TheChek News Flow

Hedge fund manager opens bet on CEFs to investors, but risks are rising

The man who harpooned the London whale is spearfishing in another obscure area of the financial markets these days — and now he is inviting ordinary investors to join him in the sport.

Boaz Weinstein, the New York hedge fund manager, is planning to launch an exchange-traded fund that will invest in closed-end funds, publicly traded US investment vehicles whose shares have looked mispriced for most of the past three years. Is he launching too late?

You may remember that Mr Weinstein made a big splash in 2012 when he took the other side of outsized derivatives trades placed by JPMorgan prop trader Bruno Iksil. Those trades were so ill-advisedly large that they earned Mr Iksil the nickname “London whale” and ended up costing his bank $6bn in losses, as well as netting Mr Weinstein a tidy return.

CEFs are small fish by comparison, rarely more than $500m in market capitalisation, but there is a reason they caught Mr Weinstein’s attention. Their shares are so illiquid, they can often trade at very large discounts to the value of the underlying assets, which in many cases are just the sort of high-yield bonds, loans and other securities that Mr Weinstein knows well.

Through his hedge fund Saba Capital, he has spent the past couple of years buying CEF shares and urging their managers to do something to narrow the discount. So prolific has he become, he might reasonably claim to be partly responsible for the narrowing of the average discount in the sector.

Take the Franklin Limited Duration Income Trust, for example. When Saba took a 14.5 per cent stake in the fund last March, it was trading at an 11 per cent discount to its credit portfolio, leading Mr Weinstein to suggest it would be better winding itself up and returning the money to shareholders. In January, the fund’s managers agreed to buy back 15 per cent of the shares at close to net asset value in a tender offer that helped narrow the discount to 6 per cent.

Action may also be brewing at the Clough Global Opportunities Fund, which invests in both stocks and bonds: since Saba revealed a stake in January, a long-time portfolio manager has left, and the fund’s discount to net asset value has shrunk from 18 per cent to 10 per cent.

Mr Weinstein was early to the CEF market, suffering as discounts continued to widen in 2015, but last year was a much stronger year, and the launch of an actively managed ETF is an attempt to capitalise on his recent record. As its name suggests, the Saba Interest Rate Hedged CEF ETF also aims to neutralise one of the main objections to investing in CEFs, namely that rising interest rates will be bad for the sector.

Many CEFs employ leverage to juice returns, so higher rates raise their borrowing costs, at the same time as the bonds in their portfolio may be falling in value. The generous monthly dividends that CEFs pay also look relatively less attractive in a higher rate environment, so shareholders may drift away from the sector, depressing share prices.

So, rising rates are bad, and that is why the average discount on fixed-income CEFs actually narrowed sharply last week when the Federal Reserve’s well-trailed quarter-point rise was accompanied by commentary that was more dovish than anticipated.

The question is what happens from here. When this column last looked at fixed-income CEF shares in September 2015, they looked a no-brainer. The discount to net assets was an average 11 per cent, worse than at any point in the past decade, outside the credit crisis.

At less than 4 per cent, the discounts are not now wildly out of whack with historical averages.

The reason discounts have narrowed substantially in the past 18 months is partly because the Fed has made it clear interest rate rises will be gradual, and partly because the activism of Saba and others has rekindled interest in the sector and put managers on notice that they must work to improve share prices.

That is not to say there will not be opportunities for profit, since funds with weak managers or those with particularly unloved investment strategies can still trade at double-digit discounts, and many contain provisions deep in their prospectuses that could be used to trigger liquidation or put other pressure on them to take shareholder-friendly action.

That will require the skill of a patient fisherman. Making money in CEFs is no longer like shooting fish in a barrel.

At the same time, Chicago-based Grubhub is facing rising delivery expenses as it seeks to expand beyond the country’s most densely populated urban markets. The combination of increased competitive and cost pressures could damp financial results, and send the stock (ticker: GRUB) down over 25% in the next year or so. Grubhub went public in April 2014 at $26 a share. Some analysts see the shares sliding to $25, or lower, from a recent $34.51.

