Author: Mei Ling Tan

  • Time for China’s smartphone brands to bloom

    Time for China’s smartphone brands to bloom

    Like many urban Chinese consumers, Shenzhen civil servant Gao Jian has had a long-held belief that the quality of domestic smartphone brands paled in comparison with foreign brands, especially Apple. But in December, Gao joined the growing number of mainland consumers who have made the switch from Apple’s iPhone to a premium Android smartphone from a major Chinese brand. He bought a Mate 20 Pro, the flagship model from the country’s largest smartphone supplier Huawei Technologies.

    “Its design and cameras are better than what I expected,” Gao said. “Also, iPhones have become increasingly unaffordable.”

    His experience reflects the broader success of the Chinese mobile phone industry in smashing people’s perception that domestic suppliers are only good for inexpensive, low-quality products.

    That stereotype has beset many Chinese brands in the home appliances, consumer electronics, personal computer, car and mobile phone markets, where products from more established brands in the US, Japan or Europe were preferred by mainland consumers for many years.

    But brands like Haier Group Corp, Lenovo Group and, more recently, Huawei, have expanded their operations, increased research and development, and made advanced products to change that impression around the world.

    China is now home to some of the most successful smartphone brands, which rival the likes of Samsung Electronics, Apple and LG Electronics.

    Shenzhen-based Huawei, the top global supplier of telecommunications network equipment, was ranked the world’s second biggest smartphone vendor – behind Samsung and ahead of Apple – for the second consecutive quarter in the three months ended September 30, according to research firm IDC. Xiaomi Corp and Oppo took the No 4 and 5 spots in the same quarter.

    The emergence of Chinese smartphone brands on the global stage has mirrored the rising competitiveness of the country’s telecoms network equipment suppliers, which have won market share with value-for-money offerings as well as on heavy investments in research and development.

    The gains have also sparked increasing pushback by the US, which is persuading its allies to boycott Chinese telecoms gear suppliers such as Huawei on grounds of national security.

    With the world’s biggest internet population and smartphone market, China had as many as 300 domestic mobile phone companies about three years ago. Cutthroat competition reduced that number to about 200 last year, as Chinese consumers bought fewer smartphones and the economy grew at a slower pace.

  • Axiata slides 5% in early morning trade on tax bill

    Axiata slides 5% in early morning trade on tax bill

    Axiata Group Bhd saw some selling pressure in early morning trade on news that it had been hit with a capital gains tax bill of RM2.16bil by the Nepalese Supreme Court. The stock lost as much as 20 sen or 5.1% in early morning trading on Friday to a low of RM3.70. At 9.30am, the counter was down 14 sen or 3.59% to RM3.76 a share on the back of 1.57 million shares traded.

    Analysts said the news report by the Himalayan Times yesterday came as a negative surprise, which may impact the group’s FY19E earnings forecasts.

    Kenanga research made no changes to its FY18-19E earnings forecast pending its upcoming 4Q18 results but lowered its target price to RM4.50 from RM4.60 previously.

    “All in, we are keeping our Outperform call for now in view of its relatively decent valuation (Forward EV/EBITDA of 7.2x vs. peers of 12-13x) coupled with a stronger Celcom and earnings recovery at XL.

    “Bargain-hunting opportunity could potentially arise on any share price weakness due to the recent hiccup. We advocate investors to start accumulating the share at c.RM3.70 level,” it said.

    PublicInvest research said its core earnings forecasts remain unchanged but headline profit could see a sharp decline if Axiata paid the capital gains tax in FY19F.

    “Although our core earnings forecasts and Neutral call remain unchanged, we believe share price would react negatively to this news due to uncertainties and the potential downside to headline profit,” it said.

    It maintained its target price at RM3.85.

    In its response to news reports, Axiata said in a statement that it is yet to receive the judgment and order of the Supreme Court and is yet to receive any details of the order.

    “Ncell, Reynolds, and Axiata UK were given the full clearance by the Large Tax Payers Office of Nepal [LTPO] of its obligations to withhold any CGT payment on behalf of the Seller in relation to the Transaction via the letter from LTPO dated 4 June 2017, following the full and final payment made by Ncell, albeit under protest on the basis that CGT is not applicable on offshore transactions and even if applicable, any shortfall on payment is the responsibility of the Seller,” it said.

