TheChek News Flow

Volvo, which China’s Zhejiang Geely Holdings Group bought for $1.8 billion in 2010, has approached a number of Chinese investors about the share purchase, including sovereign-wealth funds and private-equity firms, the people said.

Volvo told the potential investors it could be seeking an initial public offering, the people said. The listing venue could be either Europe or Hong Kong, but the company hasn’t yet decided on a location or timetable, according to one of the people.

Geely is always talking with investors, said communications manager Ashley Sutcliffe. He added Geely has no plan for a Volvo IPO in the short term.

A spokesman for Volvo said an IPO is an option for the firm but said there are no current plans. He declined to comment on a share sale, saying it was “market speculation.”

Volvo said in late December that it had raised 5 billion kronor ($564 million) in a similar preferred-share sale to a group of Swedish institutional investors, including two pension funds and a local insurer. The sale was “another step towards Volvo Cars’ long-expressed ambition to act as a listed company,” Volvo said at the time.

Geely has plowed $11 billion into Volvo since the purchase, sprucing up Volvo’s model lineup, and boosting sales sharply in the U.S. and China. Volvo has slashed costs, in part by manufacturing some models in China for global export, and has embarked on a massive investment program to help it compete better with BMW AG, Daimler AG’s Mercedes-Benz, and Volkswagen AG’s Audi.

Volvo reported a 67% increase in net profit to 7.5 billion kronor in 2016 on revenue of 180.7 billion kronor, up 10% from the previous year. The Swedish company’s global sales grew 6% to 534,332 vehicles last year, on track for its sales target of 800,000 vehicles by 2020.

Italian insurer Generali has promised faster delivery of its planned €200m of cost savings.

The company saw off bid interest from Intesa Sanpaolo, one of Italy’s biggest banks, last month. If Intesa’s interested had persisted, Generali was gearing up for a big increase in its savings target as part of its defence.

There was no increase announced alongside Generali’s full year results on Thursday but the company said that it would reach its target in 2018 rather than 2019. It added that €70m of the savings had already been delivered.

Generali said that its operating profits, which rose 1 per cent to €4.83bn, were at the highest level ever although its return on equity fell slightly.

The company also announced an 11 per cent increase in the dividend to €0.8 per share.

Philippe Donnet, chief executive, said:

I am encouraged by Generali’s progress in the last year. We are already seeing the early results of our “Simpler, Smarter. Faster” Plan, announced in November 2016. We will build further on these achievements and we have the best possible team to accelerate the execution of our current strategy.

E-commerce Faces Wave of Consolidation

The buzzy digital companies that took backing at high valuations are now looking for their next step.

The boomlet of niche-y e-commerce companies that once struck fear in the heart of traditional retail is going bust, deflating into a category that is also subject to the laws of economics.

Already the go-go start-ups that got big-time funding from Silicon Valley types, but could never really make their businesses work, have started to run into the wall. Nasty Gal was just the beginning, having spent heavily and taken money from former Apple Retail and J.C. Penney Co. Inc. chief Ron Johnson only to find its intellectual property sold off to Boohoo for $20 million in a bankruptcy auction last month.

Now others are expected to see the same fate. The stronger concepts, meanwhile, maybe finding themselves better off but are stuck making a tricky shift, looking for additional funding in a world that suddenly wants not just growth, but also profits.

The brands said to be navigating this landscape and in the market for capital include Bonobos, which is working with Citi, and Birchbox.

And some companies could do more than just bring in a new investor.

Fabletics owner TechStyle Fashion Group is said to be working with J.P. Morgan as it looks to raise additional money or even find a buyer. The company already toyed with the idea of an IPO last year as it tried to solve the typical tech company problem of how to satiate its investors.

“It’s always a possibility at a company our size and with the money that we have invested into it,” said Kimberly Tobman, vice president of global communications, of a potential IPO in May. “Of course, the investors want some kind of strategic exit. That’s what the end goal is when you’re putting that kind of money into a business.”

Others are finding themselves swept up into more traditional retail businesses.

So far, Wal-Mart’s been the most active, having bought up Jet.com for $3 billion last year, adding Shoebuy.com in January and outdoor apparel site Moosejaw for $51 million last month.

