Fashion Shows, Calendar Reset by Coronavirus, Roksanda CEO Says

Jul.01 -- Roksanda Chief Executive Jamie Gill expects to “resume some normality for September,” as he discusses the impact of the coronavirus pandemic on the business of fashion, and offers insight into diversity in the fashion industry. He speaks with Bloomberg’s Francine Lacqua on “Bloomberg Surveillance.”

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  • Vladimir Putin Is Ready For His Next Act

    (Bloomberg Opinion) -- After a week of voting, with plenty of inducements to get people to the polls, Russians have backed constitutional changes that could keep President Vladimir Putin in the Kremlin longer than Josef Stalin.With most precincts now counted, the Central Election Commission says 78% of voters came out in favor and turnout was 65%. It’s almost too impressive — given the ongoing epidemic, economic crisis and questions about voting procedures — for the genuine popular endorsement the president craved. That assessment may take time.More immediately, Putin has restored his status as a permanent, if inscrutable, fixture at the pinnacle of power. With his presidential terms reset to zero, he has all options open when his current mandate ends in 2024. The revamped constitution doesn’t stop there either. It arms him, even as his popularity has waned, with extra powers to steer Russia when it’s facing some of its biggest challenges under his leadership. It also suggests he doesn't think his next decade or so will be his easiest.The Kremlin has long worried about succession, and rightly so. When time begins to run out for authoritarian leaders, the elites who support them become restless, potential substitutes jostle for position and the system begins to look fragile. It’s no accident, as we’ve written before, that Putin rushed citizens to the polls.From the moment he was reelected two years ago, there were three options: Step down gracefully at the end of his term, pick a malleable replacement or find a way to stay on. The first was always implausible. Putin’s description in a hagiographic documentary aired before the poll suggested he sees the transfer of power as a needless distraction. We need to work, he tells the interviewer, not hunt for successors. The second alternative was no more likely: Putin, after all, was himself Boris Yeltsin’s hand-picked replacement. In neighboring Kazakhstan, Nursultan Nazarbayev has found it hard to retain control once outside the presidency, as have others.That left the third choice — adjusting the rules — in the mold of Xi Jinping, after China abolished term limits in 2018, or Azerbaijan’s Ilham Aliyev. The vote that culminated on Wednesday, endorsing the comprehensive overhaul of the constitution, formalized that: Putin can stand again to remain in the Kremlin, or step aside into a father-of-the-nation role, such as running the newly invigorated state council, an advisory body. Importantly, while he’s signaled he will stay on, he has stopped short of confirming he will and, if so, how. By keeping everyone guessing, he’s making it near-impossible for rent-seeking oligarchs or potential rivals to position themselves for what comes next. But the entire exercise was not just about saving Putin from being considered a lame duck.Yeltsin’s 1993 constitution, brought in at a time of intense political strife, was contradictory and tangled. It was also Russia’s most liberal, pluralist constitution, and encouraged hope. The 2020 document does not. Instead, it prepares the man in the top job to manage Russia in a potentially more hostile environment. To date, Putin’s ability to run the country has been underpinned by economic growth, falling inflation, high oil prices — and for a period from 2014, by the wave of popular support for his move on Crimea. Yet the effect of that sequence of extraordinary events is waning, says Sam Greene, director of the Russia Institute at King's College London.While many of the amendments directly contradict the spirit of Yeltsin’s document, they are in part about pandering to various constituencies, from the nationalists to the Russian Orthodox Church. They helpfully camouflage the small matter of allowing Putin to potentially rule until he is 83. As Ben Noble of University College London points out, not all of the measures are even entirely new— just new to the constitution.Yet a strong presidency has become a super-presidency. Putin gets a greater ability to interfere with the judiciary by dismissing judges. He gets a stronger veto to block legislation. He gains immunity from prosecution. That matches ongoing efforts elsewhere to tighten control over everything from the media to the theater stage. He may need all of that if popular disappointment increases faster than economic growth. Some of the government’s past crisis-proofing efforts have worked to ward off the worst of this downturn, including keeping public debt low and foreign reserves high. The recession looks shallower than feared.But recovery will be slow and painful. Job losses have soared. Corporate bankruptcies are expected to surge when a moratorium is lifted in October. The epidemic, meanwhile, has not fully ebbed: Russia is still registering more than 6,500 new cases a day.In his next act, Putin will still prioritize stability and will surely turn back to his $400 billion national projects. That won’t fix the need for more innovation and enterprise, the impact of a weak oil price or international isolation, which would be likely to increase in the event of a Joe Biden presidential victory in the U.S. Putin’s new powers will at least keep critics at bay.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Clara Ferreira Marques is a Bloomberg Opinion columnist covering commodities and environmental, social and governance issues. Previously, she was an associate editor for Reuters Breakingviews, and editor and correspondent for Reuters in Singapore, India, the U.K., Italy and Russia.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • China is Not the Middle East’s High Roller