    The group said it would provide further updates upon receiving the order of the Supreme Court.

     

  • Astro seen benefiting if Android box is banned

    Astro seen benefiting if Android box is banned

    Astro Malaysia Holdings Bhd is the clear winner if the government moves to ban the sale of Android set-top-boxes (STBs) in the country as this could possibly halt or slow down its declining subscriber base and lift its average revenue per user (ARPU), according to HLIB Research. It was reported that the government has set up a task force to consider banning the sale of Android STBs, mirroring Singapore’s move last month.

    The rapid sale of Android STBs in Malaysia has hampered the development of Pay-TV in the last two to three years, HLIB Research analyst Khairul Azizi Kairudin said in a note.

    He said this is evident by Astro’s declining premium subscribers who opted to shift to Android STBs and other digital platforms (both legal and illegal).

    “In Malaysia, Astro appears to be the most impacted player with the rapid sales of Android STBs as evident by its declining premium subscribers in the past three years. However, we note that Astro has managed to slow down the subscriber loss with NJOI,” he added.

    Nevertheless, he noted that despite the ban on Android STBs, Astro would still face competition from legal streaming platforms such as Netflix.

    While Singapore took three years to review the ban of Android STBs, which includes amending its Copyright Act, Khairul expects a shorter timeframe for Malaysia as media companies have mooted the idea in the past two years due to the disruptive impact.

    “We believe the government has started the discussions on the ban by setting up a task force to review the current law,” he said.

    Additionally, he said HLIB Research views Telekom Malaysia’s (TM) recent announcement that their latest Unifi package would not be bundled with Unifi TV subscription due to changing consumer trends as a positive for Astro as this could assist the latter to expand their subscriber base.

    Astro controlled 77% market share of Pay-TV market in Malaysia and the rest is controlled by TM through Unifi TV.

    Khairul said should the ban on Android STBs material, it would be a positive catalyst for the lacklustre media sector (especially for Astro) which is being hampered by the digital disruption.

    “For now, we maintain our ‘underweight’ rating on the media sector. Following the recent surge in Astro share price, we downgrade Astro from ‘buy’ to ‘hold’ with an unchanged target price of RM1.70.

    “Nevertheless, Astro’s earning prospect remain intact on the back of its stable advertising expenditure outlook and coupled with generous dividend payment of 5% yield,” he added.

  • Gucci unveils fragrances collection ‘The Alchemist’s Garden’

    Gucci unveils fragrances collection ‘The Alchemist’s Garden’

    Gucci has revealed its luxury fragrances collection – The Alchemist’s Garden – with oud, amber, violet, iris, mimosa, rose and woods as the seven scents. The Alchemist’s Garden collection has seven scents – oud, amber, violet, iris, mimosa, rose and woods.

    The design of the bottles is inspired by vintage apothecary, pharmacy jars and the first perfumery containers, resonating with the nostalgic theme of the collection. All the bottles are white except for oud, which is black, and rose, which is in a shade of blue chosen by Michele.

  • Nintendo launches flagship store in Tokyo

    Nintendo launches flagship store in Tokyo

    Nintendo is opening a Tokyo flagship store, marking the iconic Japanese company’s first-ever domestic retail outlet. During Nintendo’s latest Corporate Management Briefing, the president of the Nintendo, Shuntaro Furukawa, announced the game company would be opening a store in the Japanese capital in 2019.

    The executive said that plans are set for Nintendo Toyko to be located in the tentatively named ‘Parco’, which is yet to be opened and will bow in the Shibuya district. The Nintendo store in Japan will have its own floor in a new department store and is targeted at teens and commuters.

    “We are hoping [the store] will be a new point of contact between consumers and Nintendo that a wide range of people, regardless of age, gender, or experience with games can enjoy,” explained Furukawa.

    The new store also hopes to attract shoppers to Nintendo Switch, which is struggling to draw a wider swath of users, according to Bloomberg. Last month, Nintendo cut its shipments forecast for the console, which can be used at home or on the go.

    “In addition to selling products such as video game systems, software and character-based merchandise, we plan to host events and offer opportunities to play games, and are preparing to make this shop a new base for communicating Nintendo information in Japan. We will announce further details on each of these initiatives at a later date.”

