going to have the opportunity or the guts to test the latest power couple template.

Bizzarri, already a star at Kering, gambled on the relatively unknown Michele, a Gucci veteran and the accessories designer under former creative director Frida Giannini. His discovery of such a star designer already in-house has spurred other brands to look inward, too.


Principals at LVMH Moët Hennessy Louis Vuitton are said to be interviewing “number-two” designers at a wide swath of fashion houses for the Céline job, and sources believe Michael Rider, who’s been working closely with Philo as design director rtw at Céline, is a strong candidate.

Yet one headhunter, who spoke on condition of anonymity, said LVMH “is very rarely tempted by a number-two designer,” preferring a splashy name instead, which some would argue is a shame. Another headhunter said that if LVMH were to choose Rider, “Céline would continue with the DNA of Phoebe,” but with no frisson or freshness.

It’s not just the hot ceo/creative combination that’s going to make or break a brand: Principals also have to think about creating a team that can set social media on fire, appeal to Millennials and remain authentic to a brand’s DNA. Then, of course, there’s the challenge of China, a market that needs to be handled with care.

According to a Bernstein report from November, brands are still seeing diverging momentum in Greater China and the trend is set to continue into 2018.

“For soft luxury, Gucci, LV, YSL, Moncler, Balenciaga and Fendi continue to power ahead; Hermès, Chanel, Ferragamo and Prada are flattish while Céline, Givenchy, Burberry and BV are sluggish,” the report said, adding that the winners will be leather goods companies that “innovate and introduce entry price products to gain an edge with Chinese consumers.”

Gucci has already dropped the price of some of its footwear, with certain styles now costing less than comparative styles from competitors such as Miu Miu, Prada and Dolce & Gabbana, proof that the Italian brand is blazing a trail into the future — once again.

WWD : DVF’s Goals for 2018: Selling a Stake and Hiring New Creative Chief

DVF’s Goals for 2018: Selling a Stake and Hiring New Creative Chief
Last month, DVF revealed she was interested in selling all or part of her company and a week later that her chief creative officer Jonathan Saunders had resigned.

Diane von Furstenberg has entered a new year that could bring lots of changes to her contemporary sportswear business.

Last month, DVF revealed she was interested in selling all or part of her company and a week later that her chief creative officer Jonathan Saunders had resigned. All this is on top of the fact that her business has been without a chief executive officer for more than a year.

Von Furstenberg said of looking for a potential investor that “2018 will be the year in which we will be able to attract the best expertise and leadership to protect the legacy of the brand and make sure DVF is relevant in this disruptive moment of the industry.”

The designer revealed she would hire Michel Dyens & Co., a leading independent investment banking firm, headquartered in New York and Paris, which focuses on mergers and acquisitions, to sell a stake in the business. Dyens has extensive experience leading transactions in luxury goods, beauty, spirits and other premium brand consumer goods. In fact, Dyens worked with DVF some 35 years ago when she sold her cosmetics company to British pharmaceutical giant Beecham Group Ltd. in 1983.


“My goal in the next phase of my life is to focus on my commitment to women’s causes,” von Furstenberg, 70, said last month. She acknowledged that over the years, the brand has been cleaned up and shrunk a bit in volume.

She also revealed that she planned to bring back Paula Sutter, president of DVF Studio LLC from 1999 to 2013 and a highly regarded executive, as a member of the board of directors after the first of the year.

Meanwhile, the search continues for a successor to Saunders, who it is understood didn’t want to renew his contract. He had served in the role since May 2016 and was responsible for all product categories, store design, web site design, a new corporate brand identity and marketing, including advertising campaigns. The company is also in need of a ceo following Paolo Riva’s departure in November 2016. He was brought in as “an heir, somebody to take it on for the next decades,” von Furstenberg said at the time, and lasted 18 months. Since that time, DVF’s family has become more involved in the company.

Karen Harvey, ceo of Karen Harvey Consulting Group, doesn’t think there would be a problem finding an investor when the company doesn’t have a ceo or chief creative officer. “Uniquely, she [DVF] could find that [investment] partner with or without that ceo or the creative director. She would clearly be bringing those people in within a short period of time,” Harvey said.

