News As We Read- 18th July'13

Thought of the Day:

Did you know?

Following made the Headlines:

India:

• No Easy Day for Bharti as Walmart Sheds Baggage: Bharti Retail has returned 17 properties, which it had leased across the country to open Easyday stores, back to landlords, a possible fallout of the newfound reluctance of ally Walmart to engage in frontend retailing in India for now, said three company insiders. Walmart, which operates a cash and carry joint venture with Bharti, had lobbied hard for the entry of foreign supermarkets into India, and was expected to be the first foreign retailer to set up shop in the country. It pumped in $100 million into Bharti Retail’s holding company in 2010, and after the government allowed foreign direct investment in the retail sector last year both companies had said they were natural allies for a front-end retail partnership. But people familiar with the situation said the world’s largest retailer has decided to go slow. The company, which is conducting an internal probe to check if its Indian unit violated US anti-bribery laws, does not want to open stores until it is able to put in place a foolproof compliance mechanism. Walmart, these people said, feared the process of procuring the dozens of licences needed to open stores in India would involve practices that would violate the provisions of the US Foreign Corrupt Practices Act (FCPA). The US government is investigating Walmart’s Mexico unit for bribing local officials, and the retail company could face a hefty penalty if found guilty.

• Heavy Rains Bring Coke to a Standstill: Coca-Cola’s sales volume growth in India crashed to 1% in April-June, its slowest quarterly growth in five years, as early and heavy monsoon rains across the country took the fizz out of the world’s largest soft drink company. This compares with the 20% year-on-year volume growth in the year-ago quarter. “India volume growth…reflects the impact of an earlier and heavier-than-normal monsoon season in 2013 and cycling a later-than-normal monsoon season in the prior year,” the Atlanta-based firm said in a statement announcing its Q2 results. The April-June quarter typically contributes 40% of the soft drink industry’s annual sales. Coca-Cola’s arch rival PepsiCo has not released its numbers, but experts say it would not have fared much better either as early rains played havoc in June for the . 14,000-crore aerated drinks industry in the country. “We don't ever recall such a bad month of June,” a top industry official said. “This month has deflated all the growth we achieved in April-May,” the person added. India received its heaviest rainfall in 12 years in June, according to the meteorological department, which also said the monsoon rains were likely to last through September. In fact, both Coca-Cola and PepsiCo have stepped up consumer promotions and trade discounts to push sales due to slow offtake in June.

• Italian Luxury Brand Furla to Ride a Superfast in India: Italian high-end accessories brand Furla plans to expand its presence in the Indian market once the government clears its joint venture with Genesis Luxury Fashion, a top official said. “We are yet to get a go ahead from the Foreign Investment Promotion Board of India to have a joint venture here. The moment it happens, our investments will be made at a super-fast speed,” Eraldo Poletto, CEO of the Italian firm, told ET. Poletto, 51, was in Delhi on an official visit.  Furla, known for its handbags and shoes, has sought the government’s approval to operate single-brand retail outlets through a 51:49 joint venture with Gurgaon-based Genesis, which currently runs two Furla stores as a franchisee and plans to open a third one in either Kolkata or Bangalore. The joint venture plans to invest about 13 crore in the first four years to open stores, with Furla bringing in 6.6 crore, according to the application submitted to FIPB. Poletto sees India as a unique market where one requires a lot of patience to establish a brand in the minds of people and expect financial returns. “The value of time here is different from anywhere else in the world,” he said. “I think a brand has to wait to evolve in India, but once it does the growth is faster.” He expects Furla stores in India to break even in 2-3 years of operations. The Bologna-based, family-owned brand is on an aggressive expansion drive in Asia. Earlier this year it announced a joint venture with China’s Fung Group to open 100 boutiques there in four years.

• Mirc Reorganises Business Strategy, Appoints New CEO: MIRC Electronics, manufacturer of Onida brand of consumer durables, on Wednesday said the company is re-organising and restructuring its business strategy to achieve market leadership. As part of this strategy, MIRC has appointed new Chief Executive Office Y V Verma to strengthen its team, the company said in a statement. Meanwhile, MIRC’s former CEO G Sundar has been elevated as Director (Strategy), where he would handle company’s strategy and financing of new businesses. Prior to MIRC, Verma was with LG Electronics as Director (Home Appliances), where he had scaled up the business of the South Korean major. According to the company, consumer durables market in India is highly competitive and dominated by the MNCs.

• SpiceJet phases out expat pilots on costly $: The falling rupee has made airlines act in an area where they have dragged their feet for years — phasing out expat pilots. Low cost carrier SpiceJet has brought down its number of expat pilots, all of whom are commanders, from over 100 a year ago to just 25 now. With an expat commander getting almost three times more than the average Indian commander’s monthly pay of Rs 5 lakh, the airline is looking at saving Rs 90 crore per annum. Even the remaining 25 expat commanders are set to be eased out by the end of this calendar year. Airline sources said the expats are now only for the Bombardier Q-400 aircraft, as being a new plane in India, there are not enough desi pilots for it. “The Boeing 737 fleet is being operated fully by Indian pilots for the past three months. We are now the only airline in India whose mainstay fleet is operated only by Indian pilots,” said the source. Airlines spend more on expat pilots for mainly three reasons: They have to be paid in dollars apart from being provided with accommodation here and free return ticket to their home countries every few months. “We were trying to phase out expats as per the aviation regulator’s guidelines but the rupee’s fall made us expedite the process. We did that by speeding up the training process of our pilots,” said sources.