    Looking forward, Nintendo is also planning to open exhibits at Universal theme parks in Osaka, Orlando and Hollywood.

    Additionally, the company is looking to participate in more e-sports tournaments, where gamers get together and compete in stadiums

    Nintendo opened its first store in New York as Pokemon shop in 2005 in the city’s Rockefeller Centre, and has since rebranded as Nintendo New York.

    Nintendo Tokyo is scheduled to open in the fall of 2019.

  • From Gucci to Dolce & Gabbana: racism in fashion continues?

    From Gucci to Dolce & Gabbana: racism in fashion continues?

    Luxury fashion is all about breaking codes, creating a new, irresistible message that captivates consumers. But some of the globe’s top brands have raised eyebrows with designs that have seemingly racist undertones. The latest instance of that was Italian fashion designer Gucci, which produced a black wool balaclava jumper with an oversized collar that pulls over the chin and nose. It includes a slit where the mouth is, ringed with what look like giant red lips.

    Its similarity to blackface prompted an instant backlash from the public and forced the company to apologise publicly on Wednesday.

    Gucci also withdrew the offending garment from sale on websites and stores. It said the incident would be “a powerful learning moment for the Gucci team and beyond”.

    But the question persists: how can fashion houses that thrive on detail miss such critical social cues?

    Prada similarly withdrew a monkey bag charm that recalled blackface in December, saying it “abhors racist imagery.” And Dolce & Gabbana issued a video apology after one of the designers made insulting remarks about Chinese people in a private chat discussing the questionable depiction of a Chinese model in a campaign.

    “Luxury brands used to be able to get away with provocative and eccentric ads that push the boundaries of our society and culture in the name of being creative and cutting edge,” says Qing Wang, a professor of marketing at Warwick Business School in the United Kingdom.

    “However, a long list of recent incidents have caused public outrage, suggesting that era is now gone, or that luxury brands have lost touch with public sentiment. What used to be considered ‘creativity’ has now turned into ‘bad taste’ or even ‘racist’.

    He cited other fashion fails that evoked stereotypes, including Dolce & Gabbana’s “slave sandal” in its spring-summer 2016 collection and a recent Burberry campaign for the Chinese New Year that was compared to Asian horror films.

    While many of these incidents have caused immediate social media backlashes, the longer-term impact will take time to measure, and will depend on the brands’ reaction and future sensitivity.

    Dolce & Gabbana was forced to cancel its Shanghai runway show after the insulting remarks were publicised, top Asian influencers backed out of campaigns and Chinese websites dropped their line – a warning sign from a region that holds great sway in global luxury sales.

    The blackface images have particular resonance in the United States, where the governor of Virginia and his attorney general have been caught up in a scandal over blackface incidents from their college days in the 1980s. The offensive depictions are reminiscent of travelling entertainers from the 19th century, who would paint their faces black to portray African characters in a ridiculous and mocking fashion, spreading racial stereotypes along the way.

    Italian sociologist Michele Sorice at Rome’s Luiss university says that the evocation of blackface by Italian fashion houses signals “a mixture of good faith, and ignorance”. He notes that Italian society still isn’t fully aware of the racial charge in some words and images.

    “I imagine that they don’t truly think they are racist,” Sorice says. “I think they didn’t have the instruments to understand that these images are archetypes that were used to contrast the concept of blackness and make them ridiculous. I think that many simply don’t know. It is a cultural issue.”

    Paolo Cillo, a marketing professor at Milan’s Bocconi University, says the designer’s intent may have been taken out of context and amplified, and she credits Gucci with acting swiftly to quell the controversy.

    “I wouldn’t stigmatise fashion,” Cillo says, comparing the fashion designer process to artistic pursuits like filmmaking, painting or music. “There are artists in the world of culture that did more outrageous things and no one ever said a thing. There is a perception that fashion is ephemeral, or commercial. But from my point of view, it is not. It reflects the times, like all other artistic forms.”

    While the fashion world has been at the forefront of addressing sexual norms – Gucci has been redefining genderless dress codes under Alessandro Michele – it has lagged behind other industries in taking on social issues such as racial tolerance, climate change or women’s empowerment, according to Larry Chiagouris, a marketing professor at Pace University, US.

    “It is not clear why this is,” Chiagouris says, “but the evidence clearly points to the fashion industry’s need … to catch up with the rest of the world.”