In an interview last month, DVF said she has been “overwhelmed by private equity people who want to participate and are showing what types of expertise they can offer.”

“With that you also get ceo’s, experts and leadership that this brand, at this point, deserves,” von Furstenberg said. “We need to have an investor so that there is a discipline that is created with leadership and strategy, and it has to be a new strategy.”

She said in December that the company would be naming Saunders’ successor “in a month,” and that there’s a team in place. “I want to make sure that I make the right decision,” she said. Saunders’ last collection for DVF was his pre-fall lineup, inspired by Michelangelo Antonioni’s “Zabriskie Point.”

As for how involved her family is in the business, she said, “[They’re] very involved because my son [Alexander] and I are the ones who put the money in it. We will have new money and then those people will be involved. I’m not selling the company. I’m looking for new investment. The reason why I’m doing that is not only to bring money but leadership, expertise and discipline.”

Allan Ellinger, cofounder and senior managing partner of Marketing Management Group, said, “I can see her doing a joint venture with a company or a strategic relationship. Given who she is, and who her husband is [Barry Diller] and the relative importance of the family name, I don’t see why she would even sell a piece of it.” He added that there’s a heritage to the brand name.


Ellinger said there isn’t a fashion business that doesn’t hit a brick wall at some point.

Gary Wassner, ceo of Hilldun Corp., said, “It’s a heritage brand and it has great respect globally. I think it [selling a stake] is a good idea because Diane has other things she wants to focus on. I think it’s probably frustrating for her not finding the right creative director. That’s been a challenge. I think the brand has great global reach, great global recognition. It’s probably the right time.”

Further, he noted, “I think the potential for the brand is really significant. The fact that it’s struggling now should not be an impediment because the brand has such strong value.”

Asked who could be a potential buyer, Wassner said, “The Chinese are so active today. They’re buying and buying and buying. It resonates globally and has a global retail footprint. They’ll probably find quite a bit of interest from Chinese private equity.”

One financial source, who requested anonymity, said, “While DVF is saying she is selling a stake, the belief is that she would prefer to sell the entire company.” The source didn’t know who would buy it, but said DVF has been thinking about it for several months. This individual acknowledged that the business hasn’t been doing well.

“DVF has been putting money into the company since Joel Horowitz [former vice chairman] left and apparently doesn’t want to do it anymore,” the source said.

The source said volume has declined since Horowitz left the company, but this person also believes that a number of missteps were made during his tenure, such as letting Sutter go and opening stores when the business was heading downward. This person, as well as other market sources, also said a problem for anyone looking to buy it is that von Furstenberg can be very demanding.

Meantime, another source said, “She has no need for the money and would be embarrassed to sell it for too little. It’s a tough sale. It’s her child.”

WWD : What to Watch: Ralph Lauren’s 2018 Game Plan Focuses on China, Digital and

What to Watch: Ralph Lauren’s 2018 Game Plan Focuses on China, Digital and Wholesale Improvements
Expansion in China, a new e-commerce platform, evolving the product, increasing marketing spend and growing its international presence are key initiatives in 2018.

As Ralph Lauren Corp. prepares to celebrate its 50th anniversary this year, the company continues to make progress on its turnaround plan.

Under chief executive officer Patrice Louvet, who joined from Procter & Gamble in July, China remains a top priority. The company looks to build its Chinese business, which represents the most significant geographic growth opportunity for the brand. Other major initiatives this year include further developing its new e-commerce platform; evolving the product; increasing the marketing spend significantly to tell the brand’s story and appeal to a new generation of consumers, and growing its international presence.

In its most recent quarter ended Sept. 30, Lauren posted net income of $143.8 million on net revenues of $1.66 billion. In disclosing second-quarter results in November, Louvet said the focus on driving “efficiencies” will continue through the rest of the [fiscal] year,” and “we are on track to deliver our full-year targets.”

Over the past two years, Lauren has elevated the brand in Asia and built a strong foundation there by improving quality of sales and overall profitability, Louvet told analysts during November’s call. Interestingly, only 13 percent of the company’s overall business is conducted in the region.

