Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Wealth creation benefits everyone. But when those who have do better than those who do not, luxury stocks — you would think — should outperform. Investors, however, should be focusing on a different sort of inequality. In the context of slowing luxury spending globally, the sector’s companies are increasingly divided between the haves and the have-nots.
Hermès and Kering are a case in point. In a sector that has so far posted an organic revenue decline of 2 per cent, according to Luca Solca at Bernstein, Hermès defied the slowdown with an 11.3 per cent rise in third-quarter sales. Kering’s were down 16 per cent, with the flagship Gucci brand down a quarter. Following multiple profit warnings, the group led by François-Henri Pinault now expects full-year operating profits of €2.5bn — down almost half compared with last year. Such diverging fortunes are reflected in stock market valuations, with Hermes trading at almost three times Kering’s forward price/earnings multiple.
Advertisement
In part, this highlights the two companies’ different customer bases. With handbags costing tens of thousands of pounds, Hermès caters to the really wealthy, rather than the merely very well-off. These tend to fare better in a slowdown. Gucci’s streetwear phase, meanwhile, attracted a whole host of younger and potentially less affluent customers. Gucci’s troubles may also reflect a more complex brand DNA. Known for its over-the-top designs, it is more prone to fashion risk when the zeitgeist turns against it.
A reversal in Gucci’s fortunes looks a long way off. What the company calls “newness” — its latest launches — already accounts for 35 per cent of sales. Their impact has clearly not been sufficient to offset a major decline. To make matters worse, Kering’s second-largest brand, Yves Saint Laurent, is also spluttering. That leaves analysts pushing out their forecast recovery. Citigroup expects consensus operating profits to be cut by 10 per cent for 2024 and 2025.
Prolonged poor operating performance comes alongside rising leverage. Kering has splashed out on several acquisitions of late, including 30 per cent of Valentino for €1.7bn, perfumer Creed for €3.5bn, and a series of snazzy shops. Net debt is expected to reach 2.5 times ebitda in 2025, according to UBS analyst Zuzanna Pusz. It may rise further should Kering acquire the 70 per cent of Valentino it does not already own, a commitment that was valued at €4bn in its annual report and that is governed by put and call options. The gulf between the top and bottom of the luxury sector is likely to rise further.
LACED is a footwear website which functions as an online marketplace for shoe sellers.
The website functions in a similar way to Depop but has a particular focus on footwear.
Born in London
Laced was founded in London in 2018 by its CEO Chris Gibbons.
Advertisement
The brand aimed to make accessing the latest sneakers as “easy as possible”.
Chris explained: ”At the heart of the Laced platform and mission lies our belief that everyone, wherever they are, should be able to go online, purchase luxury goods and have them delivered to their door in the easiest way possible.”
Laced stocks some of the biggest brands in footwear, including Nike, New Balance and UGG.
Read More on the internet
Is the brand legitimate?
The brand describes itself as the “middleman between buyer and seller”.
Advertisement
It has a Trustpilot score of 4.3, which suggests most users agree that it is a reliable website.
THE world’s longest suspension bridge has finally been given the go-ahead – linking Italy to its biggest island.
First announced back in the early 2000s, the €14.6billion (£12.1billion) bridge would join the mainland to Sicily.
A contract was given for the bridge back in 2009, only for the plans to be scrapped in 2013.
But it has finally been given the go-ahead, with construction to start this year.
The Società Stretto di Messina and the Climate, Infrastructure and Environment Executive Agency of the European Commission (CINEA9) – the construction company behind the bridge – has signed a new funding proposal.
Around €25million of the infrastructure will be covered by the EU – 50 per cent of the executive design costs.
Advertisement
Read more on world’s biggest
The bridge was initally estimated to cost €10billion, although a forecast conducted by the Treasury’s Economic and Financial Document (DEF) said it would be closer to €14.6billion.
This includes €13.5billion for the bridge itself and another €1.1billion for better rail-links between Sicily and the south of Italy.
It hopes to open until in the 2030s, with no confirmed date.
Matteo Salvini, Italy’s infrastructure minister said it had “always been one of his goals” to build the bridge.
Advertisement
Currently, travellers have to fly to the island, or get a ferry, taking anything between 20 minutes to 24 hours.
But the new bridge would have both road and rail links, stretching 3km (1.8 miles) long.
First look at completed £80m River Clyde bridge as it gets set to open
There would be three vehicle lanes going in each direction, with just two used by the public and one would be for emergency situation.
As many as 6,000 cars and trucks could use the bridge every hour.
Advertisement
And train line would run throughout the middle, with as many as 200 a day.
The bridge project has faced both criticism and support.
Critics of the project fear it is badly placed, being in Italy‘s earthquake zone as well as concerns over the migration of birds between Africa and Europe.