Grubhub’s Web and mobile platform matches diners with neighborhood restaurants for prepared-food delivery. The company has signed up more than 50,000 eateries in 1,100 U.S. cities, and boasts 8.2 million active users. Grubhub charges restaurants 15% to 30% of an order tab for a listing, and roughly 15% more for delivery. Consumers also pay a $2 to $3 delivery fee.

Grubhub recently reported 2016 revenue of $493 million, up 36% year over year. Earnings rose 30%, to $49.6 million, or 58 cents a share, based on generally accepted accounting principles, or GAAP, although they missed estimates in the fourth quarter by two cents a share on an adjusted basis. Revenue is expected to rise 26% to 34% this year, to $620 million to $660 million, while earnings could come in at 78 cents on a GAAP basis.

GAAP figures include stock-based compensation, which Barron’s has long argued should be recognized as a business expense. On a non-GAAP, or adjusted basis, analysts expect Grubhub to earn $1.08 a share this year, up from last year’s 89 cents.

Grubhub trades for 44 times this year’s GAAP estimates, a lofty multiple that leaves little room for error. But the company’s rapid growth rate and continued success are by no means assured.

To the contrary, certain business metrics, while still robust, have been steadily deteriorating. Active diners—consumers who used the service at least once in the past 12 months—rose 21% in the fourth quarter, down from 34% growth in the year-earlier quarter, and 47% growth in the final quarter of 2014. Similarly, average daily order growth fell to 21% last year from 75% in 2013. As Grubhub expands and competition encroaches, growth rates are likely to slow further.

UBER TECHNOLOGIES’ UberEATS and Amazon.com ’s (AMZN) Amazon Restaurants have joined the online-ordering fray, and could be Grubhub’s most formidable competitors. Both charge rates similar to Grubhub’s but have better delivery capability. UberEATS already has an army of drivers and Uber customers across the U.S.; Amazon Restaurants doesn’t charge Amazon Prime members for delivery currently. Both could steal market share by offering discounts to restaurants and consumers. Indeed, restaurants list on multiple platforms, and consumers can easily toggle among ordering apps.

Howard Penney, an analyst at Hedgeye, an independent research firm, expects Uber, Amazon, and smaller order-and-delivery outfits, including PostMates and Yelp Eat24, to cut into Grubhub’s market share, estimated at a market-leading 10% to 15% of the current delivery market.

Some 70% to 75% of Grubhub’s orders comes from New York and Chicago, cities where restaurants typically handle their own deliveries. As the company looks to grow elsewhere, a delivery infrastructure will become more important—and potentially costly. In the past two years, Grubhub spent $155 million to buy four delivery companies, including LAbite.com, to service second- and third-tier markets such as Los Angeles, Boston, and Philadelphia. That is a tacit acknowledgment that delivery—a low-margin business that management intentionally had avoided—is going to be an important future capability.

Grubhub said in its fourth-quarter earnings call that delivery investments will “approach a de minimis level” by the end of 2017. That’s a “strategic mistake,” says Penney, as it underestimates the cost of building delivery capacity outside of major cities.

Moreover, order frequency is likely to be lower outside New York and Chicago, where having prepared food delivered is common, says James Cakmak, an analyst at Monness Crespi Hardt. Yet the company will have to maintain a basic delivery presence, regardless of order frequency.

Grubhub also is planning to increase its national TV advertising this year. The company recently issued guidance of $165 million to $190 million for 2017 adjusted earnings before interest, taxes, depreciation, and amortization, up from $145 million last year, noting that the wide guidance range builds in flexibility on promotional activity. In other words, it might have to spend more on marketing than in the past.

Longer-term, Cakmak sees Grubhub’s revenue growing in line with e-commerce generally, at a rate of about 15% a year. Given such growth estimates, a P/E multiple of 20 to 25 seems more appropriate than the current valuation. Even if applied to adjusted earnings estimates for 2017, that would suggest a stock price of $22 to $27. The Wall Street consensus probably hasn’t incorporated Grubhub’s rising promotional and delivery spending into its estimates.

Grubhub declined to make CEO Matt Maloney available for comment. The company says that order frequency trends are stable to up, and that its delivery capability will allow it to service restaurant chains.