Wal-Mart Stores Inc. might well be hungry for more and experts see potential for the company to continue buying e-commerce companies as it squares off for a battle royale with Amazon, the undisputed U.S. e-commerce king.

Observers said more companies, from LVMH Moët Hennessy Louis Vuitton to Kering to Fast Retailing, could ultimately jump into the game and look to grow online via acquisition as the shakeout continues.

“It’s a natural economic cycle,” said apparel veteran Ari Bloom, chief executive officer of tech firm Avametric, which builds virtual fitting room software that’s being put to use by Gap Inc.

Bloom said business school graduates from the 2009 and 2010 period found themselves starting their own companies as jobs were hard to find, ultimately building e-commerce businesses that found a favorable funding environment in the years that followed.

“It was a time when people were a little bit more forgiving because they were looking for places to put their capital,” he said. “If [start-ups] were seeing growth, even if they weren’t seeing profit, it was encouraging enough for them to keep receiving funding.”

But times have changed as more players struggle just to keep their heads above water.

“We’re going to see a lot of M&A in the next year or two and I think we’re going to see a lot of companies go out of business or fold and sell their [intellectual property] like a Nasty Gal or a One Kings Lane,” Bloom predicted. “It’s destined to happen and it doesn’t mean that good businesses aren’t going to fail, that’s a tough thing to happen and that’s a good lesson.”

An executive at a prominent private equity firm that plays in the fashion space said investors are scrutinizing valuations much more closely than they were and that the key question today is: “What’s your path to profitability?”

“So many of these businesses start raising capital and it’s in this very West Coast model,” said the executive, noting that fresh funds went toward customer acquisition to drive growth with no profits in sight.

While some e-commerce companies that have taken venture money and built up complementary store businesses are said to be driving profits, most seem to find themselves in some version of this bind of having to pay back investors who bought in at a lofty valuation.

Negative Underwear went a different route and has never taken outside funding, which cofounder Lauren Schwab said has helped the business learn how to be careful with its money.

“Certainly lots of our peers are continuing to take money and generally the idea is that this is to fuel additional growth and I think it has to do with, customer acquisition is expensive and getting a brand out into the ether is expensive,” Schwab said. “Up until this point, we have not invested at all in paid advertising and in order for us to do that in a meaningful way, we would likely have to take on some funding. We have managed our customer very smartly and have been able to thoughtfully experiment and really focus on ROI, so we weren’t able to frivolously invest large amounts of money in potential big mistakes.”

Negative is profitable and reinvests those profits in its business.

It’s a form of corporate modesty the high-flyers of the digital age are increasingly looking to adopt.

An IPO is not on the table in 2017 due to market conditions, revealed ceo Stefano Sassi.

MILAN — Valentino’s profits and sales may continue to be on a roll, but it isn’t rushing to an initial public offering this year.

“An IPO in 2017 is not on the table and we’ll see what happens in 2018,” said chief executive officer Stefano Sassi. “We’ve shelved it because of market conditions. If things change, we’ll review [the project]. We are not talking about it internally at the moment.”

To be sure, no firm date had ever been forecast, and Sassi last year said there was “no IPO before 2017.”

Valentino doesn’t have to be in a hurry. The company is controlled by the Qatar-based Mayhoola Group, which is not eyeing an exit from its investment, first made in 2012. On the contrary, Mayhoola “has [Valentino] and wants to keep it, with ambitious plans to do even more,” said Sassi, alluding to the expansion of the fund’s fashion and luxury stable with the acquisition of the Balmain brand last year.

In his 11th year helming Valentino, Sassi underscored the still-untapped potential for the brand, which, he said, has “been growing in a healthy way.”

In 2016, earnings before interest, taxes, depreciation and amortization rose 14.3 percent to 206 million euros, or $226.6 million, from 180.2 million euros, or $200 million, in 2015.

Operating income climbed 16.6 percent to 133 million euros, or $146.3 million, from 114 million euros, or $126.5 million, in the previous year.

Revenues in 2016 were up 13 percent to 1.10 billion euros, or $1.21 billion, compared with 987 million euros, or $1.09 billion, in 2015. Dollar figures were converted from the euro at average exchange rates for the periods in question.

