- Meenakshi Kumar |
Americas ecommerce marketplace eBay looks close sale of its India business to Flipkart second half of this year and hopes its 500-million dollar investment in and strategic partnership with the country’s top online marketplace will boost India play. The company will stop reporting active sales in India and related financials once the sale is closed.
Devin Wenig, CEO at eBay optimistic about the new exclusive partnership, which enables the company to increase penetration in India by making eBay’s global inventory accessible to a significantly larger set of Indian consumers.
Scott Schenkel, CFO at eBay expects this deal to close early in the second half of 2017, and upon deal close the company will no longer report active buyer GMV and related financials for eBay India.
eBay along with Microsoft and Tencent pumped in 1.4 billion dollar into Flipkart in the biggest funding round in the Indian ecommerce space, announced earlier this month. The deal included sale of eBay.in to Flipkart and an exclusive cross-border trade agreement.
eBay had entered the India in 2004 and started operations through the acquisition of News Corp-backed Bazee. com. The company, however, failed to capitalise on its first-mover advantage and eventually lost out to Flipkart and Amazon. eBay had picked up a significant stake in Delhi-based online retailer Snapdeal in 2013, a part of which it still holds.
- Angela Gonzalez-Rodriguez |
A decline of 3.9 percent to 443.4 euros on Tuesday, the sharpest accused by Hermès in recent times, and just the most immediate consequence for the iconic French label of rival’s LVMH last move.
Hermès was heavily penalised on the trading floor by the decision of Bernard Arnault to partly finance its offer to buy Christian Dior using their shares of Hermès but, what else lies behind Arnault’s plan for its long-time rival?
The Arnault family owns 8.5 percent of the capital of its long-time rival since September 2014. By yielding his Hermès’ titles, the Arnaults will cause an influx of securities in the market, which explains the decline of the action Tuesday, according to analysts cited by Bloomberg. On the other hand, Hermès shares have risen about 350 percent since the end of 2008, the year in which LVMH began buying derivatives on the stock.
In a note issued Tuesday, Bernstein’s analyst Mario Ortelli said he expected the Hermès shares to be under pressure following the news. For all that, added the broker, the shareholders of Hermès should not be too dissatisfied with the exit of the Arnault family from the capital.
LVMH to partially finance its Dior’s investment by offering Hermès shares
In a move reported to seek for further synergies, the family group Arnault announced on Tuesday a simplification of its structure. This operation will strengthen its hold on LVMH via Christian Dior by the time it gives the Arnault Group the opportunity to dispose of its 8.5 percent in Hermès, if the minority Dior subscribe to the offer.
The Arnault group will take advantage of this opportunity to bring together all of the fashion and leather goods brands that it owns, including Dior Couture in the portfolio of Louis Vuitton's luxury holding company, Givenchy and Berlutti, among others. “This is a good acquisition for LVMH in our view, given the strong brand of Christian Dior,” analysts at Barclays said in a note, adding that it’s a “good use of its balance sheet.”
In order to achieve its goals, the Arnault family group will launch an offer to acquire shares it does not hold (yet) in Christian Dior, which owns 41 percent of the share capital of LVMH. Arnault, which directly owns 5.8 percent of LVMH's share capital, would thus become a 46.8 percent shareholder in the luxury holding company, by combining its direct shareholding and indirect shareholdings via Dior. At present, this last share is shared with other shareholders, which limits Arnault's hold on LVMH to 36 percent.
Swapping the Hermès stock for Dior shares helps the family cash out of a profitable investment without paying taxes on a sale, highlighted the ‘Financial Times’. It’s worth recalling that LVMH surprised its rival in October 2010 by announcing it held 17.1 percent of the company. The move led the Hermès’ founding family to file a lawsuit and to form a holding company to protect its ownership. Four years later, LVMH offered its particular peace offer by distributing the shares to investors.
Image:Silk Waves, Hermès Web
- Simone Preuss |
OPINION While in the wake of the four-year anniversary of the Rana Plaza disaster, everyone has been busy looking at building, fire and general workplace safety in garment factories in Bangladesh - which is a very good thing indeed - one major influence on workers' lives has not been getting as much attention as it should: wages. With a national minimum wage of 35 US dollars a month and monthly wages for garment workers at 61 US dollars (or 68 US dollars, depending on the source), Bangladesh still has a long way to go till living wage.
As the shocking illustration above shows, it takes a garment worker 18 months to earn what the CEO of a fashion brand makes on his or her lunch break. This comparison was gathered as part of "The Garment Worker Diaries", a year-long research project led by Microfinance Opportunities in collaboration with Fashion Revolution and supported by C&A Foundation. The project collects data on the lives of garment workers in Bangladesh, Cambodia and India and is a little more than half way through.