In fiscal 2017, the company generated about $50 million of revenue in Mainland China, which represents less than 1 percent of company’s total revenue, he said. Based on Millward Brown Vermeer data, Polo’s brand awareness in Mainland China is 83 percent. “This is a significantly higher figure than many of our competitors which have greater penetration than us in China. We will drive growth through both increased marketing and distribution, both online and with physical stores,” said Louvet in November.

Among developments to expect in 2018? Lauren will continue to tailor social content to the Chinese consumer and dress many Chinese celebrities with social followings nearing one billion in total. In the brand’s second quarter, Lauren successfully launched on Tmall and JD.com and with social commerce on WeChat. Coinciding with these digital moves is an expansion of its fleet of physical stores in China. In November, Louvet said the company has opened 15 smaller-format stores year-to-date in Mainland China and by the end of fiscal 2018, expects to have 60 stores on the Mainland.

Interestingly, there’s higher demand for more fashion-forward merchandise and a higher accessories penetration rate in China compared to other geographies. In taking into account Hong Kong, Macau and Taiwan, Lauren’s goal for Greater China is to reach almost $500 million in revenues in five years from about $170 million in fiscal 2017, driven by both comp growth and new distribution in China.

Part of Ralph Lauren’s North American problem has been the brand’s heavy presence in outlet stores. In an effort to improve quality of sales and distribution at the company, Lauren has been reducing shipments to off-price channels and has also cut back wholesale distribution to department stores.

Jane Hamilton Nielsen, chief financial officer, told analysts during November’s call that the group continues to execute the plan to return to profitable growth in North America — its most challenging market right now. Nielsen said she expects the wholesale business to end the fiscal year at the same range it was in the second quarter, which is down 22 percent. She said she looks for the clean-up to continue through the third and fourth quarters of the fiscal year. Global wholesale will be down in the midteens for the fiscal year.

Among the moves the company has made to address weak underlying demand in the North American wholesale business is evolving the product and marketing, and investing in its wholesale store environments to improve the consumer experience. In North America, the company looks to refurbish its own store environments, beef up marketing, especially on the digital site, and do a better job telling its story in the U.S. While there’s no plan in place for more store closures, the company expects to look at all distribution channels and every single store to assess their viability.


As for product, Lauren has been focusing on its icons, renewing core items and aiming to inject excitement with seasonal twists and limited editions, which will continue. Last November the company introduced a digital-first, on-demand customization experience at its Prince Street store in Manhattan, allowing consumers to create their own Custom Crewneck Sweater. The sales figures were very promising and the company is looking into replicating it going forward.

WWD reported in November that Lauren was restructuring its advertising department to put greater emphasis on digital. As a way to appeal to a new generation, the plan calls for digital-first campaigns with new ways to tell the company’s story on the platforms that matter most to consumers.

Lauren’s marketing spend was down in the first half of the fiscal year, “but it’s going to be up significantly in the second half, around double digits in the third quarter, but up significantly in the fourth quarter as we really believe marketing and telling our story is a great opportunity for us and a great opportunity to really get back to telling our story to position us for growth,” said Nielsen.

In the directly operated e-commerce business, where comps were down 18 percent in the second quarter, the company has been aggressively reducing promotional activity to both ensure price coherence across its channels and enhance the overall brand and shopping experience for its digital consumers.

Market experts believe Lauren is making the right moves.

Asked whether he believes Ralph Lauren can successfully turn the business around, Gary Wassner, ceo of Hilldun Corp., said, “Yes, some brands are so strong, and they’ve just got a little bit diluted over the years. They need to recapture their essence, and I think Ralph and the company can do that. It’s one of the most valuable trademarks in the world. It’s a matter of redefining who they are for today’s consumer. It’s a very loved brand.”

Allan Ellinger, cofounder and senior managing partner of Marketing Management Group, added, “I think it has the potential to turn around. Ralph’s smart, he’s surrounded by smart people. He might have to shrink it to go bigger. Look at what Coach did. These guys are public. They have to be able to swallow the bad medicine and focus on the long-term prospects instead of the short-term losses.”