Last year marked the appointment of Pierpaolo Piccioli as sole creative director of Valentino, following the exit of Maria Grazia Chiuri, who joined Dior. Sassi underscored the “significant effort” of the recent five shows in five months, expressing “great satisfaction, proving Pierpaolo’s very strong creative leadership and the correct stylistic statement — that of an evolving Valentino.”

As reported, the company will once again show its pre-collection in New York. The event will be held on May 23. Pre-collections account for 70 percent of Valentino’s business, said Sassi. The shows are a strong element of communication that allow Piccioli to express his point of view and, for that reason, Sassi waved away the option of combining the men’s and women’s collections in one show per season. “Last year emphasized how there are no longer any dogmas, each brand has its own strategy.”

Sassi emphasized the “ongoing evolution” of the brand under Piccioli. “The past is behind us, there is a good team in place and there is great positivity. The brand is strongly recognizable and has been carefully distributed. We’ve never aimed at growth at all costs.” Sassi has stayed clear of overexposure of the brand, which “does not pay.”

While it reached the $1 billion milestone last year, Sassi said Valentino’s goal is to focus on its core business and a “very high, strong and clear positioning. This is not a snobbish attitude, but an emphasis on quality.”

He said it was difficult to provide estimates for 2017, although the year has started on a positive note. Revenue of 1.2 billion euros, or $1.32 billion, is “a reasonable target” for 2017, he added. “There are all the elements in place to support further growth this year,” said Sassi.

The company last year started investing in Japan and will continue to do so in 2017. “We had been making fewer investments in the region compared to our competitors,” he said. Following the opening last summer of a store in Tokyo’s Omotesando district, a 10,800-square-foot unit will open in a month in the new Ginza Six shopping landmark.

“With these two important locations we make a strong statement in Japan,” observed Sassi, who lamented how challenging it was to find the right space in the Ginza area. He also admitted the company was “thinking” about holding a show in Japan later in the year.

The store concept of the Ginza venue will be an evolution of the blueprint conceived by David Chipperfield with Piccioli and Chiuri. “We adapt and experiment in each location, there is no definite model, but that concept is working very well,” explained Sassi.

The American market remains the main business area for the company, accounting for between 20 and 22 percent of sales.

There are 175 stores globally and Sassi characterized the expansion of the brand’s retail network as “cautious.” The company has earmarked between 7 and 8 percent of sales for investments in 2017 and plans to open 20 stores this year, including some men’s units.

Sassi underscored the growing relevance of its men’s wear division, which now accounts for 15 percent of total sales.

Retail sales in 2016 represented 55 percent of total revenues, unchanged from 2015. Sassi has been focused on upgrading Valentino’s wholesale channel with dedicated spaces and increasing concession agreements.

Aware of the “obsession” with all things digital, Valentino has been actively working to improve customer service and has renewed its partnership with the Yoox Net-a-porter Group to develop omnichannel tools “as much as possible.”

“The digital phenomenon has accelerated changes, and there is more attention to spending, customers look for opportunities on the web and compare prices,” said Sassi, noting that Valentino has also seen important online business with partners including Neiman Marcus and Mytheresa.com, for example. In every case, substantial efforts have been made to control the product and the quality of the service, he said. He also pointed to applications in Valentino stores that allow for interaction with customers.

A main effort last year was to realign prices globally. Sassi admitted the company had seen the effects of the Brexit vote in the U.K., which showed strong growth compared to France, for example.

Last year “was very much influenced by the flow of tourists, and the exchange rates, so the Chinese traveled less, and the dollar appreciation versus the euro impacted the U.S.”

He said Macao and Hong Kong were “complicated,” and Japan was lifted by domestic sales. “We did not see a growth of the Chinese in Japan.” He was upbeat, saying that the flows adjust each year.

Asked whether the issue of a potential increase in U.S. custom taxes has been discussed, Sassi was practical. “We’ll tackle that if and when that will happen.”

Accessories at Valentino continue to account for 50 percent of sales. Asked if there could be synergies with Balmain, for example, Sassi admitted that brand does not have a big accessories business, and that Valentino “has skills and tools to help grow the smaller companies” in the Mayhoola Group.

Valentino employs around 3,300 people.