Unfortunately, for now in Bangladesh, there seems to be little room to grow as the groups on either end of the spectrum are at loggerheads: while apparel workers and unions point to the measly wages and long working hours that make workers' lives tough and unhealthy, factory owners and industry bodies like the BGMEA counter with their favourite scare: buyers and orders moving away to even cheaper countries like Ethiopia should wages be raised in Bangladesh.
Are buyers going to leave Bangladesh should wages increase?
However, buyers will not move away overnight, especially not from a powerful textile and apparel producing country like Bangladesh. The reasons are many: Firstly, apart from China and India, there is no other country that can supply a ready, eager and young workforce in the millions. Secondly, let's face it, there are currently not many countries that have lower wages in the garment sector than Bangladesh; regional neighbours on the lower end like Sri Lanka and Myanmar are already at about 88 US dollars per month and Vietnam, Pakistan and India above that.
Thirdly, Bangladesh has established textile and garment centers with infrastructure and supplier networks that have been created over many years. An up-and-coming (and cheap) garment-producing country like Ethiopia could not replicate this easily and certainly not overnight. Thus, any buyers thinking about jumping production countries would weigh the pros and cons carefully.
Fourthly, let's look at China again. Here, wages have actually risen quite a bit over the last few years; they have tripled in the last ten years. In fact, China is close to a living wage at this point with an average of 239 US dollars per month. Compare that to Bangladesh's 61 (or 68) US dollars per month - still far from it. Plus, wages in China did not increase drastically but step-by-step; the same would be true in Bangladesh.
Which would fifthly, give manufacturers enough time to have a heart-to-heart with their international buyers, well-known apparel brands and retailers that could sure do with a bit of positive publicity, to support them in their quest for living wages for their workers. After all, with customers becoming more inquisitive and caring as to where their clothes were made (and thus factoring it into their buying decision), which brand or retailer would not like to be first one to contract a factory in Bangladesh that pays a living wage or makes sure their workers are well taken care of?
Which brings us to the next consideration: If factory owners are reluctant to raise wages, there are many other ways in which they can help: Why not provide workers who have been with the factory for a while with food rations? Rice, vegetables and pulses are cheaper in bulk and would really improve workers' diets. Also, health insurance. Why not tie up with a big provider and offer free or subsidised health care for workers and their families?
There are many ways in which factory owners and international buyers can help - and should help, if not for humanitarian reasons than for economic ones. After all, happy and healthy workers and their families are better and more efficient workers with fewer days of sick leave and home emergencies. Plus, they would be reluctant to leave a job where they are happy and feel cared for, thus preventing the exodus of skills and factory-specific knowledge as well.
And this is where projects like "The Garment Worker Diaries" come in - Fashion Revolution will use the findings gathered from observing the lives of garment workers in various developing countries to "advocate for changes in consumer and corporate behavior and policy changes that improve the living and working conditions of garment workers everywhere". Let's hope consumers, buyers, factory owners and industry stakeholders are listening.
Illustration 1: by Georgia Keeling for Money Fashion Power; stat source: Labour Behind the Label; illustration2: Stitches to Riches via worldbank.org
- Prachi Singh |
Deckers Brands maker of labels such as UGG and Teva, has announced that its Board of Directors has initiated a process to review a broad range of strategic alternatives to enhance stockholder value, which may include a sale or other transaction.
“The management team continues to remain focused on driving improvements in the business through our recently announced 150 million dollars savings program. We are also continuing to explore additional margin enhancing opportunities and plan to further articulate more details on our upcoming year-end earnings call on May 25, 2017,” said Dave Powers, President and Chief Executive Officer of Deckers in a press release.
The company has retained Moelis & Company as its financial advisor.
Picture:Deckers Brands website
- Prachi Singh |
First quarter revenues at Kering totalled 3,573.5 million euros (3,912 million dollars), up 31.2 percent as reported and 28.6 percent on a comparable basis. The company said, revenue generated by luxury activities totalled 2,417.1 million euros (2,646 million dollars), up by 34 percent reported and 31.6 percent on a comparable basis, against a favourable base of comparison.
“Kering achieved a record performance in the first three months of the year, posting a sharp acceleration in sales growth. In a climate of persistent geopolitical and macroeconomic uncertainties, our first quarter puts us in a particularly good position for the balance of the year,” said François-Henri Pinault, Chairman and Chief Executive Officer of Kering in a statement.
