Daily News Digest- 7th Jan'14

Thought of the Day:

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Following made the Headlines:

India:

• Good Day! Vinita Bali to Exit Britannia in March: Vinita Bali, the long-serving managing director of Britannia Industries, is set to leave the company in March, two years before her contract expires, and will be succeeded by Varun Berry, the biscuit maker’s current chief operating officer. Berry, who joined Britannia last year, will take over the top job as the company prepares to script a new growth strategy focusing on high-margin products and innovations amid stiff competition from ITC, Parle and Danone. “Bali did a good recovery job for Britannia when she came in as the chief executive in 2005. But Britannia Chairman Nusli Wadia feels she has had a long stint and a new person should take over to compete in the new environment,” said a person aware of the development. A company insider said Bali had told Wadia and the board last year that she wanted to step down and pursue interests in the non-profit sector. But she was asked to stay on till her successor, Berry, found his feet in the company. The company is expected to announce the organisational changes and a new management structure by the month-end. An email sent to the Britannia spokesperson did not elicit a response.

• ONLINE RETAILER HIGH ON FASHION: Flipkart has launched its own fashion brand and could also acquire another online apparel company as it seeks to increase sales of high-margin products on its portal. Among the companies most likely to be under consideration are two fashion portals, Zovi and YepMe, which sell exclusively on the web. “They have reached a scale that will interest Flipkart,” said a person with direct knowledge. If successful, this acquisition will be the second in two years for India’s largest online retailer which bought electronics portal Letsbuy in 2012. Last year, Flipkart raised equity funding of 2,200 crore, creating a pool of capital that it can dip into for possible acquisitions. Sachin Bansal, co-founder of Flipkart, declined comment, only saying “2014 will be an important year for us”. His company expects to record sales of $1 billion, about 6,200 crore, by 2015. “This will mean looking at private labels and also opening up our marketplace to more and more sellers,” he said. Typically, the margins in private label fashion can be upwards of 60% while for branded apparel it can go up to 45%, making it an attractive category for online companies seeking to cut losses. In contrast, electronics offer margins of less than 10 %. Flippd, a range of men’s apparel and footwear launched last week, will soon be expanded to cover other categories such as women’s wear, sunglasses and watches by the end of this quarter.

• Danish Co Bestseller may File for Multi-brand Retail: Denmark-based fashion house Bestseller may soon apply for entry into India’s multi-brand retail segment, according to a person aware of the development. Bestseller owns the brands Jack & Jones, Vero Moda and Only, which it sells in India through franchisee partner Bombay Rayon Fashion. The retailer will be approaching the Department of Industrial Policy and Promotion (DIPP) with its plan for a multi-brand apparel and fashion venture with Prashant Agarwal, managing director of Bombay Rayon, in the coming weeks, the person, who did not wish to be named, told ET. In the proposed venture, Bestseller will hold the permissible 51% stake while the rest will be held by Agarwal, he added. According to the DIPP website, Bestseller has already filed a proposal to invest in the country’s single-brand retail segment. Separate applications for the three brands were filed by Bestseller United Singapore, last week. The person quoted earlier said that since Bestseller has already agreed to comply with the 30% mandatory local sourcing as part of its separate applications for single brand retail business for Jack & Jones, Vero Moda and Only, the company will not have any issue with the 30% sourcing clause for the proposed multi-brand venture. Under the multi-brand venture, all three brands — Jack & Jones, Vero Moda and Only — would be sold under one roof. Jesper Stubiker, a spokesperson for Bestseller, declined to comment. Agarwal did not respond to ET’s emailed query on the development. If confirmed, Bestseller will become the second global retailer to seek a multi-brand retail licence after Tesco, the British retailer whose $110-million investment plan was cleared last month.