>>> US Early premarket gappers

Early premarket gappers
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>>> INTC/AMD : design flaw in Intel's processor chips could Weight on INTC +AMD

http://bit.ly/2CzuDI0 Link to article

A fundamental design flaw in Intel's processor chips has forced a significant redesign of the Linux and Windows kernels to defang the chip-level security bug.

Programmers are scrambling to overhaul the open-source Linux kernel's virtual memory system. Meanwhile, Microsoft is expected to publicly introduce the necessary changes to its Windows operating system in an upcoming Patch Tuesday: these changes were seeded to beta testers running fast-ring Windows Insider builds in November and December.

Crucially, these updates to both Linux and Windows will incur a performance hit on Intel products. The effects are still being benchmarked, however we're looking at a ballpark figure of five to 30 per cent slow down, depending on the task and the processor model. More recent Intel chips have features – such as PCID – to reduce the performance hit. Your mileage may vary.

Similar operating systems, such as Apple's 64-bit macOS, will also need to be updated – the flaw is in the Intel x86-64 hardware, and it appears a microcode update can't address it. It has to be fixed in software at the OS level, or go buy a new processor without the design blunder.

Details of the vulnerability within Intel's silicon are under wraps: an embargo on the specifics is due to lift early this month, perhaps in time for Microsoft's Patch Tuesday next week. Indeed, patches for the Linux kernel are available for all to see but comments in the source code have been redacted to obfuscate the issue.

However, some details of the flaw have surfaced, and so this is what we know.

Impact

It is understood the bug is present in modern Intel processors produced in the past decade. It allows normal user programs – from database applications to JavaScript in web browsers – to discern to some extent the layout or contents of protected kernel memory areas.

The fix is to separate the kernel's memory completely from user processes using what's called Kernel Page Table Isolation, or KPTI. At one point, Forcefully Unmap Complete Kernel With Interrupt Trampolines, aka FnCKWIT, was mulled by the Linux kernel team, giving you an idea of how annoying this has been for the developers.

Whenever a running program needs to do anything useful – such as write to a file or open a network connection – it has to temporarily hand control of the processor to the kernel to carry out the job. To make the transition from user mode to kernel mode and back to user mode as fast and efficient as possible, the kernel is present in all processes' virtual memory address spaces, although it is invisible to these programs. When the kernel is needed, the program makes a system call, the processor switches to kernel mode and enters the kernel. When it is done, the CPU is told to switch back to user mode, and reenter the process. While in user mode, the kernel's code and data remains out of sight but present in the process's page tables.

Think of the kernel as God sitting on a cloud, looking down on Earth. It's there, and no normal being can see it, yet they can pray to it.

These KPTI patches move the kernel into a completely separate address space, so it's not just invisible to a running process, it's not even there at all. Really, this shouldn't be needed, but clearly there is a flaw in Intel's silicon that allows kernel access protections to be bypassed in some way.

The downside to this separation is that it is relatively expensive, time wise, to keep switching between two separate address spaces for every system call and for every interrupt from the hardware. These context switches do not happen instantly, and they force the processor to dump cached data and reload information from memory. This increases the kernel's overhead, and slows down the computer.

Your Intel-powered machine will run slower as a result.
How can this security hole be abused?

At best, the vulnerability could be leveraged by malware and hackers to more easily exploit other security bugs.

At worst, the hole could be abused by programs and logged-in users to read the contents of the kernel's memory. Suffice to say, this is not great. The kernel's memory space is hidden from user processes and programs because it may contain all sorts of secrets, such as passwords, login keys, files cached from disk, and so on. Imagine a piece of JavaScript running in a browser, or malicious software running on a shared public cloud server, able to sniff sensitive kernel-protected data.

Specifically, in terms of the best-case scenario, it is possible the bug could be abused to defeat KASLR: kernel address space layout randomization. This is a defense mechanism used by various operating systems to place components of the kernel in randomized locations in virtual memory. This mechanism can thwart attempts to abuse other bugs within the kernel: typically, exploit code – particularly return-oriented programming exploits – relies on reusing computer instructions in known locations in memory.