Sam McBride, an analyst at New Constructs, an independent stock-research concern, thinks Grubhub investors’ main hope is that the company will be acquired, although the current valuation could discourage buyers. A potential acquisition doesn’t seem like a reason to buy the stock, however. With growth trends slowing and costs expected to rise, Grubhub is more likely to give investors indigestion than a meal-ticket to fatter gains.

VALENZA, Italy — Those lamenting the sale of Italian brands to foreign groups were silenced on Friday at the official opening of the new Bulgari manufacturing plant and offices in Valenza, the historic jewelry hub located between Milan, Turin and Genoa.

“This investment in Italy, with such an advanced project proves three clichés wrong,” said Minister of Economic Development Carlo Calenda after the formal ribbon-cutting ceremony to a packed room of authorities, including the president of the region and the mayor of Valenza, as well as Toni Belloni, group managing director of parent company LVMH Moët Hennessy Louis Vuitton, the press and selected clients. “International investments do help Made in Italy, especially if they keep evolving production, making it more competitive to grow globally — and not the contrary,” said Calenda.

When Bulgari was acquired by LVMH in 2011, Italian media worried about a possible decamping of talent and creativity outside the country. “Until five or six years ago, people were saying manufacturing was dead, but this plant shows this is not true and emphasizes how it’s actually returned to being even more central, it paves the way to prosperity and is the foundation for welfare, whenever culture and craftsmanship are strengthened by innovation,” continued Calenda.

Referring to the third cliché of projects being stalled in Italy, locked in a gridlock of bureaucratic red tape, Calenda said Bulgari’s manufacturing plant was set up “in record time,” crediting local administrators as well. The first discussions over the project were started three years ago, but construction took 17 months. “Everything is very symbolic and important today and conveys an optimistic yet realistic message,” he concluded, adding that last year Italy registered “record exports” of 417 billion euros, or $459 billion at average exchange, which were “drivers of development, showing what Italian and international entrepreneurs can do.”

To be sure, the upbeat mood was reflected in the words of Bulgari’s chief executive officer Jean-Christophe Babin, who billed the day as one of “celebrations,” feting “the goldsmith art, the most antique in the world; craftsmanship, the expert hands,” that contributed to Bulgari’s history of more than 130 years; Made in Italy, pointing to Bulgari’s silk production in Como, leather goods in Tuscany and perfumes in Lodi, and the family “that made the brand one of the most admired and desired in the world.” The day also paid tribute to tradition, as the plant incorporates the Cascina dell’orefice, the first goldsmith site in the Piedmont region, dating back to the 19th century and set up by Francesco Caramora.

Babin proudly noted that the plant will create 300 new jobs by 2020, additional to the existing 400 in the location. Bulgari also created its own Jewelry Academy, which is free, on the site, which already counts 40 students. The goal is to enroll 100 students per year.

Vice president Nicola Bulgari was touched by the event. “I wish my father Giorgio and my grandfather Sotirio, so brave in coming to Italy from Greece, were here to see this day. They worked so hard to build the brand and they would be impressed,” said Bulgari. “This is a jolt for a country that needs to be stimulated.” Asked on the sidelines of the event about the decision to sell to LVMH, Bulgari admitted at first it had not been an easy one. “We realized that by joining forces with LVMH we would have jumped to the next level and allowed the brand to live on,” said Bulgari, whose brother Paolo is also still part of the company.

In an interview from a spacious office in the new Glass House overlooking the green hills surrounding the plant, Babin spoke of the need to create “a beautiful working space because we sell dreams and art.” The 151,200-square-foot site combines activities shared in two previous production plants, in Valenza and Solonghello, and introduces new “production islands” which allow 18 to 20 artisans to be skilled in every phase of production.

“This adds empowerment and autonomy to the islands. This multidiscipline also brings more flexibility,” explained Babin, who highlighted the need to have “happy employees in a location they enjoy and a good quality of life.” There is a canteen, and a number of areas where people can meet and socialize pepper the site, which is extremely luminous and sleek, yet welcoming. More than half of the employees are women, underscored Babin. The production building is reminiscent of the structure of a Roman Domus, built on three floors and marked by a 6,480-square-foot inner courtyard. Babin declined to provide details about the investment in the plant, saying it totaled “some tens of millions of euros.”