• Ronnie Screwvala-backed Unilazer Ventures to Buy 25% in EkStop Shop: Venture capital fund, Unilazer Ventures, said it would buy 25% of Mumbai-based online grocery retailer, EkStop Shop, for an undisclosed sum. Launched last year, Mumbaibased EkStop provides grocery, personal care, and stationery and joins online grocery shops such as BigBasket, Zopnow and Localbanya. “There is tremendous potential for the e-grocery space in India. A disconnected last mile experience for the customer, high customer life time value, and an ability to build local monopolies in the top metros of India — are all exciting opportunities for this kind of business to grow exponentially,” said Abhishek Shah of Unilazer Ventures. Ronnie Screwvala-backed $100 million (. 620 crore) fund of Unilazer Ventures in the past has funded ventures such as Zivame, Lenskart and MeraCareerGuide. “The investment by Unilazer will further help us build best inclass technology, bring in key hires and increase reach and depth to the consumer,” said Sumat Chopra, co-founder and CEO of EkStop.com. An alumnus of Insead Business School, Chopra cofounded EkStop with batch-mate Shaurya Mehta. Food and grocery constitutes about 70% of India’s total retail market and is estimated at about $500 billion (. 31.1 lakh crore), as per a study by advisory firm Technopak. Less than 1% of it is through online sales.

• India’s Luxury Market Poised for Growth: Assocham: India’s luxury market bucked the lingering economic slowdown and swelled to $8.5 billion in 2013 as savvy consumers continued to open their purses on high-end products and services, an Assocham study found. “Be it a family holiday to exotic locations in Europe or US, sporting branded jewellery, driving around in top-end SUVs, going out for a fine dining in five star hotels, India’s luxury life style market has remained largely affected by the economic slowdown in 2013,” Assocham Secretary General D S Rawat said. He reasoned that a young demographic profile, increasing number of millionaires and aspirational integration with the globe are all among the driving factors for the luxury markets in India. Since high-end products and lifestyles are not price elastic, they are not much affected by the slowdown.

International:

• Japan Uniqlo same-store sales up 1.1 pct: Fast Retailing said on Monday that same-store sales at its Uniqlo clothing chain in Japan rose 1.1 percent in December from a year earlier as the colder weather pushed up sales of winter clothing. Asia's top apparel retailer gets the bulk of its profits from Uniqlo Japan. (Reporting by Chang-Ran Kim; Editing by Shinichi Saoshiro)

• US Senate confirms Janet Yellen to lead Federal Reserve: The US Senate has confirmed Janet Yellen as the next head of the US Federal Reserve. Fifty-six senators voted in favour of Ms Yellen with 26 opposed - many members of the chamber were unable to attend the vote because of bad weather. It was the last procedural hurdle for the 67-year-old before taking over from outgoing chair Ben Bernanke on 1 February. She is the first woman to lead the central bank in its 100-year history.

• Retail Shares Slip 0.8% on Wall Street: The retail sector has yet to post a gain on Wall Street in 2014. The S&P 500 Retailing Industry Group surrendered 0.8 percent to end today’s session at 927 — the sector's third-straight decline. That performance was weaker than the 0.3 percent shed by both the Dow Jones Industrial Average and the S&P 500, which closed at 16,425.10 and 1,826.77, respectively. The teen sector continued to feel much of the pressure. Aéropostale Inc. was down 1.9 percent to $8.99 and Abercrombie & Fitch Co. off 0.6 percent to $32.59 while Ascena Retail Group Inc., owners of the Justice tween chain, traded down 0.2 percent to $22.54. The Buckle Inc. and Urban Outfitters Inc. both declined 0.1 percent, to $52.36 and $37.96, respectively, while American Eagle Outfitters rose 0.5 percent, to $15.05, and Pacific Sunwear of California Inc. was up 0.3 percent to $3.65. The Wet Seal Inc. posted one of the strongest gains of the day in the retail world, rising 2.2 percent to $2.77. Brean Capital analyst Eric Beder lowered his projections for American Eagle, Abercrombie, Aéropostale and Wet Seal following what he described as a “disastrous year for the teen players….with the holiday season capping off the misery.” Beder has a “buy” rating on American Eagle, Abercrombie and Wet Seal and a “hold” rating on Aéropostale. An abbreviated roster of U.S.-based retailers, including Buckle and Zumiez Inc., will report sales results for December on Thursday. A number of retailers who no longer report same-store sales on a monthly basis are expected to provide updates on holiday sales results throughout the week. Shares of both The Men’s Wearhouse Inc. and Jos. A. Bank Clothiers Inc. rose as the battle between the company's entered a new phase. Men's Wearhouse raised its offer to buy Bank to $57.50 a share, from $55, bypassing Bank’s board by going directly its shareholders. Shares of Bank were up 4.5 percent to $56.87 while Men’s Wearhouse’s rose 2.2 percent to $51.68. Bank said it would consider the elevated offer and urged shareholders to take no action until it made a recommendation to shareholders on or before Jan. 17. 