If you randomize the placing of the kernel's code in memory, exploits can't find the internal gadgets they need to fully compromise a system. The processor flaw could be potentially exploited to figure out where in memory the kernel has positioned its data and code, hence the flurry of software patching.

However, it may be that the vulnerability in Intel's chips is worse than the above mitigation bypass. In an email to the Linux kernel mailing list over Christmas, AMD said it is not affected. The wording of that message, though, rather gives the game away as to what the underlying cockup is:

AMD processors are not subject to the types of attacks that the kernel page table isolation feature protects against. The AMD microarchitecture does not allow memory references, including speculative references, that access higher privileged data when running in a lesser privileged mode when that access would result in a page fault.

A key word here is "speculative." Modern processors, like Intel's, perform speculative execution. In order to keep their internal pipelines primed with instructions to obey, the CPU cores try their best to guess what code is going to be run next, fetch it, and execute it.

It appears, from what AMD software engineer Tom Lendacky was suggesting above, that Intel's CPUs speculatively execute code potentially without performing security checks. It seems it may be possible to craft software in such a way that the processor starts executing an instruction that would normally be blocked – such as reading kernel memory from user mode – and completes that instruction before the privilege level check occurs.

That would allow ring-3-level user code to read ring-0-level kernel data. And that is not good.

The specifics of the vulnerability have yet to be confirmed, and this discussion of its severity is – aptly enough – speculation, but consider this: the changes to Linux and Windows are significant and are being pushed out at high speed. That suggests it's more serious than a KASLR bypass.

Also, the updates to separate kernel and user address spaces on Linux are based on a set of fixes dubbed the KAISER patches, which were created by eggheads at Graz University of Technology in Austria. These boffins discovered [PDF] it was possible to defeat KASLR by extracting memory layout information from the kernel in a side-channel attack on the CPU's virtual memory system. The team proposed splitting kernel and user spaces to prevent this information leak, and their research sparked this round of patching.

Their work was reviewed by Anders Fogh, who wrote this interesting blog post in July. That article described his attempts to read kernel memory from user mode by abusing speculative execution. Although Fogh was unable to come up with any working proof-of-concept code, he noted:

My results demonstrate that speculative execution does indeed continue despite violations of the isolation between kernel mode and user mode.

It appears the KAISER work is related to Fogh's research, and as well as developing a practical means to break KASLR by abusing virtual memory layouts, the team may have somehow proved Fogh right – that speculative execution on Intel x86 chips can be exploited to access kernel memory.
Shared systems

The bug will impact big-name cloud computing environments including Amazon EC2, Microsoft Azure, and Google Compute Engine, said a software developer blogging as Python Sweetness in this heavily shared and tweeted article on Monday:

There is presently an embargoed security bug impacting apparently all contemporary [Intel] CPU architectures that implement virtual memory, requiring hardware changes to fully resolve. Urgent development of a software mitigation is being done in the open and recently landed in the Linux kernel, and a similar mitigation began appearing in NT kernels in November. In the worst case the software fix causes huge slowdowns in typical workloads.

There are hints the attack impacts common virtualisation environments including Amazon EC2 and Google Compute Engine...

Microsoft's Azure cloud – which runs a lot of Linux as well as Windows – will undergo maintenance and reboots on January 10, presumably to roll out the above fixes.

Amazon Web Services also warned customers via email to expect a major security update to land on Friday this week, without going into details.

There were rumors of a severe hypervisor bug – possibly in Xen – doing the rounds at the end of 2017. It may be that this hardware flaw is that rumored bug: that hypervisors can be attacked via this kernel memory access cockup, and thus need to be patched, forcing a mass restart of guest virtual machines.

A spokesperson for Intel was not available for comment.

WWD : Tapestry, Michael Kors: Destined to Be Competitors on M&A Front

Tapestry, Michael Kors: Destined to Be Competitors on M&A Front
Both firms are building out their brand portfolios.

First it was the handbag wars. Now the race is on in the U.S. to see who gets to build the better brand empire.