With a low environmental impact, the plant, designed by architectural firm Open Project, is expected to achieve LEED certification by the end of the year. It produces Bulgari staples such as the B.Zero1, Serpenti, Diva, Parentesi and Bulgari-Bulgari designs retailing up to 50,000 euros, or $53,651 at current exchange.

The Academy inside the location will also help avoid impoverishing the web of local artisans in the surrounding area, noted Babin. “There’s been this obsession with universities that drove away from manual jobs, and there is the need now for companies to create their own academic structures, and to promote the beauty of manual jobs, to show that this can be a pleasant and creative job,” observed Babin.

Bulgari’s haute joiallerie remains in Rome, where 60 artisans create 400 to 500 unique pieces, priced from 100,000 euros, or $107,303, to 10 million euros, or $10.7 million, and “where creativity evolves as they work,” said Babin. He revealed that the Rome atelier will be extended in the July-September period and increase its production by 50 percent.

Bulgari has ambitions to grow further, aiming at becoming “the first” jewelry company (analysts, he said, point to Cartier as the first and Tiffany & Co. as the third). Asked about the strength of this industry, he said “it’s the most antique art in the world, harking back to 6,000 years ago, in all civilizations, marked by the rarity and fascination with gold and stones. This has never changed and never will. It’s connected to the most important moments of our lives.”

Sabrina Bonesi, formerly of Dior, will join as design director for leather goods and shoes.

LONDON — Ahead of top management changes later this year, Christopher Bailey is fortifying the creative team at Burberry with two senior appointments in key growth areas, WWD has learned.

Sabrina Bonesi will become design director, leather goods and shoes, a new role. Bonesi, a leather-goods expert who previously worked for Dior, will be responsible for men’s and women’s bags, shoes and accessories.

At Dior, Bonesi was head designer for women’s leather goods. She has also worked for Prada and helped design collections for brands including Bottega Veneta, Marni, Ferragamo and Tod’s.

She starts Monday and reports directly to Bailey, chief creative and chief executive officer.

A Burberry spokesman confirmed Bonesi’s appointment, but declined to comment on it.

In July, Bailey will relinquish his ceo role and take on the new title of president while remaining chief creative officer. Marco Gobbetti, who joined Burberry in January as executive chairman, Asia-Pacific and Middle East, will take over as ceo in July.

In January, Bailey added another senior executive to the team, Claudia Plant, a Net-a-porter cofounder who had been with that company since its inception. Plant served as global brand creative director at the Net-a-porter Group until last December.

Plant’s title at Burberry is senior vice president, brand experience. Hers is also a new role and she will report directly to Bailey. She is working across online and offline channels, and her remit is to bring fashion and products to life for customers, and help to establish a strong editorial voice that will support brand and product initiatives.

The spokesman also confirmed Plant’s appointment.

The appointments are a clear indicator that Bailey remains committed to the brand where he has worked since 2001 (he’s been ceo since 2014) and that fresh creative blood is key to Burberry’s future in a changing climate for luxury goods. Other creative appointments are understood to be in the works.

Against a backdrop of slowing demand, changing tourist flows and consumer habits, Bailey outlined an austerity plan in May aimed at saving 100 million pounds, or $123 million, by 2019. As part of the plan, the company has been streamlining operations and slashing the number of products on offer.

Burberry’s overarching strategy is to outstrip luxury market growth, which is projected to be 2 to 3 percent in coming years.

Since the plan was unveiled, Burberry has been simplifying operations, cutting costs and shifting the retail focus away from tourists to locals and a younger, digitally engaged customer base. The company has also been reducing its product assortment in a bid to clarify its offer in customers’ eyes, and to emphasize “fashion and newness” in the collections.

Of his and Gobbetti’s future roles, Bailey has said: “I will focus more specifically on design, the products, creativity, architecture, marketing, communication, experiences. He will focus more on the operational side, finance, retail and merchandising. I see this really as two pieces working together. We will jointly lead all the strategies and people.”

Accessories is Burberry’s largest product category, accounting for nearly 40 percent of revenue in the first half of fiscal 2016-17. At reported exchange rates, the category grew by 8 percent, year-on-year, to 426 million pounds, or $588 million.

But stripping out the benefits of the weak pound, underlying accessories revenue fell 1 percent.