Growth boosted by robust performance of luxury segment
Sales growth in the group’s directly operated store network was 36.6 percent on a comparable basis, driven by remarkable performances in Western Europe and the Asia Pacific region, which reported retail sales increases on a comparable basis of 49.9 percent and 46.7 percent, respectively.
Growth in retail sales was also positive in North America and the Rest of the world, up 29.7 percent and 28.1 percent, respectively, on a comparable basis. Online sales rose 60.1 percent on a comparable basis, while wholesale revenue climbed 20.2 percent on a comparable basis.
Revenues at Gucci jumped 51.4 percent as reported and 48.3 percent on a comparable basis, with all regions and product categories contributing to the overall rise. Sales in directly operated stores were up 51.4 percent on a comparable basis, with sharp increases in Western Europe and the Asia Pacific region, up 66.4 percent and 63.1 percent on a comparable basis, respectively.
Bottega Veneta's revenue was up 4.7 percent as reported and 2.3 percent on a comparable basis. The company said, Western Europe, Asia Pacific, and the Rest of the World experienced positive momentum, fuelled by sales to both returning and new customers. Overall, sales in directly operated stores climbed 3.6 percent year on year on a comparable basis.
Yves Saint Laurent revenue was up 35.4 percent as reported and 33.4 percent on a comparable basis. Directly operated stores saw double-digit sales growth in all geographic regions except Japan, with particularly sharp increases in Western Europe (up 46 percent on a comparable basis) and Asia Pacific (up 48.1 percent on a comparable basis). Online sales also grew driven by Western Europe and North America.
Other luxury brands sales rose 12.3 percent
Revenue from the group’s other luxury brands rose 12.3 percent as reported and 11.1 percent on a comparable basis, with all distribution channels contributing to the overall growth. Couture & Leather Goods stores posted an aggregate revenue rise of 11.1 percent on a comparable basis, boosted by Balenciaga's directly operated store network across all geographic regions and all product categories. Stella McCartney and Alexander McQueen achieved further growth in the period, while Brioni’s sales in directly operated stores trended upwards again.
Revenue from Watches & Jewellery Houses climbed 13.1 percent on a comparable basis, with good performances at Boucheron and Pomellato. Revenue generated by Sport & Lifestyle activities advanced 16.5 percent as reported and 14 percent on a comparable basis, fuelled by an excellent performance from Puma, which reported record quarterly revenue of 1,008.9 million euros (1,104 million dollars). All geographic regions except Japan registered double-digit sales growth and footwear was the leading product category, with sales up by 24.8 percent on a comparable basis. However, Volcom’s sales continued to be weighed down by the difficulties experienced by specialist distributors in the US, despite a solid showing from the directly operated store network.
For the first time, Kering Eyewear – whose operation of the Gucci license for sunglasses and frames has been effective since January 2017 – is accounted for under Corporate and other. Kering Eyewear's total sales, before elimination of intra-group sales and royalties received by the brands, amounted to 112.9 million euros (123 million dollars) and net revenue for the period totalled 85.5 million euros (93 million dollars).
- Prachi Singh |
Puma's sales growth continued in the first quarter of 2017 with the company reporting an increase of 15.4 percent currency-adjusted or 18 percent reported to 1,005.1 million euros (1,093 million dollars). Net earnings improved by 92.2 percent to 49.6 million euros (53.9 million dollars) and earnings per share were up at 3.32 euros (3.61 dollars) compared to 1.73 euros (1.88 dollars) in the first quarter 2016.
Commenting on the first quarter trading, Bjørn Gulden, Chief Executive Officer of Puma said in a press release, “For the first time in the Puma history, we achieved sales exceeding 1 billion euros in a quarter. Our EBIT also developed very positively with a growth of 70 percent to 70 million euros. Therefore we have raised our outlook for the full year to low double digit growth in revenue and the full-year EBIT to be between 185 million euros and 200 million euros.”
The gross profit margin improved slightly by 30 basis points from 46.8 percent in the first quarter 2016 to 47.1 percent, which the company said was due to selective price adjustments and further improvements in sourcing.
The operating result (EBIT) increased by 70.1 percent to 70.2 million euros (76.3 million dollars), as sales grew stronger than operating expenses, supported by a slightly higher gross profit margin.
Puma raises FY17 outlook
In light of the strong first-quarter increase in sales and profitability as well as the positive business outlook for the current year 2017, Puma has raised the full-year guidance for its consolidated sales and operating result (EBIT). The management now expects that sales will increase currency-adjusted at a low double-digit percentage rate (previous guidance: currency-adjusted increase at a high single-digit percentage rate).