  • India central bank makes surprise interest rate cut

    India central bank makes surprise interest rate cut

    India’s central bank unexpectedly lowered interest rates and, as anticipated, shifted its stance to “neutral” from “calibrated tightening” to boost a slowing economy after a sharp fall in the inflation rate. The monetary policy committee (MPC) of the Reserve Bank of India cut the repo rate by 25 basis points to 6.25%, as predicted by only 21 of 65 analysts polled by Reuters. Most polled respondents expected the central bank to only change the stance, to neutral.

    Four of six members of the MPC voted to cut the rates, while all six voted for a change in the stance.

    “Investment activity is recovering but supported mainly by public spending on infrastructure,” the MPC said in a statement. “The need is to strengthen private investment activity and buttress private consumption.”

    Rupa Rege Nitsure, chief economist at L&T Financial Services, called the central bank moves “the perfect policy response in the current circumstances.”

    Indian shares pared gains while 10-year bond yields slid 5 basis points after the surprise rate cut.

    The Indian rupee weakened to 71.69 to the dollar immediately after the announced but strengthened soon after to 71.42.

    The NSE index was up 0.04% at 11068.05 while the 10-year benchmark government bond yield fell to 7.51% from Wednesday’s close of 7.56%.

    India’s last rate cut, to 6.00%, was in August 2017.

    Also, in Manila, the Philippine central bank kept its benchmark interest rate steady for a second straight meeting , saying inflation risk had fallen on lower crude oil and food prices.

    The Bangko Sentral ng Pilipinas kept the rate on its overnight reverse repurchase facility The central bank paused its tightening cycle in December to allow its five straight previous rate increases, totalling 175 basis points, to work their way into the economy.

    The rate increases appear to be having their desired effect as inflation has started to cool since it hit a near-decade peak of 6.7% in September and October last year.

    The decision to stay on hold was based on the central bank’s view that lower oil costs and stabilisation in food prices would bring inflation under control and could see it back on target as early as March, when it could fall to below 4%.

  • Decathlon opens Singapore megastore

    Decathlon opens Singapore megastore

    French sports chain Decathlon opened its largest store in Singapore late last month, as the European retailer continues to build upon its popularity in the Asian market. Dubbed ‘Decathlon Singapore Lab’, the new experience store is located at Stadium Boulevard and covers 5,000 square metres of retail space, making it the biggest Singapore store. It is also opened 24 hours.

    In addition to Decathlon’s inventory of sports apparel, footwear and accessories, the new ‘Lab’ boasts a series of ‘experiential’ features including an indoor area of four different running surfaces wherein shoppers can test running shoes before purchasing, as well as a hiking path with a gravel surface for the testing products in-store.

    At a media briefing last month, Decathlon Singapore chief executive Yves Claude said the store has been named Decathlon Singapore Lab “because a lab is a disruptive and innovative place where we test new solutions.”

    The store also hosts an Active Health Lab in partnership with Sport Singapore, where users can take a free health assessment and there are free-to-play areas next to the store as well.

    To speed up the delivery process for shoppers, Decathlon has established an in-house conveyor built that transports products as soon as they are ordered online. Shoppers can also order online and collect their items at their preferred store within two hours for free.

    “We have to give new reasons for customers to come back to our store,” added Claude.

    The store is the latest in a string of ‘Decathlon Experience’ stores being rolled out across Singapore and is the fourth in the nation’s offering.

    Decathlon also has a 4,000-square-metre showroom in Joo Koon and two click-and-collect stores.

    In May last year, Decathlon signed a memorandum of understanding with Sport Singapore, which marked the announcement of this new Decathlon in Kallang.

    “We share a common purpose, which is to make sport accessible. They come with a good price point, high-quality products, (and) most importantly, they come with ideas on how to improve participation,” said Lim Teck Yin, Sport Singapore CEO.

  • The Shoppes at Marina Bay Sands hit record high in 2018

    The Shoppes at Marina Bay Sands hit record high in 2018

    The Shoppes at Marina Bay Sands has capped its most successful year ever, breaking revenue records in 2018 and strengthening its leading position as the luxury shopping destination in Singapore. The luxury mall, which enjoys an occupancy of 95.4%, rang in a record mall revenue of US$179 million last year, a 7 per cent rise against the same period in 2017 – by far its best performance since opening. In 2018, retail tenant sales at The Shoppes jumped 19 per cent to US$1,898 per square foot from the preceding year.