Burberry said bags outperformed in the six months to Sept. 30 with the runway rucksack and the new Buckle bag leading the way. The Bridle bag was the number-one selling item from the September runway collection, Burberry’s first see-now-buy-now, coed outing, according to the company.

There is, however, room for improvement: Last May, UBS said in a frank report that Burberry’s handbag pricing was well below that of its luxury peers — about 14 percent lower — and that there were opportunities for growth in large leather goods, and notably in handbags.

Bailey told WWD in November that bags and backpacks have come to the fore as the company reorganizes its operations, and added that Burberry had started to develop more commercial, lower-priced iterations of some of the runway pieces.

With regard to improving Burberry’s digital and editorial credentials, there are few more experienced operators than Plant, who was at Natalie Massenet’s side when she launched Net-a-porter in 2000. She also worked with the new Yoox Net-a-porter management after the companies merged in 2015.

E-commerce is the fastest-growing channel in the industry, and Burberry has said its aim is to leverage its digital capability to drive revenues on its own platform and through third parties, and convert its fan base into loyal customers.

The company has recently launched a redesigned web site for desktop, with an enhanced browsing and purchasing experience, while a new app is in the works.

While the efficiencies and improvements have begun to pay off, Burberry has also been benefiting from the weak pound.

After a tough start to the 2016-17 year, third-quarter retail performance grew by 22 percent to 735 million pounds, or $911.4 million, with underlying sales up 4 percent in the three months to Dec. 31, fueled mostly by like-for-like growth rather than new stores.

Change in Fashion’s C-suite

Fashion ceo’s are coming and going at a rate that’s finally in keeping with shifts in the market.

Fashion has become a place rife not just with impossible people, but impossible situations.

Big personality is something the industry self-selects, even thrives on. But the intoxicating mixture of executive charm and corporate jargon that many chief executive officers relied on to give near-sighted business plans their punch, seems to be finally wearing off as business turns south.

The same goes for the enthusiasm for business models that were good enough to churn out some money when things were good, but are now barely limping along or failing outright.

The rise of e-commerce, fast-fashion, off-price, social media and a generation that’s simply less interested in filling their closets has amplified the industry’s every weakness. And ceo’s are finally paying the price — some for screwing up, some for successfully getting a job they were wrong for and some for simply being there when things went bad.

There is always churn in fashion and retail’s executive ranks, but something different is happening now. And it’s happening faster than ever.

Ceo’s are falling right and left as the industry feels its way forward. Boards are get antsier, sensing that something different, something more needs to be done.

Frederic Cumenal is out at Tiffany & Co. having failed to make it to the three-year mark amid disappointing financials. Larsson’s departure from Ralph Lauren Corp. was revealed just 16 months after his arrival as he disagreed with the company’s namesake. Also caught up in the ceo churn were Paolo Riva at Diane von Furstenberg, Sharen Turney at Victoria’s Secret, Dawn Robertson at Stein Mart Inc., Federica Marchionni at Lands’ End Inc., Lorenzo Delpani at Revlon Inc., Brian Lee at Honest Co., Gianluca Flore at Brioni and more.

Each departure characterized the circumstances of the individual company, but the pressure that’s being felt in the market is almost universal.

“Business is extremely difficult. Maybe patience is getting shorter with some companies,” said Michael Gould, the former chairman and ceo of Bloomingdale’s. “Unfortunately, we are not a business for the most part that has a long view of life, and therefore we do things that are counterproductive, like bang the heck out of promotions. It’s tough and it’s getting tougher.”

J. Michael Stanley, managing director of factoring firm Rosenthal & Rosenthal Inc., said: “The problem is companies look at whoever is involved, and they blame the boss because he’s driving the bus. If the marriage is not working out, you get rid of him. It always looks better on the other side.”

The ceo switch-ups recall changes atop the creative pillar of many businesses and reflect many of the same pressures. Brands across every sector are simply looking for something more, especially a better way to connect with consumers.