The guidance for the gross profit margin remains unchanged (improvement to approximately 46 percent; previous year: 45.7 percent). Operating expenses for the full-year 2017 are now expected to increase at a high single-digit percentage rate (previous guidance: mid to high single-digit percentage rate). As a consequence the operating result (EBIT) is now anticipated to come in between 185 million euros (201 million dollars) and 200 million euros (217 million dollars) against previous guidance of between 170 million euros (184 million dollars and 190 million euros (206 million dollars). In line with the previous guidance, the management still expects that net earnings will improve significantly in 2017.
- Vivian Hendriksz |
London - One of the biggest deals within the fashion industry is set to take place this year as luxury giant LVMH announced plans to buy fashion house Christian Dior for a 12.1 billion euros (10 billion pounds) and Christian Dior Couture for 6.5 billion euros (5.52 billion pounds).
The deal, announced Tuesday morning, sees the Arnault family making an offer on the publicly held Christian Dior shares it does not already own and regrouping the entire Dior brand within LVMH as part of its two-headed strategic plan to further solidify its luxury offering. The move sees LVMH, which currently owns Perfumes Christian Dior, buying the Christian Dior brand and its Haute Couture, women’s and men’s ready-to-wear lines, footwear and leather goods, uniting one of the most iconic fashion houses under one roof for the first time in decades.
LVMH to buy Christian Dior SA
Through Semyrhamis, a company held by the Arnault family, the group will file a simplified mixed public offer on Christian Dior shares it does not own, which are equal to 25.7 percent of the share capital. The primary offer sees the group offering 172 euros per share in cash and 0.192 Hermes International shares for each Christian Dior share, with the deal being completed by two secondary offers which will be cash-only and Hermes International shares only at 260 euros per Christian Dior share and 0.566 Hermes International shares per Christian Dior share respectively.
The public offer values each Christian Dior share at 260 euros, and represents a premium of 14.7 percent over Christian Dior closing share price as of April 24, 2017, as well as an 18.6 percent premium over the 1 month average share price. This offer values the remaining Christian Dior shares at 12.1 billion euros (10 billion pounds). Revenue at Christian Dior has doubled over the last five years, as profitability has soared during the same timeframe. For the last 12 months which ended March 31, Christian Dior reported revenue in excess of 2 billion euros, with an operating profit of 270 million euros.
“This project represents an important milestone for the Group. The corresponding transactions will allow the simplification of the structures, long requested by the market, and the strengthening of LVMH’s Fashion and Leather Goods division thanks to the acquisition of Christian Dior Couture, one of the most iconic brands worldwide,” said Bernard Arnault in a statement. “They illustrate the commitment of my family group and emphasize its confidence in the long-term perspectives of LVMH and its brands. I am delighted to announce this project today and thus continue and reinforce the development of LVMH in France and worldwide.”
The announcement led to an increase in LVMH shares on Tuesday morning, which rose 2.9 percent to 221 euros during early trading. The move sees LVMH merging the entire Christian Dior brand together, which could create great synergy between Christian Dior and Parfums Christian Dior, which is set to be be accretive to LVMH earnings per share once the deal is complete. The luxury conglomerate expects the filing of the proposed offer to be completed by the end of May 2017, after which the acceptance period of the offer would last three weeks.
“Reuniting Christian Dior Couture and Christian Dior Parfums, so one brand under one leadership, has to be a good thing for LVMH shareholders,” said Stephen Mitchell, head of strategy for global equities at Jupiter Asset Management, during a Bloomberg Radio interview. “It does clean up the corporate structure.” Couturier Christian Dior first founded his eponymous fashion house in 1946, thanks to support from businessman Marcel Boussac. He later expanded his namesake brand into fragrances, watches and accessories and began opening stores in New York, London and Tokyo. Iconic designers such as Pierre Cardin and Yves Saint Laurent also worked for the leading fashion house early in their careers, as Christian Dior himself passed away in 1957.
Photo: Christian Dior and Dior.com
- Meenakshi Kumar |
Future Retail’s shares are set to rally 22 per cent in the next 12 months. The stock has surged 128 per cent since January. Sales may jump 25 per cent this year as the company adds to its chain of 1,000-plus stores. Future Retail swung to a profit in the nine months ended December. Revenue jumped almost fourfold. The company has exited non-core businesses and hived off its supply chain infrastructure to a group firm as part of efforts to lower debt. At the same time, it bought smaller chains, including a dairy products retailer Heritage Foods, to expand in the convenience stores segment. This area is expected to grow 43 per cent annually in the next five years.
