News As We Read- 6th May'13

Thought of the Day:

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Following made the Headlines:

India:

• Foreign Retailers Coming to India won’t have Anand: Commerce and Industry Minister Anand Sharma has said that foreign supermarkets wanting to enter India will have to make fresh investments in new back-end infrastructure and not acquire existing facilities of local companies. This would dash hopes of global retailers such as Walmart, which might have planned to buy out franchisee Bharti Retail’s back-end infrastructure along with the front-end Easy Day stores for speedy access to the Indian consumer. Sharma, widely regarded as the architect of the policy, also clarified that the cost of land and real estate will not be included in the mandatory $50-million investment on infrastructure and logistics over a three-year period — one of the conditions foreign supermarkets have to meet to enter India. “It is an additionality. Investments have to be in new back-end infrastructure, not in acquisition of existing ones,” Sharma said. Back-end infrastructure typically includes cold chain, warehouses, processing plants and logistical support, and is critical for the smooth functioning of a retail firm. In an hour-long interview to ET, Sharma ruled out any dilution of the conditions for FDI in multi-brand retail and said clarification, if needed, will be given on a case-by-case basis. Another stipulation that foreign retailers are finding hard to meet is the mandatory sourcing of 30% of all goods purchased from small and medium enterprises. Since the controversial FDI retail policy was notified in September 2012, no foreign multi-brand retailer has evinced interest in setting up shop due to lack of clarity on the numerous conditions attached to the policy. 

• Has the Tide Turned? P&G Takes Away Some Work from India: One of the world’s biggest technology spenders is having an outsourcing rethink that may result in some work moving back inhouse when contracts come up for renewal this year. Any decision by Procter & Gamble not to entrust a part of its information technology requirement to software services companies is bound to cause nervousness among Indian and multinational outsourcers. P&G, whose products include Tide detergent and Duracell batteries, is contemplating the shape and size of the $3-billion (. 16,000-crore) contracts that it awarded in 2003 to EDS, which is now owned by HP. People familiar with the US-based company’s plans said the reason for P&G’s rethink is that it wants to have direct control over crucial portions of the technology piece with implications for its competitive positioning. While P&G’s move does not indicate a trend against outsourcing, the fact that a major technology spender is considering such a move is not good news for India’s IT industry, which is forecast to grow just 12-14% in 2013-14. So far, the part US government-owned General Motors and credit card company American Express are the only other big MNCs that have taken outsourced work back inhouse. P&G’s decision to explore the possibility of reducing outsourcing comes at a time India’s $76-billion (. 4-lakh crore) IT exports sector is facing uncertainties in the US, its biggest market that contributes about 60% of revenues.

• Infiniti Retail to Launch Croma 3G Tablets: Tata group firm Infiniti Retail, which runs ‘Croma’ chain of consumer electronics and durables stores, is planning to expand its range of private label items by introducing 3G-enabled tablet within next two weeks and high-end refrigerators by Diwali this year. The company has already started offering affordable range of Croma-branded smartphones, which are sourced from China. “We are going to expand our offering in the private label segment by rolling out more products in coming days. We will introduce 3G tablet in the next 1-2 weeks,” said Infiniti Retail managing director and CEO Ajit Joshi. The company will source the tablets from China and Taiwan and they will be priced at 9,990, he added. Infiniti Retail at present sells Croma-branded 2G tablets, priced at 6,990. “We will also introduce high-end refrigerators under our private label. These will hit the market around Diwali,” Joshi said without sharing the possible price of the product.

• RCOM to Raise Call Rates In Discounted Plans: After increasing call rates, Anil Ambani group company Reliance Communications (RCOM) is now planning to raise tariff of its bulk discounted calling plans, said a senior official of the company. The company is reducing the available talktime on fixed larger plans and effective rate per minute in a range between 20% and 60%. “The thing to note is that we have not found any change in usage since our last price increase in October,” said Gurdeep Singh, chief executive, wireless business at Reliance Communications. All the company’s mobile users have been migrated to the 25% higher headline tariff plan that the company had initiated last year. It was the single-largest tariff hike implemented by the Anil Ambani company and the second bold step taken by the debt-ridden telco after it disconnected phone connections of subscribers who didn’t use their phones for two months, resulting in a drop of its customers. According to the new price revision, people enjoying lower tariffs through bulk plans, or packs as they are called, will now have to pay a higher price. An analyst, who didn’t wish to be named, said the increase should add nearly 4-5% to the Anil Ambani flagship company’s operating profit. The previous rise has added around 7% to the profit, but the full impact is realised in the April-June quarter, he added. As in the previous case, Singh said it will take 6 months to migrate all customers to the new tariff plans. RCOM tends to offer among the lowest rates in the industry and has lower average revenue per user than even some of its smaller competitors like Idea Cellular. However, Singh said the company is now no longer spending too much time on other parameters, and is instead focusing on the profitability per user aspect. In October, the company had revised its base price to 1.5 paise per second from 1.2 paise. Rivals such as Vodafone, Idea Cellular and Aircel did not respond to ET’s email query on whether they too are planning similar hikes. However, most of them do not have immediate plans to do so. “We have no plans to revise headline tariffs anywhere in India. Reduction of discounts and promotional offers is part of our ongoing strategy,” said a Bharti Airtel spokesman. In mid-2011, mobile phone companies began raising tariffs by about 20%, the first call rate hike after three years of savage price cuts. This process was done in a phased manner and was completed only in March.