Calvin Klein tapped Raf Simons as chief creative officer, a role not filled since Calvin Klein himself stepped away in 2003. Donna Karan departed her house after 32 years and her replacements, Public School’s Dao-Yi Chow and Maxwell Osborne, who served as DKNY co-creative directors, didn’t survive the business’ sale to G-III Apparel Group. Additionally, Reed Krakoff picked up the Tiffany & Co. creative responsibilities from Francesca Amfitheatrof, Chloé appointed Natacha Ramsay-Levi creative director for ready-to-wear and Givenchy tapped Clare Waight Keller as its next artistic director.

Many businesses are simply at a crossroads, creatively and otherwise.

“Companies are focused on revenue, and they’re taking a hard look at the product to see whether they’re really offering the consumer the most complete assortment,” said Christa Hart, who leads the retail and consumer products practice at FTI Consulting. “Nearly all of the focus is on the top categories that can help drive revenue.”

There’s been some c-suite experimentation as companies seek to connect with consumers, particularly in Europe.

When Angela Ahrendts left Burberry for Apple, creative chief Christopher Bailey picked up her duties as ceo in 2014 in an ambitious test of his right brain-left brain abilities. It proved to be too much multitasking and the company will welcome Marco Gobbetti as ceo in July.

And Johann Rupert, Compagnie Financière Richemont’s chairman and shareholder of reference, whittled down the management structure at the luxury parent of Cartier, wiping out the role of ceo entirely as the group grows accustomed to the “new normal” of slower growth in the luxury watch industry, one of Richemont’s main profit engines.

“It’s not possible for one individual to be ceo and this was highlighted to me by poor Mr. Lepeu, who ended up with 35 direct reports,” said Rupert, pointing to Richard Lepeu, who will retire as ceo next month. Rupert said he wants the board to run the company, although ultimately everyone will answer to him. “We need to look at having a structure that allows managers more time to really address their responsibilities.”

Slower growth has gone hand-in-hand with executive turnover in the European luxury market, whether it be from business pressure or openings at other companies looking to push forward or just executives surveying the landscape and finding themselves with itchy feet.

Executive change-ups have accelerated notably at Kering Group, kicked off by the ouster of the top creative and business roles at Gucci to make room for ceo Marco Bizzarri and creative director Alessandro Michele in early 2015. Kering’s other holdings in Italy such as Bottega Veneta and Pomellato have since changed ceo’s as well. Other Italian houses to see a new ceo in 2016 include Salvatore Ferragamo, Versace, Roberto Cavalli and LVMH’s Loro Piana.

“The luxury industry is not used to a low-growth environment — they don’t know how to deal with it,” said Marco Pozzi, a senior adviser at Contact Lab.

The strategy for top luxury brands had previously been more straightforward, with store openings in China being the key to big gains. But as growth in China’s luxury spending slowed, brands found they needed a more nuanced approach to keep their edge. Those nuances remain vital even though the Chinese market has begun to show a bit of a rebound in recent months.

“The major skill for the ceo now is complexity management — because complexity is booming,” Pozzi said. “You have many countries that are important — China, [South] Korea, and Russia which is starting again — many product lines and multiple channels, including e-commerce.”

Faced with rising complexity, arrangements like Burberry’s experiment with Bailey are unlikely to thrive, according to Pozzi, and the days of a brand’s founder continuing to run the business her- or himself could also be numbered.

“You need a strong designer and a strong ceo,” he said. “A lot of these houses have problems that are more strategic. It’s not just design, it’s positioning and strategy. The company has to decide where they want to compete, and the designers don’t really have the skill to reposition.”

The wave of executive changes over the past few months hasn’t only been remarkable for its scope and speed, but for the changing profiles of the people being tapped for top roles. Whereas strength in finance and distribution used to be the most common path to the top job, a number of rising ceo’s have come from marketing, retail and product development.

Kering’s pick for ceo of Balenciaga, Cédric Charbit, served as head of product and marketing at Saint Laurent during a period of double-digit growth under creative director Hedi Slimane, while Ferragamo’s Eraldo Poletto was previously head of merchandising at Brooks Brothers.

At most companies, it’s the board that’s responsible for deciding what skills a new leader should have and when they should be held accountable for a poor performance. (That check doesn’t always exist, as some boards are stacked with directors who are too buddy-buddy with their charges).

And even with all the turnover in the c-suite, more could, or should, come.