Such is the shift in business model for both Tapestry Inc. and Michael Kors Holdings Ltd. The two made acquisitions last year and each firm is expected to continue foraging for brand additions to their growing stables in 2018. Of immediate concern is the integration of the new acquisitions, as well as the pay down of debt. That could suggest no deals for at least the first half of the year, and likely not even the third quarter. But since quality brands come up for sale infrequently, and sometimes the smaller deal presents greater growth opportunities, their current mind-set of waiting a bit could change should the right opportunity present itself.

With an evolving model that now includes two acquisitions under its belt, the former Coach Inc. outgrew its monobrand moniker and transitioned to Tapestry Inc. in October. Its first acquisition was in 2015, paying $574 million for the Stuart Weitzman footwear brand. That was followed last year by the $2.4 billion deal for accessories competitor Kate Spade & Co. With Victor Luis heading up corporate, the company named Joshua Schulman president and ceo of the Coach brand in June. The brand itself has been undergoing a successful transformation as creative director Stuart Vevers has been working on the more design elevated, higher-end 1941 Collections line.

Luis, chief executive officer of Tapestry, said at the time of the name change that the company had already been considering the move a few years ago after it acquired Weitzman. Going ahead with it was indicative of the firm’s shift in business model mind-set, and that it was serious about transforming into an American holding conglomerate of accessible luxury brands — each with its own platform, as well as distinctive personality and positioning in the marketplace.

But in buying Kate Spade, Tapestry also signaled what it might be looking for in future deals. No surprise that high on the list is a brand that could take advantage of Tapestry’s now-extensive leather goods sourcing network on the backend.

What the group can learn from additional acquisitions also seems to be high on the agenda. The company learned much about designing and producing footwear from Weitzman, and eventually took back the Coach footwear license to produce in-house. Kate Spade has a number of licenses that Tapestry is likely reviewing, and these eventually could serve as a roadmap for select Coach brand licenses.

With the Kate Spade transaction, and given its aim to expand its portfolio, one can glean that Tapestry is likely looking at firms that can help further its new focus on lifestyle and modern luxury, as well as expand further into other regions.

Luis told WWD in an interview after the Kate Spade deal was disclosed, “Lifestyle is perhaps one of the most important [factors] because it speaks to our vision for [Tapestry Inc.] and what our group of companies represent.”

The ceo noted that also important is how the company defines modern luxury, adding that “how we define it for ourselves is about quality and great design, while at the same time offering the customer an emotional experience through great brands, its history and narratives. Modern for us is different from the traditional European groups. [For us] it’s about being inclusive, not exclusive based on price. It is not based on a country of origin, [nor] is it made in any specific market as traditional luxury brands are.”

Given that great premium brands take time to build the requisite emotional connection with consumers, expect Tapestry to scout around for brands that have a proven track record of connecting with their targeted consumer base, as well as those that fit the group’s definition of luxury, whether here or abroad.

Over at Kors, its number-one priority — the result of the $1.35 billion acquisition of Jimmy Choo, its first-ever — is to pay down the term loan “rapidly,” suggesting it is already on the hunt for more brands to grow its portfolio.


Kors ceo John Idol, at a Morgan Stanley Global Consumer and Retail Conference last month, admitted as much in explaining the goal of paying down the debt: “We’re going to do that very rapidly and then we will be in an incredible position again with the balance sheet that’s [got] very, very little leverage on it — and so we’re prepared to do something of size and scale, and we have the means and the wherewithal to do that.” The company produces cash flow of $1 billion annually, and has access to a $1 billion revolving credit facility.

Idol said of the credit facility, “It’s there for us to use so we can make sizable acquisitions even on our existing financing structure, not having to even go to the debt market if we don’t need to.”

When Kors revealed its deal for Jimmy Choo back in July, Idol told WWD that the company is “creating a global luxury fashion group,” with a focus on “international fashion luxury [brands] that are industry leaders.”

Wall Street analysts have noted that the Choo brand gave Kors an automatic “in” at the super high-end luxury level on a global scale. And Idol himself has noted on conference calls to Wall Street after posting quarterly earnings results that the company is not interested in brands in need of a turnaround.