• Men's Wearhouse Sets $1.61 Billion Offer for Jos. A. Bank: Shrugging off an earlier rejection, The Men’s Wearhouse has taken its offer to acquire archrival Jos. A. Bank Clothiers directly to Bank’s shareholders. Early Monday morning, the Fremont, Calif.-based Men’s Wearhouse, which has been mired in a back-and-forth battle to acquire or be acquired by Bank since the fall, commenced a cash tender offer to acquire all the outstanding shares of Bank for $57.50 a share, or about $1.61 billion, 4.5 percent higher than the $55 a share, or $1.54 billion, offered in November and rejected by Bank’s board on Dec. 23. Unless extended, the offer to buy Bank’s shares is scheduled to expire at 5 p.m. Eastern Standard Time on March 28. MW said Monday’s offer represents a 52 percent premium over Bank’s unaffected enterprise value and a 38 percent premium over the company’s closing price on Oct. 8, the day before Bank made public its proposal to acquire Men’s Wearhouse, the opening fusillade in what’s become a war of men’s wear titans. Men’s Wearhouse delivered notice to Bank that it will nominate two independent director candidates for election to the company’s board at its 2014 annual meeting. These are former Macy’s East chief executive officer Arthur Reiner as well as John Bowlin, a former president and ceo of Miller Brewing Co. In a research note issued after the offer, Stifel Nicolaus analyst Richard Jaffe noted that the two seats on the Bank board up for election this year belong to Bob Wildrick, chairman of the Hampstead, Md.-based specialty retailer, and Neal Black, president and ceo. Because it is directed at Jos. A. Bank shareholders, rather than its board, this sweetened offer could also give Men’s Wearhouse a detour around the tougher “poison pill” adopted by Bank’s board last week. Provisions for the shareholder rights plan would now kick in when a hostile suitor — or a group of hostile suitors working in concert — acquires 10 percent of Bank’s shares, half the threshold level previously in force. Deployment of the measure would allow shareholders to purchase shares at a discount, substantially elevating the price for the company and diluting a hostile suitor’s holdings.

• Cherokee, Target Extend License to 2017: Cherokee Inc.’s licensing agreement with Target Corp. has been extended into 2017. Target exercised its right to renew its license with Cherokee through Jan. 31, 2017. In a modification of the previous arrangement, Target now will have the right to renew the agreement for two-year periods, rather than the one-year periods previously covered, provided that Target has met the minimum royalty payment of $10.5 million for the preceding year. As before, Target is required to provide written notice of renewal at least one year prior to the end of the current term. In a recent modification of the pact between the two companies, Target’s minimum annual royalty payment rose to $10.5 million from $9 million and was reworked to apply to sales of Target’s growing roster of stores in Canada as well as its units in the U.S. The two firms have a separate agreement covering Target’s license for Cherokee branded school uniforms and another that applies to Target’s rights to the Liz Lange and Completely Me by Liz Lange brands, which Cherokee acquired in September 2012. In the three months ended Aug. 3, royalties from Target accounted for $4.1 million, or 54.6 percent of Cherokee’s total revenues of $7.5 million. “It’s gratifying to receive recognition for the great strides the Cherokee brand has made with Target,” Henry Stupp, chief executive officer of Cherokee, told WWD. “Target is a fantastic partner that provides great product for its guests. The changes in our agreement show Target’s commitment to the brand, and we think our decision to open an office to better service the relationship shows how we’re dedicated to better servicing the relationship.” The revised terms of the Cherokee-Target deal were disclosed in a Form 8-K filed by Cherokee with the Securities and Exchange Commission. Stupp said Cherokee was pleased with its acquisition of Liz Lange and that its recent licensing deal with Mahindra Retail Pvt. Ltd. to introduce the brand in India through Mahindra’s Mom & Me stores and its Web site was “the start of what will be an international rollout for the brand.”