“This guy Cumenal at Tiffany’s, he’s not going to be the last one to go,” predicted Craig Johnson, president of forecasting firm Customer Growth Partners. “At the ceo and at the board level, there’s the lack of a sense of urgency. The board [in some cases] is like a hand-picked board, picked by the ceo, it’s like a captive board.”

Johnson said fashion needs to move faster.

“It’s not reacting quickly enough to Amazon,” he said. “It’s not reacting quick enough to the fact that people entering the peak consumption years, they are not buying as much, or are not as interested in buying as many material goods as their parents were.”

Part of the challenge is that apparel companies — even the powerhouses who shaped fashion for a generation or more — find themselves changing on many fronts, from their store bases to their supply chains to their marketing.

Add in personality and turbulence is almost the guarantee. Take Larsson, who was stepping into some pretty big shoes and a tricky situation, taking the reins as ceo directly from Ralph Lauren.

While ushering Larsson to the door, Lauren said: “We have found that we have different views on how to evolve the creative and consumer-facing parts of the business. After many conversations with one another, and our board of directors, we have agreed to part ways. I am grateful for what Stefan has contributed during his time with us, setting us in the right direction with the Way Forward Plan.”

So Larsson’s plan to shorten the company’s supply chain and deliver goods quicker resonated, but he couldn’t sync up with Lauren, who can be expected to remain in control no matter who carries the title of ceo. It didn’t help that Larsson perhaps pushed too hard when sources said he suggested to Lauren that the founder consider handing over some of the design responsibilities to another person.

Les Berglass, ceo of executive search firm Berglass + Associates, said Larsson had to first build a good working relationship with Lauren.

“Stefan Larsson came from a business where he was running Old Navy and the question with Ralph is, you have a leader whose DNA is tied to the brand, who you’re going to have to partner with. It’s not Ralph Laruen’s fault,” Berglass said. “Stefan had to work on building his relationship with Ralph first and then the retailer and then the customer, he didn’t do it in that order.”

While Larsson found himself at a strong brand needing to evolve and in the midst of some tricky politics, others are jumping into situations that are more dire and have already gone though a few would-be saviors.

“The problems plaguing the industry have more to do with the historic structural sustainability of these organizations than the single individual at the helm, particularly if at the helm there’s been a succession of changes over a short period of time,” said Elaine Hughes, founder and ceo of E.A. Hughes & Co.

“The revolving c-suite [stems] from a lack of conscientious succession planning which should be a disciplined exercise in every company and something the board of directors should demand,” Hughes said.

The corner office departures at Ralph Lauren, Victoria’s Secret, Lands’ End, Stein Mart and Tiffany’s can’t be linked to any one common cause, she said.

“The individuals chosen for these roles who now have been released probably displayed the drive, resilience and thought leadership these boards sought,” Hughes said. “What was lacking was a combination of historic success in a similar model coupled with an inability to sustain as well as improve these businesses in a time of unprecedented change and acceleration.

“As long as the industry retains a myopic view on leadership and organizational development as well as refuses to see that the world is a flat canvas for talent that can be integrated from other industries particularly on the technology side, we will remain not only an industry which will be late to change but may erode because of it,” she said.

The fact that so many ceo’s are on the move could be an indication of just how seriously fashion brands and retailers are finally taking the broader shifts in the market.

“The amount of change that’s going on behind the scenes and at the c-suite, people realize they have to change, they’re looking for different ideas and talent to accelerate the pace of change,” said Tom Snyder, global practice managing partner of Heidrick & Struggles consumer markets practice.

“Everybody’s trying to figure out how can you make your stores or your web site a destination that isn’t easily replicated by Amazon or some other lower-priced competition that doesn’t have brick-and-mortar,” Snyder said. “When you look at some parts of apparel, everybody’s product looks alike…how many places do you go to shop that have the wow factor?”

If all the ceo changes are any indication, not enough.

Chiffre important, deuxième plus gros démarrage de l'histoire du mois de Mars

Movies 1st Week End US Box Office

Beauty and The beast 170M

Frozen 94M

Toy Story 3 110M

Batman v Superman 170M

Vaiana 85M

Moi Moche et Mechant 2 140M

Star Wars 7 250M

Star Wars Rogue One 155M

Proprietary trading firm’s head says investors too confident of higher rates in Europe

Don Wilson says his company is “in the business of taking risk”. 