Perhaps that’s because its core Michael Kors brand is still in need of some turning around. The company has followed the Coach brand’s lead in pulling back on department store promotions and — as Idol promised to Wall Street analysts in conference calls — it has begun to introduce some product innovations in its merchandise offerings. But its core business in handbags — similar to the same pressures faced by the Coach and Kate Spade brands — remains challenged due to issues in the North American market. Adding to the problem is the lackluster fashion watch sector.

For now, Idol and his management team are busy executing on their Runway 2020 plan, which is focused on increasing new offerings, and growing its digital and social media base. The early read on the Runway 2020 initiative — based on second quarter results in November — seems promising, helped in part by the continued pull back on promotions at the department store level.

So if Kors is looking for another Jimmy Choo at the global, high-end luxury category, and one that’s not in need of any fixing to boot, what’s really left for acquisition?

According to Idol at the Morgan Stanley presentation, “The bigger issue is going to be to be finding the target….We want to buy companies that have great quality and actually have high levels of recognition outside of the U.S. market. We don’t view the U.S. market as the high-growth engine for whatever brand we would acquire. We will actually probably say Asia first, Europe second and North America third.”

With both Tapestry and Kors looking for brands that are industry leaders, and each not limiting themselves solely to any one particular geographic market, the two are likely destined to be competitors in their quest for the next big deal.

WSJ : Car Sales to Top 90 Million Globally for First Time

Car Sales to Top 90 Million Globally for First Time
Results fueled by rebounds in Western Europe and emerging markets such as Brazil and Russia

Global sales of passenger cars and trucks likely surpassed 90 million for the first time in 2017, the latest indicator that demand for conventional automobiles remains strong even as driverless cars and ride sharing get increasing attention.

The results, based on preliminary data provided by WardsAuto.com, were fueled in part by a continued rebound in Western Europe and recovery in major emerging markets, including Brazil and Russia. Asian buyers are the main engine for sales growth with more than a quarter of the cars sold last year going to Chinese customers, up from less than 15% a decade ago.

The North American market is the world’s most profitable for auto makers, but American dealership traffic has slowed after several years of momentum. Analysts expect U.S. sales in 2017 to fall short of a record 2016 and are bracing for production cuts in the first quarter of this year amid further slowdown. December’s U.S. sales are due out Wednesday.

Global demand remains robust, however, with 2017’s relatively modest 2.7% growth estimate far outpacing population growth. WardsAuto.com says world vehicle sales have grown at an average annual pace of 4.1% since 2009, higher than the 1.2% population growth over the same period, according data provided by the World Bank.

The total number of vehicles in use globally topped 1 billion for the first time in 2009. That number has grown by another third in the years since, according to Wards.


The auto industry’s growth poses challenges for regulators already struggling to make increasingly congested roads safer and cleaner. Even as car companies and tech giants say autonomous cars, electric vehicles and sharing services are a way to reduce emissions and traffic deaths, governments around the world are trying to spark demand for electric cars. And the most-recent data shows highway fatalities are climbing.
Officials in China and lawmakers in the U.S.—the world’s two biggest markets—last month extended or preserved tax breaks aimed at electric cars, which represent less than 1% of global production and sales, according to IHS Markit. Officials in certain European cities and countries, meanwhile, have said they aim to ban sales of conventional combustion-engine cars in years to come.
Significant growth for electric cars remains at least five years away due to battery-range concerns and cost barriers, said Dave Zoia, director of content at WardsAuto.com. Car companies are expected to launch a spate of partial or fully electric cars by 2025 as development costs ease and charging infrastructure expands.
Government officials boosted efforts to increase EV sales via tax breaks and other incentives about a decade ago, a time when high gasoline prices and a weak U.S. economy played a hefty role in slowing global sales. Tesla Inc. and a handful of rivals have increased overall sales of battery-powered cars since then, but the increases have been overshadowed by stronger demand for conventional cars.

Global light-vehicle sales, which exclude commercial units, have surged since the U.S. financial crisis as Western Europe and North America returned to levels hit before the U.S. recession and Euro Crisis. Income growth in emerging markets, meanwhile, has created a growing class of first-time buyers and used-car shoppers in Asia.

