NZ and Aus
It’s all quiet at the moment — I don’t know — bit like watching paint dry out there. Buy more IFT I guess.
BAP — Bapcor, the aftermarket parts retailer, received a bid for $5.40 per share from Bain. No surprises given BAP’s slide downwards … it’s an NBIO, and it’s Bain, so no assurances that the offer will go through — but Bapcor has been a sitting duck for a while — margin pressures, supply chain pressures … it’s not all gravy… more like stone soup
Liquidations — Ocho Chocolate (great chocolate, not great finances?) pitching a liquidation to investors. Sign of the times…
DUR strong at 1.12, DRO at 1.36 (!) (near the billion dollar mark now!), Medadvisor at 0.43c…we have a bias in Aussie toward the small caps as the bigger boys feel “fully priced”. Aside from CSL, which has a division making bird flu vaccines. I don’t think bird flu is going to be the next COVID (I hope!) but noting the EU just ordered bird flu vaccines from CSL’s Seqirus… still like DUR plenty…
Booster — The FMA has filed civil proceedings against Booster Investment Management Ltd and several individual directors and senior managers. Relates to one of Booster’s subsidiaries, Tahi, which made significant investments in Booster Wine Group. Booster sez (in a statement on the NZX website):
“BIML strongly disputes FMA’s allegations and will defend itself vigorously. BIML does not accept any wrongdoing and stands by its robust investment practices and its decision to invest in the wine sector”
FX – Mexico election special
Think the Mexican elections and the related Peso sell-off feels a little overdone — an interesting trade may be MXNJPY … I made a very professional and detailed technical analysis below (follow me for more TA tips1)
Chanel owners took a big divvy
Say what you will of Chanel’s recent collections — but the Swiss brothers who own the company just paid themselves a $12.4bn dividend from profits taken over the last three years. That’s 12.4 billion, USD — or $20bn NZ (i.e. the NBR-estimated fortune of the Zuru dudes)2. I wouldn’t be getting too excited, though — it all feels a bit like the last of the summer harvest — Chanel’s collections haven’t looked good for a while and they can only increase prices on their bags so far. Plus, you know, even cowboys get the blues — recessions do hit the rich eventually. How many Chanel 2.55s does one gal or guy need? Remember — Chanel was essentially built up by Lagerfeld, who had the genius of the Zeitgeist — he understood the appeal of the model and the muse — in the 90s he had a coterie of the supermodels (Shalom Harlow, Claudia Schiffer, etc) and in the 2000s he had singers like Cat Power front at shows (the kids call it “indie sleaze” now). Fashion is about people. Clothes are secondary. I suspect this is one of the main reasons why NZ fashion is in such dire straits — has anybody seriously considered Karen Walker3 as a proper designer responding to what’s around her? Or, say, Burberry?
And that brings me to today’s main topic — Burberry. It’s trading fairly cheaply (and haven’t I been telling you how much I love multiples??) and its stock price has been in the toilet for some time. Here’s the P/E. It’s cheap, fam, but not that cheap —
I mean there are OTHER things which are just as cheap, like Kering. You can buy Kering – both on a NTM and LTM basis – for about the same multiple that you can buy a single-brand company like Burberry.
What would you rather — Kering (Balenciaga, St. Laurent, Gucci, etc) or Burberry? One has a +20% EBIT margin while the other lags in the low teens. They have the same cadence but not the same ability to generate cash flow. I would rather buy a company that pays me out a 24% EBIT margin at a 18x fwd multiple than a company that pays me out a 14% EBIT margin on the same multiple.
Let’s look it from a revenue CAGR perspective. One compounds at +7% like a thicc boy and the other compounds at an anemic +1.00%.
A few things — first of all — why does Burberry suck? Short answer — it’s a heritage outerwear brand trying to be a fashion label (nothing wrong with being a heritage outerwear brand — look at Moncler!)
Another answer: They made ludicrously capacious bags. “What’s even in there, huh? Flat shoes for the subway? Her lunch pail? I mean, Greg, it’s monstrous”
Another answer: no matter how much the British press tries to push it, designer Daniel Lee’s collections feel like Marc Jacobs redux from 2008. They’re not good. You end up with a brand that has flagging sales, questionable relevancy, and margins well behind its competitors. Why bother buying it?
Ages ago I looked at Ferragamo, the Italian brand, and looking back it was a similar kind of case — very niche brand, a designer who didn’t quite “get” the DNA of the brand (going back to Lagerfeld — not everybody could do what he did), and in the case of Ferragamo, the margins are even slimmer.
Not all luxury brands are alike — and the smaller houses, unfortunately, tend to suffer from a lack of scale and margin. Burberry is a good brand — but it is an outerwear brand. Paying 3.2bn for the whole thing (if it were to be taken private) still feels like a tall order for an outwear brand — could be sold but hard to know who’d be interested in buying it, save private equity dudes. Sticking to Christian Dior (CDI), Kering, Richemont and Brunello…leave the small fry to others…
Please don’t, but the govt of Mexico hasn’t changed much … I think the sell-off is a bit overdone — don’t think she is going to socialise the entire govt but again trading is risky, etc etc
People always ask me why I write about fashion and this is kind of why — it’s ridiculously profitable when done right. Status and people willing to pay for it. Great dynamic.
Designer du jour to public service workers in Wellington everywhere