Advertisement
However, supporters of the bridge say it would help the country’s struggling economy, especially in the south.
It’s not the only record-breaking attraction being built.
THE best supermarket to buy your Christmas dinner essentials has been revealed in a blind taste test.
BBC Good Food has announced the results of its yearly Christmas Supermarket Taste Awards, with winners across 21 categories.
Over 185 products from 13 supermarkets were taste tested, with judges submitting a score out of 10 for each product.
Starters, mains, alternative main, best gammon, pigs in blankets and cranberry sauce were all snaffled up by the expert panel.
Vegetarian main, vegan main, desserts, mince pies and mulled wine also featured in the final list.
Advertisement
Lily Barclay, content director at Good Food, said: “The Good Food team of experts started testing in August for the mammoth Good Food Christmas Supermarket Taste Awards, creating the ultimate guide to festive food buys.
“This Christmas the supermarkets have outdone themselves with the range and quality on offer, and our selection of winners will help save time in the kitchen, so you can focus on celebrating the festive season with family and friends.”
M&S took the crown for the most winners in this year’s blind taste test, scooping seven wins out of the 21 categories.
Waitrose was awarded five wins while Asda and Aldi tied for third place with three wins each.
Advertisement
Upmarket retailer Booths scooped the gong for best smoked salmon, with its strong oak smoked Scottish pack, worth £8, scoring well.
Judges said the thick slices and “crowd-pleasing” flavour were ideal for Christmas sandwiches.
Waitrose won the the award for best turkey crown, with its Glorious Treacle Glazed Turkey Crown, weighing in at 2.5kg and costing £60, commended for its herby chestnut stuffing and salty bacon.
Waitrose Christmas Showcase 2024
Morrison’s “The Best” pigs in blankets, which cost £3.25 for a 210g pack, had a “touch of sweetness, with pleasing crispy bacon and good texture”, judges said, as they gave it top spot in the pigs in blankets category.
Advertisement
The best cranberry sauce went to M&S, whose fresh 400g pack on sale for £3.25 was highlighted for its “pleasing tartness”.
Winner of the Christmas cake category went to Waitrose’s No.1 Hand-Decorated Matured Rich Fruit Cake weighing in at 1.5kg.
BBC Good Food Judges said the £18.50 cake had a generous amount of marzipan and “pretty, impressive appearance”.
Shoppers after something a bit different this Christmas will want to divert their attentions to the winner of the best alternative Christmas cake 2024.
Advertisement
Asda’s Ginger and Caramel Snow Cake took the top podium, with judges noting its “charming” appearance.
Shoppers can pick up the cake, which serves 16 people, for just £12.
Judges voted M&S’ classic mince pie, which is £4 for a pack of six, the winner of the “classic” mince pie award.
They said each one had a “beautiful, unique design with a well-patterned top, buttery pastry with a good mouthfeel”.
Advertisement
Boozy shoppers will want to go for Asda’s Extra Special Mulled Wine, which emerged as the judges favourite in that category.
You can snap a 75cl bottle up for a fiver.
This is the full list of 21 winners in this year’s BBC Good Food Christmas Supermarket Taste Awards:
1. Best smoked salmon: Booths Strong Oak Smoked Scottish Salmon, 200g (£8.00) 2. Best hot canapé: M&S Collection Barber’s Extra Mature Cheddar & Ham Hock Scone, 290g (£7.50) 3. Best turkey crown: Waitrose Glorious Treacle Glazed Turkey Crown, 2.5kg (£60) 4. Best alternative Christmas main: Aldi Specially Selected Wagyu Wing Rib, 1.8-2.8kg (£24.99 per kg) 5. Best gammon: Aldi Specially Selected Sugar Baked Crackling Gammon Joint, £18.99 6. Best pigs in blankets: Morrisons The Best pigs in blankets, 210g (£3.25) 7. Best cranberry sauce: M&S Cranberry Sauce (fresh), 400g (£3.25) 8. Best vegetarian main: Joint winner – Waitrose Ultimate Plant-based Festive Wellingtons, pack of two (£7.50), Joint winner – M&S Collection Handcrafted Honey Glazed Vegetable & Barber’s Cheddar Galette, 400g (£12.50) 9. Best vegan main: Joint winner – Tesco Finest Roasted Vegetable & Cranberry Star, 340g (£6) Joint winner: Aldi Plant Menu Vegan No Turkey Crown, 490g (£4.99) 10. Best Christmas cake: Waitrose No.1 Hand-Decorated Matured Rich Fruit Cake, 1.5kg (£18.50) 11. Best alternative Christmas cake: Asda Ginger and Caramel Snow Cake, serves 16 (£12) 12. Best Christmas pudding: Waitrose No.1 Jewelled Cointreau & Cranberry Christmas Pudding, 800g (£15) 13. Best showstopper dessert: Co-op Irresistible Spiced Gingerbread Crown, 600g (£8) 14. Best trifle: M&S Sticky Toffee Trifle, 1kg (£15) 15. Best free-from dessert: M&S Chocolate & Orange, Fruit & Nut Brownie, 630g (£12.50) 16. Best classic mince pies: M&S Collection Mince Pies, pack of six (£4) 17. Best flavoured mince pies: Morrisons The Best Cherry Bakewell Mince Pies, pack of four (£2.75) 18. Best gluten-free mince pies: Waitrose Mince Pies, pack of four (£2.90) 19. Best vegan mince pie: Asda Free From 4 Mince Pies 220g (£2) 20. Best biscuit tin: M&S Collection Shortbread Tin, 400g (£10) 21. Best mulled wine: Asda Extra Special Mulled Wine, 75cl (£5)
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
On paper, Arm and Qualcomm look like natural allies in some of the chip industry’s most important new markets.