    The Shoppes also kept its top position in tourism shopping, capping a record year to represent an estimated 25 per cent of the tax-free tourist market in Singapore. This is based on industry metrics that track tax-refunded tourist receipts.

    John Postle, Senior Vice President of Retail, Marina Bay Sands, said, “2018 has been an exceptional year for the mall, as we not only achieved our highest sales revenue in history, but also solidified a leading position in tourism shopping. This is so rewarding, given the competitive retail landscape and growth of online shopping.”
    The performance is also the result of an ongoing retail remix strategy that started in 2012, which saw the mall double its footprint with luxury brands in the form of duplexes, as well as expansion into luxury childrenswear.

    This strategy, coupled with attractive programming such as late-night shopping, in-store exclusives, and one of the most generous loyalty programmes in Singapore, has resulted in 120,000 shoppers walking through the doors of the mall daily. This includes locals as well as its biggest tourism markets of China, Indonesia and Japan.

    Jan Moller, Country Managing Director, Singapore & APAC Sales, Global Blue, said, “As one of Asia’s leading shopping destinations, The Shoppes at Marina Bay Sands continues to outperform other luxury malls in Singapore to own the greatest share of inbound tourist spend in the luxury sector in 2018.”

  • Oil price drops as global economic concerns grip market

    Oil price drops as global economic concerns grip market

    Oil price fell about 2 percent on Thursday as the market was weighed down by concerns that global demand growth would lag in the coming year. A rebound from late December lows seemed to stall amid worries that a trade war between the U.S. and China would continue, weighing on demand. The market also contended with the possibility that oil producers would not adhere strictly to cuts agreed to last year.

    Brent crude futures fell $1.06 a barrel, or 1.7 percent, to settle at $61.63. U.S. crude futures fell $1.37 a barrel, or 2.5 percent, to settle at $52.64.

    “The correction is stalled, mainly on concerns about demand growth,” said Gene McGillian, director of Market Research at Tradition Energy in Stamford, Connecticut. “There seems to be uncertainty about what is going to happen with the trade talks, with global economic growth and demand in the coming year,” he said.

    In particular, he said, the market is worried about whether demand is sufficient to absorb growing crude production from the U.S.

    “Supply fundamentals have increasingly been turning supportive in recent weeks, but against this the market still worries about the yet-to-be-realised – if at all – impact on demand from weaker macroeconomic fundamentals,” said Ole Hansen, head of commodity strategy at Saxo Bank.

    Though the United States published robust jobs data last week, global markets remain nervous after China reported the lowest annual economic growth in nearly 30 years in January. That focuses yet more attention on the outcome of U.S.-China talks to end the trade war between the world’s top two economies.

    The oil price also came under pressure as weekly data published by the U.S. Energy Information Administration on Wednesday showed an unwelcome increase in stocks of crude oil.

    A decline in OPEC production and a squeeze on supply from Iran and Venezuela because of U.S. sanctions have led many analysts to forecast that the market will be balanced in 2019.

    The oil price is showing a 20 percent gain so far this year.

    Price support is provided by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) to tighten the market.

    Saudi Arabia, the world’s top oil exporter, told OPEC it had pumped 10.24 million barrels per day (bpd) in January, two OPEC sources said, a deeper cut than targeted in the supply pact. The kingdom pumped 10.643 million bpd in December.

    “We believe that financial markets may be overestimating the risks of a global recession,” said Jean-Pierre Durante, Head of Applied Research at Pictet Wealth Management.

    “Moreover, lower oil prices – prices were between 14 percent and 18 percent lower in January than their 2018 average – are likely to stimulate economic activity and oil demand, particularly in emerging markets.”

    U.S. sanctions against Venezuela’s oil industry are expected to freeze sales proceeds of Venezuelan crude exports to the United States.

     

  • Chinese demand for skincare products boosts sales of French cosmetics company L’Oreal

    Chinese demand for skincare products boosts sales of French cosmetics company L’Oreal

    Strong Chinese demand for luxury skin creams helped Lancome owner L’Oreal beat sales forecasts in the fourth quarter, as did a pickup in its lagging mass market division. Like rivals including US-based Estee Lauder, the French maker of Maybelline and Urban Decay make-up has thrived on strong demand from Chinese shoppers in recent years, especially for its higher-end products.