Future Retail’s after-tax profit aims to touch Rs 895 crores by March 2020, driven by a 31 per cent yearly growth in revenue from convenience stores in the period and a decline in inventory levels. Future Retail is a food-to-fashion retailer. Heritage, Nilgiris, Easyday are the high potential convenience formats which could contribute to the company’s bottom line in the future. Investors are warming up to India’s brick-and-mortar retailers at a time when their online rivals face an intense discount war and eroding valuations.
- Angela Gonzalez-Rodriguez |
ANALYSISProfitable farms, higher demand from local apparel producers and retailers, higher consumer’s confidence levels and a profitability rebound based on growing margins are the main reasons why wool and cotton fibres are enjoying historic highs.
Thus, while the price of wool has risen to its highest point since April 2013 and is currently priced at circa 13 dollars per kilo, an intensified use of fine wool for high end fashion has proved a boon for countries such as Australia.
Wool price from strength to strength as production becomes profitable
Many have pinpointed how the global wool industry has changed recently as more wool is being grown and therefore available in the retail market. Stuart McCullough, managing director of The Woolmark Company explained in an interview with ‘Fibre2Fashion’ that "In the last decade, the (wool) price has gone up and that has been the biggest change.”
“Farmers are now becoming profitable. This is a big and important change as they are now making money; that’s because a decade ago they were not making any. They are keeping the industry alive," concluded McCullough.
Another trend noticed by analysts is how textile buyers are progressively moving away from China and going back to Western countries such as Italy. "Before, given (brands) were paying much less, they turned a blind eye to quality," said to Reuters Giovanni Germanetti, director general of Italian yarn and textile producer Tollegno 1900. For Germanetti, the return of clients responds to their seeking for better value for money.
On a related note, Alessandro Brun, professor at the MIP Milan Politecnico, said brands are also motivated by concerns over product traceability, and want to avoid potential reputational risk.
Growing interest from apparel producers in fine wool lifts Australian’s production…and prices
The wool market is enjoying quite an upwards ride in Australia, as the fibres trading on the Eastern Market Indicator (EMI) price has seen seven consecutive weeks of climbing prices per kilogramme per week.
On average, the current price range for EMI is above 25 percent higher than a year ago. Providing greater detail, Chris Wilcox, the chief executive of the National Council of Wool Selling Brokers of Australia, reported the EMI has jumped 181 U.S. dollar cents per kilo in United States dollar terms since the Christmas recess and by 219 U.S. dollar cents per kilo since the start of the 2016/17 season. Wilcox highlighted that ultra fine and superfine wool had received the major gains.
In this regard, Australian Wool Exchange senior market analyst Lionel Plunkett said the record prices had brought previously unwilling sellers to market, pushing the amount of wool being held in storage to historical lows.
“The lack of wool on hold has severely limited any large increases in weekly quantities, enabling the market to gradually rise without any extra supply pressure and this sale was no exception,” Plunkett said, adding that “With clearance rates consistently in the 90 per cent region the amount of wool on hold will continue to stay at these levels.”
The FashionUnited Wool Price Index shows how the raw material’s prices fluctuate over time
Cotton prices set to rebound as demand exceeds production for the first time in years
But wool is not the only fibre that has experienced a recent price rebound. While cotton prices had been declining for several years, they began to pick up again in 2016, when consumption exceed production for the first time in 6 years.
According to data analysed by FashionUnited Business Intelligence, cotton has reached price levels – over 82 dollars per pound - not seen since July 2014.
As indicated in theFashionUnited Cotton Price Index , cotton prices have gained 2.8 percent in India and 3.9 percent in Pakistan, only rising 1.1 percent in China where spinners were anticipating a lower level in cotton prices after the return of official sales from state reserves as of March, 6th.
One growth driver extensively highlighted by market experts consulted by FashionUnited is Meanwhile, more conscious consumers demand textiles sustainably manufactured, pushing manufacturers to source organic cotton, more costly but with a much smaller environmental impact.
The global organic cotton market was worth USD 15.76 billion in 2014/15 and shows stable growth, according to Textile Exchange. As more people are beginning to factor in sustainability when buying clothing and other products, using organic cotton can give companies an edge over their competitors.
Looking into how these moves will affect consumers, Citi senior analyst Craig Woolford said at the beginning of the year that the recent decline in clothes prices won't last because cotton and wool prices are rising.
The FashionUnited Cotton Price Index reveals how the popular fibre’s price evolves on a monthly basis.
Photo: via Wikimedia author: Kimberly Vardeman