As Arm’s low-power chip architecture moves into big new areas like data centre servers, PCs and cars, Qualcomm is one of the companies leading the charge, designing chips based on Arm’s technology. The two are natural allies as they look to move beyond their strongholds in the mature smartphone market.
Advertisement
So when Arm sued Qualcomm more than two years ago in a licensing dispute, it clouded an important chip industry partnership. From the start, this looked like a spat over how to divide up the royalties pie from the use of Arm technology. The way this battle has played out, however, has fed growing concerns that the fallout from the fight will not be so easily contained.
Investors and the tech world have been mystified and more than a little concerned about why the two appear as far apart as ever. Barring a last-minute settlement, the dispute is heading for the unpredictability of a jury trial in December. The anxiety became more acute this week as Arm turned the legal screws on its rival, hammering both companies’ stocks.
The fight revolves around Qualcomm’s quest to supercharge its move beyond the smartphone market with its 2021 acquisition of Nuvia, a chip start-up. Nuvia had designed its own “cores”, or the basic building blocks for processors, based on Arm’s technology.
Qualcomm gave up making its own cores nearly a decade ago and instead, like most in the industry, buys cores that are designed by Arm itself. So the Nuvia deal introduced an element of competition to the relationship: Qualcomm would still rely on Arm’s underlying chip architecture, but over time would become less dependent on Arm’s cores.
Advertisement
In its legal complaint, Arm has claimed that Qualcomm has no rights to use the Nuvia technology without Arm’s permission — an apparent attempt to force Qualcomm to the bargaining table and extract higher royalties.
The twist this week came as Qualcomm unveiled its first, well-received smartphone chip based on Nuvia’s technology, as well as its use of the technology in cars. Arm’s response a day later was stunning in its severity. It issued official notice that it plans to cancel a key licence to Qualcomm in 60 days’ time, cutting off that company’s ability to ship chips based on anything other than Arm-designed cores.
The cancellation would not affect many current Qualcomm products, but the company has clearly staked its future on Nuvia’s technology and its rollout of a new generation of products is already well under way. And if Qualcomm cannot ship chips, many device makers that use its products would grind to a halt.
Perversely, perhaps, the stock market’s immediate reaction was to punish Arm more than Qualcomm, wiping 9 per cent off its stock price after its licence cancellation threat, compared with the 3 per cent drop for its rival. True, Arm depended on Qualcomm for 10 per cent of its revenue last year, meaning its own business could be dented if it follows through with its threat. But for Qualcomm, the immediate risk of losing its so-called architectural licence from Arm, and seeing its technology road map blocked, looks far more extreme.
Advertisement
The drastic legal threat appeared to stir deeper anxieties that this dispute may not be headed for a smooth resolution and a return to business as usual. Besides the budding competition between the two, the relationship soured after Qualcomm became one of the main opponents to Nvidia’s attempted acquisition of Arm, which was eventually blocked by regulators.
The legal escalation seemed to stoke wider concerns. Arm, which receives only tiny royalties for each device that ships with its technology, has been bent on increasing how much it gets paid. The sight of it levelling such a legal weapon against a key customer is hardly likely to make others feel secure.
There has also been uncertainty about how Arm’s business model will evolve as it looks to become a more important supplier to its customers. Qualcomm’s move away from buying Arm’s cores highlights Arm’s heavy reliance on a handful of big customers.
Whatever the worries, it is Qualcomm that faces the most immediate and drastic threat from this legal showdown. Arm’s latest salvo looks like a clear signal that it wants to settle, rather than head to trial. If the two sides can find a new way to carve up the pie, it would calm a lot of nerves.
You must be logged in to post a comment Login