• Pawan Hans May Enter Commercial Airline Business: State-run helicopter operator Pawan Hans is planning to enter the commercial airline business offering regional connectivity and has already received a go-ahead from its board, a top official has said. The New Delhibased firm, however, is yet to decide on the business model and the timeline for the proposed venture, the official said. The country’s largest helicopter company, which slipped into the red in the 2012 fiscal, has managed to turnaround with a 7-8 crore net profit (unaudited) in the past fiscal on account of higher efficiencies and cost-cutting. “Pawan Hans has a mandate from its board as well as the government to go for fixed wing aircraft operations. That is a very challenging opportunity for us,” said Pawan Hans chairman Anil Srivastava, who is also a joint secretary in the aviation ministry. Srivastava said plans are in line for the regional connectivity policy, which envisages providing regional air connectivity to support traffic at larger airports. The government is in the process of finalising a policy to promote the regional air connectivity and increase air services in the hinterlands.

International:

• April jobs report: US Hiring picks up: The U.S. economy seemed to be headed for a spring slowdown this year. Then the April jobs report was released Friday morning, and now some economists are doing a double-take. The economy added 165,000 jobs in April, according to the Labor Department. That was more than the 140,000 jobs economists expected, and it marked an improvement over March. The even bigger story, though, came from large revisions to earlier numbers. It's a common practice for the Labor Department to revise its data for the two prior months, and this time, those revisions showed an additional 114,000 jobs were added in the U.S. economy over February and March alone. Previously, March hiring had looked particularly weak, with only 88,000 jobs added that month. Now, the Labor Department says 138,000 jobs were added in March. February job growth, which had already looked solid, now looks even stronger. About 332,000 jobs were added in February, making it the strongest month for hiring since the Census hired temporary workers in 2010. The report goes a long way "toward soothing fears of another spring slowdown," said Paul Ashworth, chief U.S. economist for Capital Economics. Economists had been warning of a spring swoon for the third year in a row, this time driven largely by government spending cuts and global economic weakness. Retail sales slumped unexpectedly in March, the manufacturing sector stalled in April, and signs abroad point to a global deceleration. China's rapid economic growth has lost some steam and Europe is still mired in a recession. But those fears eased following the report. Stocks jumped. For the first time ever, the Dow topped 15,000 and the S&P 500 climbed above 1,600.

• Adidas Net Climbs 6% in Q1: Adidas Group improved its profit performance in the first quarter, with net income gaining 6 percent to 308 million euros, or $406.8 million. Gross margin increased 2.4 percentage points to 50.1 percent, the group’s “highest-ever” quarterly gross margin, which was above 50 percent for only the second time in its history. Adidas cited a positive impact from more favorable pricing, product and regional sales mix as well as a larger share of higher margin retail sales for the development. The sales picture was impacted by currency effects and particularly strong sales comparisons from the previous year fueled by UEFA Cup and Olympics-related business. Sales slipped 2 percent to 3.75 billion euros, or $4.95 billion, in the three-month period ended March 31.

• Francois Steiner Resigns CEO Post at Nicole Farhi: Francois Steiner has stepped down as chief executive of Nicole Farhi after a year in the role. The company said Friday that Steiner, a luxury goods veteran who took up the role last May, left due to personal circumstances that require him to spend time in Paris. Sion Kearsey, the managing partner of Kelso Place Asset Management, and Joanna Sykes, creative director of Nicole Farhi, will assume day-to-day management of the business. “The response to the new collections has been fantastic, and we’ve made great progress across the business,” said Kearsey. “I’d like to thank Francois for his contribution.”

• Joseph Wan to Exit Harvey Nichols: Joseph Wan, the longtime group chief executive officer of Harvey Nichols, is set to step down and the search is on for his successor, according to industry sources. A Harvey Nichols spokesperson said: “We are a private company and do not comment on internal matters.” Headhunters have already been hired to find Wan’s successor, according to a separate industry source. It remains unclear whether Wan will retire or take up another post within the parent company, Dickson Concepts International Ltd. Wan was hired as the store’s ceo in 1992, shortly after Harvey Nichols was acquired by the Hong Kong-based Dickson Concepts. He helmed the store throughout its Nineties heyday, and was part of the team that helped to take it public on the London Stock Exchange in 1996. The store was subsequently delisted in 2003, and is wholly owned by Dickson Concepts. During the Nineties and the Aughts, Wan oversaw the brand’s expansion into catering, namely the launch of the OXO Tower restaurant, bar and brasserie on London’s South Bank, and the store’s retail expansion into more U.K. cities, Saudi Arabia, Hong Kong, Ireland, Indonesia and Turkey.

• The Bellevue Collection Aims to Ramp Up Luxury: In the land of grunge, Gore-Tex and geeks, The Bellevue Collection is betting big on luxury. “I’ve been trying to make the case for luxury to come to the Northwest for 20 years,” says Kemper Freeman, owner and operator of The Bellevue Collection, a 4-million-square-foot, mixed-use complex 10 miles east of Seattle across Lake Washington. “When I said Bellevue Collection could be another North Michigan Avenue, people looked at me and said I was crazy. But we’ve got the critical mass. We get 22 or 23 million shoppers a year. We have one of Nordstrom’s highest-volume units, among its top three, and we have some of the best restaurants in the market,” added Freeman. He now has plans for a $1.2 billion, 2-million-square-foot expansion that he’s been pitching to designers and high-priced brands. At the heart of the project will be 200,000 square feet of retailing over three levels, with stores ranging from 3,000 to 20,000 square feet for the most part, though there could be a few retailers at 45,000 square feet or even as large as 70,000 square feet. Another 125,000 square feet for restaurants is envisioned. With some rearranging of the space or tenant departures, Freeman said, Bellevue Collection could also accommodate a luxury anchor such as Saks Fifth Avenue or Bloomingdale’s, but no such deals seem close.