• FMCG stocks rally, HUL surges 10%: Led by Hindustan Unilever (HUL), FMCG stocks on Wednesday surged as much as 10% on account of several factors, including normal rains as well as anticipation of strong quarterly earnings. HUL scrip closed at Rs 685 on the BSE after rallying 12% to Rs 699 — its 52-week high. It was the top gainer on both the key indices — sensex and nifty. Analysts said various factors including hike in prices by market leader HUL bolstered investor sentiment. Among other gainers were Dabur India (4.3%), Colgate Palmolive (2.8%), ITC (2.3%) and Tata Global Beverages (2.2%).

International:

• L'Oreal Misses Sales Growth Estimates: L'Oreal, the world’s largest cosmetics maker, fell in Paris trading after second-quarter sales growth missed estimates amid the weakest performance in North America for two years. The shares slid as much as 4.2% and were down 3.4% at €124.45 in morning, the steepest drop in France's benchmark CAC 40 Index. Sales rose 5.2% excluding acquisitions, disposals and currency shifts, Paris-based L'Oreal said on Tuesday after markets closed. That compared with the prior quarter’s 5.5% advance and the 5.4% median estimate of 13 analysts surveyed by Bloomberg. Comparable revenue growth in North America slackened for a second straight quarter to 4.5%, the slowest gain since the second quarter of 2011.

• Yahoo shares soar after strong results from Alibaba: Shares in Yahoo surged more than 10% on Wall Street after the firm reported soaring sales at its Chinese online retailer, Alibaba. Yahoo's quarterly results released late on Tuesday showed that Alibaba reported a 71% jump in quarterly sales to $1.4bn (£920m). That eclipsed Yahoo's overall performance which included a fall in 13% fall in advertising revenue. Started in 1999, Alibaba now has 25 businesses and employs 24,000 staff. By some measures it has become the world's biggest internet retail firm, bigger than Amazon or eBay. Alibaba is expected to sell shares on the stock exchange for the first time later this year. Given the company's strong growth analysts have been scrambling to raise their estimates given the company's strong growth. Investment bank Evercore Partners raised its valuation on Alibaba to $120bn, that is more than $100bn than Facebook was thought to be worth before it first listed on the stock exchange in May last year. Yahoo invested $1bn in Alibaba eight years ago in return for a 40% stake in the business. Now analysts estimate that half of Yahoo's value is accounted for by those shares of Alibaba.

• Formula 1 boss Ecclestone indicted on bribery charge: German prosecutors have indicted Formula 1 motor racing boss Bernie Ecclestone on a bribery charge. The charge relates to a $44m (£29m) payment to German banker Gerhard Gribkowsky of Bayern Landesbank, linked to the sale of a stake in F1. Mr Ecclestone denies bribing Gribkowsky, and says the money was intended to stop the banker from exposing him to a UK tax inquiry. Mr Gribkowsky was sentenced to eight-and-a-half years in jail in Munich. Speaking to the Financial Times on Wednesday, Mr Ecclestone said: "I have just spoken to my lawyers and they have received an indictment. It's being translated into English." "We are defending it properly. It will be an interesting case. It's a pity it's happened." Mr Ecclestone has six weeks to respond to the indictment, Formula One Group said in a statement.

• Todd Snyder to Open Tokyo Flagship: Todd Snyder is getting back into the retail business. The designer, who was senior vice president of men’s design for J. Crew before launching his namesake label two years ago, has signed a retail licensing deal with Anglobal Ltd. to open stores in Asia. A flagship is expected to make its debut in early spring in the Aoyama district of Tokyo, followed by another two to three units over the next three years. The publicly held Anglobal was founded in 1964 and counts Margaret Howell Ltd. as a wholly owned subsidiary. The company currently operates 103 Margaret Howell stores in Japan and Europe. “This has been brewing for a while,” Snyder said. “Two years ago we did a pop-up store in Japan, and we’ve always had a huge following there. The Japanese have always embraced us — 50 percent of our business is over there. They love America and Americana.” He said Anglobal approached him with the idea to open stores in Asia and they struck a deal. In addition to the 1,200-square-foot space the partners are searching for in Aoyama, Snyder said he hopes to open another unit in Tokyo, as well as two in the surrounding area. Snyder said he will design the store and it will be “modeled after a tailor shop.” The designer’s co-branded tailored clothing with Southwick will be the “major anchor” of the store, he said, and it will be mixed with sportswear items and pieces from Snyder’s other collaborations, including Champion and Bates Hats.

• Paul Stuart Bolsters Executive Ranks: Paul Stuart has created an executive leadership team. The Ivy League-inspired men’s and women’s retailer, which was acquired by its Japanese licensee, Mitsui & Co. Ltd., at the end of 2012, has made a couple of key hires as well as promotions designed to “assure a seamless and strategic extension of the Paul Stuart brand architecture as we pursue a myriad of growth plans and opportunities,” according to Michael Ostrove, president and chief executive officer. The former family-owned business had a very loose operating structure in the past, according to a spokesman. Ralph Auriemma, longtime designer of the company’s younger-skewed Phineas Cole label, has been named design director and will now oversee all product development for the retailer. Bob Green, a men’s wear veteran who was most recently president of Façonnable USA, has been named chief merchandising officer/general manager/general merchandise manager. Green, who has also served as executive vice president of sales and marketing for both Ermenegildo Zegna Corp. and St. John Knits, will be responsible for all new retail development, store management, staffing and merchandising. Thomas Mastronardi, president of Thomas Mastronardi and Associates, has been named chief marketing officer. Mastronardi, who spent the past 18 months consulting with the retailer as director of marketing, has also represented clients including Zegna, Canali, Lacoste, Isaia and Robert Talbott. At Paul Stuart, he will oversee all brand architecture, creative development and advertising. Michio Fujii, who spent more than two decades at Mitsui in Italy and Japan, has been named chief financial officer. All three executives report to Ostrove.