DRW, named after his initials, is one of the world’s largest proprietary trading firms. From a base in Chicago it bets its own capital via futures contracts listed on 40 exchanges around the world. As Wall Street banks take fewer risks, companies like the one he founded have filled the vacuum. 

There is plenty of risk in the markets DRW plies. President Donald Trump has promised to roll back reforms passed after the financial crisis. Europe has scheduled a series of pivotal elections. While populists fizzled at last week’s Dutch polls, a more important French election is fraying investor nerves. 

However, broad measures of implied volatility for equities, bonds and currencies have all notably eased after peaking in the wake of November’s US presidential election.

Mr Wilson, DRW chief executive, says he’s been surprised by the lack of volatility in financial markets since Mr Trump’s unexpected election. “There are many things that could happen that could cause volatility to increase,” he told the FT at a futures industry conference in Boca Raton, Florida last week. “In this environment, being long some wings is probably a good idea,” he added, referring to options that pay out if markets become extremely stressed.

In Europe, he believes markets may be too confident of higher interest rates. He points to uncertainty over the elections and the size of foreign deposits flowing into Switzerland, where rates are negative. “There’s a lot of risk of something misfiring and people becoming more concerned. Yet the markets aren’t really saying that,” he said. 

DRW faces turbulence of its own. Mr Wilson is awaiting a judge’s ruling after the US Commodity Futures Trading Commission accused him and his company of “brazen and repeated acts to manipulate” an interest-rate futures market six years ago. Rather than settle with the regulator, Mr Wilson chose to fight the civil charges at trial. 

The entire trading industry is nervously following the case, both for its importance in defining what constitutes manipulation and its potential to hobble DRW. The CFTC seeks a permanent trading ban for Mr Wilson and DRW if they’re found liable. 

Few trading firms are as influential as DRW, established in 1992 by Mr Wilson, then an options trader on the floor of the Chicago Mercantile Exchange. The company now has 750 employees, two-thirds more than five years ago. By contrast Virtu Financial, a New York peer, has fewer than 150 on the payroll, according to an annual report. 

Mr Wilson, aged 49, “is absolutely viewed as a leader in the industry”, said Matt Haraburda, president of XR Trading, a competitor. 

DRW is best known for high-frequency trading in fractions of a second. A subsidiary submitted plans to build a radio tower on the English Channel to beam market data between London and Frankfurt. A UK district council, however, rejected the proposal for a structure the height of London’s Shard earlier this year. 

As traders invest to shrink data delays from milliseconds to microseconds, “the incremental improvements are constantly smaller”, Mr Wilson said. Some companies have quit, leaving bigger ones such as DRW, Jump Trading and Virtu. “To be the fastest in a pure speed game does require greater resources,” he added. 

However, DRW says only a quarter of its business derives from speed trading. It holds some positions open for months, as evidenced by those at issue in the CFTC litigation. Or years: Convexity Properties, a DRW division, develops real estate.

Mr Wilson supports pushing privately negotiated trades, such as interest-rate swaps, on to futures markets where costs are generally cheaper. Unlike a typical proprietary trader he is also an inventor: DRW has licensed its patent on variance swap futures, which track volatility, to Germany’s Eurex exchange, and has created an interest rate contract to be listed by US-based Intercontinental Exchange. 

The rise of electronic trading firms has accelerated exchange volumes and offered a sense that markets are liquid, or easy to enter and exit. But increasingly frequent “flash crashes”, when prices collapse for no apparent reason, suggest those traders flee when they are needed most.

Mr Wilson blames shaky liquidity in fixed income markets on the retreat of banks, which once held more bonds in inventory. “If you push risk capital out of the market, then you have to expect greater risk of flash crashes.” 

He declined to elaborate on the CFTC case in the interview, but on a panel in Florida he bemoaned what he called “‘gotcha’ regulation” and said government lawyers were “more interested in collecting fines and generating headlines than in making markets better”. 

A loss for the CFTC could shatter its theory of market manipulation, while defeat for Mr Wilson could imperil his company. For both sides, it is risky business.