    Sales of L’Oreal’s top-flight brands exceeded analyst expectations in the last three months of the year thanks to this market, despite cooling economic growth in China, and fears over a Washington-Beijing trade war.

    Some heavy-hitters in the luxury fashion industry, such as LVMH’s Louis Vuitton, have also reported encouraging momentum in Asia. At L’Oreal Asia-Pacific overtook North America as its biggest region last year.

    But L’Oreal, which is due to detail its results at a news conference on Friday, also faces a challenge to keep improving revenue growth in other areas, including its consumer products unit, home to brands like Garnier shampoo.

    Sales rose 2.8 per cent in that division on a like-for-like basis in the fourth quarter, which strips out currency effects and acquisitions, up from 2.3 per cent a quarter earlier.

    That helped boost overall sales at the firm, up 7.7 per cent like-for-like and head of forecasts for a 6.4 per cent rise, and which came in at 7.1 billion euros ($8.1 billion).

    Yet the mass market segment still slightly lags the performance of peers like Nivea-maker Beiersdorf and Dove soap owner Unilever.

    L’Oreal said it was also facing a sluggish market in France and the United Kingdom.

    While the latter only makes up around 3 per cent of sales, the company has joined others in preparing for Britain’s potentially chaotic exit from the European Union, and has started stockpiling cosmetics.

    The company said it still expected to outperform the broader beauty market in 2019, though the tone of its outlook was a tad less bullish than last year, forecasting “growth in both sales and profits” rather than “significant growth”.

    For 2018 as a whole, the company’s operating profit rose 5.3 per cent to 4.7 billion euros, giving a margin of 18.3 per cent of sales, up from 18 per cent at the end of 2017.

    One of L’Oreal’s biggest shareholders with a 23 per cent stake, Switzerland’s Nestle, has come under pressure from an activist investor to sell off its stake in the French cosmetics firm. The firms have yet to signal whether such a move was in view.

  • The shares of Lululemon athletica have risen 90% in 2018

    The shares of Lululemon athletica have risen 90% in 2018

    Over the past 12 months, shares of lululemon athletica have risen 90%. The most recent surge came after an upgrade on 2018 holiday season guidance, helping the athletic-wear stock rebound from a slump brought on by a broad stock market sell-off at the end of the year. Lululemon has enjoyed several tailwinds. Athleisure (that is, activewear and sports-inspired clothing for all situations) has continued to grow in popularity, and consumers have been generously spending — to the tune of 4.9% more on clothing alone in 2018, according to the U.S. Census Bureau. After a blockbuster run, though, Lululemon may have a difficult time repeating that same success in the new year.

    It is easy to see why shares of the clothing company have come roaring back. During the all-important holiday shopping season, management updated revenue guidance to between $1.14 billion and $1.15 billion, up from previous guidance of $1.12 billion. Earnings per share also got an upgrade to a range of $1.72 to $1.74, up from a range of $1.64 to $1.67.

    The results are impressive, but Lululemon has been measured by how it approaches expansion. Through the third quarter of 2018, there were 426 physical stores, up a net 22 from the start of the year. Instead of growing primarily by new openings, the company has instead benefited from a surge in same-store sales at existing stores — which increased 6% during the third quarter — as well as directing traffic to the online store. Direct-to-consumer sales were 25.3% of revenue in the third quarter, compared with 21.2% in the same period in 2017.

    Lululemon is not alone in the athleisure-wear category, though. Gap and its Old Navy and Athleta brands continue to grow their presence in sportswear, and the largest sports-only chain, Dick’s Sporting Goods, has also launched its own branded lines of clothing. Yet in spite of the competition, Lululemon has continued to resonate with new and existing buyers, both here in the states and abroad.

    The maker of stretchy pants and other sports-inspired clothing could nevertheless continue to run higher. After all, Lululemon has momentum on its side, both on the top and bottom lines. Even should sales growth take a breather, management has said it thinks gross profit margin on product sold could continue to expand, especially as a result of the emphasis on direct selling online and new higher-margin products such as coats and sweaters.