Some of the fastest-growing auto makers in the world are based in China, including Chery Automobile Co., Guangzhou Automobile Group Co. , SAIC Motor Corp. and Zhejiang Geely Holding Group Co.
SAIC in 2016 sold 285,803 vehicles, a 115% increase compared with the previous year, and Geely’s sales rose 28% to more than 1.1 million vehicles in 2016, according to WardsAuto.com.
“China is still a strong market and still a growing market,” said Mr. Zoia of WardsAuto.com. “It’s hit the next level where all the growth isn’t coming from first-tier cities. It’s expanding to second- and third-tier cities.”
As roads become more congested, they are also getting deadlier. Globally, more than 1.25 million people die each year because of road-traffic crashes, according to the World Health Organization, with more than 90% of the fatalities occurring in low- and middle-income countries where sophisticated safety gear isn’t as readily available.

Even as cars in mature markets are loaded with the latest features to assist drivers—such as lane-keeping aids and automatic braking—traffic fatalities in the U.S. had an unexpected spike recently. More than 37,000 traffic fatalities are estimated to have taken place on U.S. roads in 2016, according to the National Highway Traffic Safety Administration.
An estimated 18,680 people were killed on U.S. roads in the first half of 2017, according to the National Safety Council. Although that is 1% lower than deaths in the first half of 2016, it is 8% higher than the 2015 first-half estimate.
Auto makers and tech giants—spanning from General Motors Co. to Uber Technologies Inc. to Alphabet Inc. —are working on driverless-car technology aimed at reducing or eliminating traffic fatalities. But those projects remain in initial phases. Mr. Zoia said adoption of autonomous vehicles will be “slower and more limited,” with sales of fully autonomous vehicles at the retail level “a ways away.”

>>> Crypto-boom boosts Plus500

Plus500, the online spreadbetting company, said it expected full year profits to beat market expectations thanks to growing interest in its cryptocurrency-based derivatives, despite a looming regulatory clampdown expected to come into force early this year.

In a post-close trading update, Plus500, which is listed on London’s Aim market, said that “strong momentum” in trading meant the company reported record revenues in the final quarter, while full-year revenues and profits will likely beat market expectations. It attracted a record of around 246,000 new clients in 2017, it added, up from 104,432 last year.

This was driven by “strong volumes” in its cryptocurrency derivatives, which it introduced in 2013 but have grown in popularity recently among punters looking for ways to bet on soaring prices. Bitcoin, the most popular, has more than tripled in value over the past three months.

Both EU and UK regulators flagged the “significant risks” associated with leveraged trading of cryptocurrency-based derivatives recently, highlighting the volatility of digital currencies and immaturity of the marketplace. Plus500 said it remained “focused on risk management”.

More broadly, the online retail trading sector faces tough new regulations originating from Europe that are expected to come into force early next year and hit firms’ revenues.

Asaf Elimelech, chief executive, said:

We are pleased to announce another strong period in both revenues and profits. Momentum in the business has continued to be strong with increased interest in our crypto currency CFD offering and record new and active customer numbers, demonstrating our ability to serve our customers’ trading needs through product innovation and technology leadership.

>>> DSM intends to make acquisitions

DSM intends to make acquisitions

The Dutch health, nutrition and materials company DSM [AMS:DSM] wants to do acquisitions, DSM CEO Feike Sijbesma told the Dutch daily Het Financieele Dagblad in an interview.

Sijbesma said that after a few quiet years, his company is now ready to do small and large acquisitions, explaining that this could be acquisitions in the field of nutrition, as well as acquisitions in the field of materials. Names of possible targets were not mentioned.

Sijbesma said that DSM now has a large sum of money on its balance and low debts, which gives the company the opportunity to acquire other companies. Unnamed analysts told Het Financieele Dagblad that DSM has at least EUR 3bn available for acquisitions.

Sijbesma also said that DSM is working on a strategic update which will be announced in the second quarter of this year. Without willing to go into too much details, the CEO explained that all options are on the table. A possible option is a split up of the company.

Unnamed analysts said that it’s very well possible that DSM decides to split the materials division of from the main company. Sijbesma said that the materials division is doing very well and that he sees a lot of growth potential in it.