    On the other hand, there is reason for investors to give pause before jumping on the bandwagon. Even after earnings nearly doubled in 2018, the stock still trades at a premium, largely because share performance matched that of earnings. The trailing-12-month price-to-earnings (P/E) ratio currently sits at 52.5, a metric that only slightly improves to 43.2 when using free cash flow — a better measure of profitability, as it factors only for basic operating expenses and capital expenditures and excludes items such as depreciation and amortization.

    On a one-year forward basis, the P/E is currently at 40. Paying for decades’ worth of profits that haven’t yet been realized only makes sense if the bottom line continues to expand at breakneck speeds, and that’s what is implied in the rich valuation. Thus, there’s little room for error, and if there’s any slowdown at Lululemon, the stock could suffer losses at current levels.

    Of course, for those looking to the long term, Lululemon looks like a solid bet on the apparel industry of the future. Nevertheless, after renewed investor optimism over new fourth-quarter guidance, the stock is too rich for my taste.

  • Emirates to fill pilot gap with exodus from Etihad, Norwegian airlines

    Emirates to fill pilot gap with exodus from Etihad, Norwegian airlines

    Emirates, the world’s biggest long-haul airline, may feed its appetite for new pilots with recruits from ailing neighbor Etihad Airways and cash-strapped discounter Norwegian Air Shuttle ASA, according to an internal memo from the Gulf carrier. Hong Kong Airlines has also contacted Dubai-based Emirates about opportunities to temporarily transfer some cockpit crew, according to the document. Pilots at the unit of beleaguered HNA Group are Airbus SE-rated, meaning they could be trained to fly the Mideast company’s A380 superjumbos.

    “The current situation with several airlines in financial difficulty globally leaves Emirates in a good position to be sourcing and selecting good-quality pilots,” the memo says.

    It said the airline recruited 52 pilots last month, the highest number since August 2016, and that the number of viable applications it’s receiving “is higher than the number of candidates that can be invited.”

    Emirates declined to comment on the communication, which was dated Jan. 29 and appeared to be a meeting report. A spokeswoman said there are sufficient pilots for current operations, though the airline will “continue to welcome qualified candidates.”

    Norwegian Air said it’s not uncommon for members of any company’s workforce to seek opportunities elsewhere. Hong Kong Airlines couldn’t be reached during the Chinese New Year holiday, while Abu Dhabi-based Etihad didn’t respond to requests for comment.

    Hiring Challenge

    Emirates faces an annual hiring challenge to meet the needs of its expanding global network. President Tim Clark said last April that there would be a shortfall of 100 to 150 flight crew over 2018’s busy summer travel season.

    According to the memo, 499 crew have been deemed eligible to join from this coming April through the end of 2019.

    Applications from Norwegian Air and Etihad have been spurred by redundancies at the airlines, according to the Emirates memo.

    Norwegian, heavily indebted after one of the fastest growth spurts in aviation history, resorted to a 3 billion kroner ($354 million) rights issue last week after British Airways parent IAG SA walked away from a takeover bid.

    The Scandinavian carrier is also closing six bases and cutting routes to stem losses, proposing that pilots transfer to other locations.

    Etihad last June offered captains and first officers a two-year secondment, or temporary transfer, to Emirates. In January, it revealed plans to cut 50 pilot posts as it cancels jet orders and shrinks operations to stem losses.

    The Emirates memo said Hong Kong Air has identified a 10 percent surplus in pilot numbers. The carrier, whose debt-laden owner HNA is offloading $20 billion in assets, is being sued by a Macau-based lender for failing to pay $20 million in principal and interest, according to a court filing last month.

     

  • Chinese tourists prefer Australia, Japan and Singapore: Survey

    Chinese tourists prefer Australia, Japan and Singapore: Survey

    Mainland Chinese tourists prefer visiting Australia, Japan and Singapore over Hong Kong, a survey has found, citing a preference for outdoor and nature activities in these places. Consultancy firm Kantar, which polled 300 people from Beijing, Shanghai, Guangzhou and Shenzhen, found that 52 per cent of respondents were interested in Australia as a holiday destination, followed by 40 per cent for Japan, 38 per cent for Singapore, and 35 per cent for Hong Kong.

    Some 22 per cent said they were keen to visit Taiwan, compared to 21 per cent who favoured South Korea, 15 per cent for Indonesia and 9 per cent for India.

    “Urban Chinese holidaymakers are looking for a diversity of experiences – nearly nine in 10 say that having lots to do is either important or very important to them,” stated the report, released last month.

    “The dominance of nature in the minds of urban Chinese leisure travellers may, at face value, present a challenge for retailers, malls, theme parks and other places.”

    The report stated that the trend could be an indication for businesses on potential growth directions.

    Despite Hong Kong not being the top destination for Chinese tourists in the poll, official figures showed visitor arrivals in the city – driven mainly by mainlanders – soared to a record high of 65.1 million last year, up 11.4 per cent from 2017.

    About 51 million tourists from across the border visited the city in 2018, a rise of 14.8 per cent from the previous year.

    But the Tourism Board has admitted that 2019 could be a “bumpy and unpredictable” year. Chinese tourists now see the city as a short-term destination, and they prefer Southeast Asia or Europe for long holidays.

    The board said Chinese tourists also craved “in-depth” travel in Hong Kong rather than the usual hotspots. One of the board’s strategies this year will be to attract mainland and overseas visitors to places such as the Geopark, the Ha Pak Nai mudflat in Yuen Long and Lau Fau Shan.

    The Kantar report also stated: “Hong Kong outperforms Singapore on most factors, but when it comes to perceptions of safety and cleanliness, Singapore dominates all [Asia-Pacific] markets, though it is held back by its lack of nature and outdoor [activities].”

    It acknowledged that Hong Kong had a “relative abundance of natural attractions” compared to the Lion City.

    On preferences for nature and outdoor activities in the eight destinations listed in the survey however, only 22 per cent of respondents indicated an interest in what Hong Kong had to offer, compared to 62 per cent for Australia, 42 per cent for Japan, 32 per cent for Indonesia, 31 per cent for Taiwan and 29 per cent for Singapore.

    In the category of sporting events, only 27 per cent said they were interested in those held in Hong Kong, with 47 per cent for Japan, 43 per cent for Australia, 30 per cent for Singapore, and 28 per cent for South Korea.

    Kantar’s group director, Mike Underhill, suggested that to boost Hong Kong’s attractiveness as a tourism haven, unique sporting events could be held, such as a mountain marathon.

    “I’m not saying it’s an easy thing to do, but if such an event is created, it will [capitalise on] an emerging trend among Chinese tourists to help grow a niche sector, thereby raising the perceived uniqueness of Hong Kong.”

    Jenny Zhang, 29, an accountant from Beijing, is among those for whom Hong Kong does not rate highly as a destination.

    “I would choose other places because I have visited Hong Kong several times already. But if I am in transit here to somewhere else, I would visit the city,” she said. “The world is huge and there are many places I have not been to. I love to see natural attractions and take in the culture of other places.”

    Asked to rank the eight destinations in the survey, Zhang placed Hong Kong in last place. Her top choices were Australia, Japan and Indonesia.

    But Chen Peng, 36, from Tianjin is among those who still enjoy coming to Hong Kong after visiting the city six times. This month, he took his daughter to Disneyland for the first time.

    “My wife loves Japan and so I would choose Japan as my top choice. For me though, Hong Kong is my No 1 choice,” he said.

    “When I come, I mostly go shopping with my wife and meet friends. I would go to Harbour City and Central.”

  • Loewe launches outdoor menswear collection

    Loewe launches outdoor menswear collection

    Inspired by the great outdoors, Loewe has launched a new permanent collection of functional clothes and accessories for men. The campaign features British actor Josh O’Connor in the wilds of Cap de Creus, Spain. Loewe has launched a great outdoors-inspired collection of functional clothes and accessories for men. Featuring a wide range of vibrant colours, the collection – Eye/LOEWE/Nature – makes use of recycled materials, adding an innovative touch to conventional apparel.

    The ready-to-wear collection includes jumpers knit from partly recycled cotton fibre, parkas made of technical material, outerwear, shirts, trousers and cargo shorts.

    The accessories, manufactured in Japan, boast exclusive technology. Hand-sewn from quality canvas with calfskin trim, the Eye/LOEWE/Nature backpacks come with extra cushioning and support. There are interior zip pockets in which iPads can be stored. There are also tote bags and sling sacks for men to choose from.