    (Bloomberg Opinion) -- The emerging narrative of China’s rise in the Middle East as a counter to American power and influence rests on the skewed portrayal of a few very large investments, mainly involving state entities, and a few large contracts to build infrastructure—mostly centered in the states of the Gulf Cooperation Council. In a public-relations success most Middle Eastern leaders would envy, Beijing has claimed the mantle of a great power in the region without a commitment to wider economic development or security.The GCC, meanwhile, has been looking eastward, seeing in China a promising export destination for hydrocarbons, and a middle-class consumer base for a full cycle of energy-based products, from plastics to refined liquids. (This is also true of India.)This is a bilateral interdependence, driven as much from the GCC as it is from China—a diversification strategy and a bid for market-share. Proclamations of great strategic alliances are, as yet, unfounded.When it comes to foreign direct investment, aid, capital expenditure and job creation, China is often characterized as the angel investor of choice in the Middle East. It is often erroneously labeled as the region’s most important source of FDI. Certainly, China is a major source of FDI in a few places, especially in the GCC. When Chinese investment does arrive, it usually targets the energy sector and large government contracts. Investment surges and then declines; in fact, globally, China's 2019 outgoing investment was the weakest since 2011.China’s agenda in the Middle East is about China, not about sharing a development ideology, institution-building or improving access to capital. Private investment that flows from the U.S., Britain and Europe to the Middle East is consistent over time and a stronger force for job-creation and regional economic development. This is ironic, given the popular perception of Western private investors as seekers of narrow self-interest.When compared with American and European efforts, China spends less and creates fewer jobs in most of the Middle East, North Africa and West Asia. Indeed, the GCC states have higher capital expenditure and create more employment across the Middle East and North Africa than China—and that’s not counting counting remittance flows, aid, financial intervention such as central-bank deposits, and in-kind oil and gas transfers.China is more active as a regional investor and contractor where private capital doesn’t want to go—places like Iran, Syria and, to a degree, Turkey. One notable exception is the United Arab Emirates, where Chinese investment and contracts have surged since 2015. This skews the data and inflates China’s reputation as a regional investor and source of capital.The view that China is  the largest investor in the Arab region overlooks the fact that Beijing has invested inconsistently over time, and picks and chooses its engagement in the broader region, from Morocco to Pakistan. The assertion also fails to mention that the GCC is a major source of FDI in that same geography, and also in the Horn of Africa.For example, Oman has a $3.55 billion outstanding loan from Chinese banks, and the industrial park at Duqm port has received some investment (but not the $10 billion pledged) by Chinese-owned Wanfang. But the other GCC states invest more and create more jobs in the sultanate. The same is true in Egypt, where China has been an inconsistent investor and job creator. Between 2014 and 2020, the GCC states created more jobs with more capital expenditure. Combined American and European private capital expenditure and job creation in Egypt outweigh China’s impact in the same period.For all the hype around Beijing’s supposed advantage of state capitalism, through which all its FDI activity in the region counts towards a national political goal, China has not yet proven to be a good investor or a desirable development partner for the Middle East—and certainly not a great power.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Karen E. Young is a resident scholar at the American Enterprise Institute.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Wirecard Is a Wild Card, Even Without SoftBank Money

    (Bloomberg Opinion) -- What’s more perplexing, a company that can’t seem to avoid due diligence failures, or one that throws its name behind a controversial partner without putting in a dime? Investors in SoftBank Group Corp. may have seen a bit of both. Now, its entanglement with Wirecard AG leaves shareholders wondering exactly what kind of business they’ve been sinking their money into.Over the past year, SoftBank’s $80 billion startup splurge has quickly unraveled, as WeWork imploded and the initial public offering of Uber Technologies Inc. fell flat. But unlike WeWork, Wirecard won’t force SoftBank to write down any assets — because the tech conglomerate never put money into Wirecard itself.Instead, SoftBank facilitated a 900 million euro ($1 billion) convertible bond deal for the German digital payments company. Without requiring any SoftBank cash, the deal appeared to give the company’s stamp of approval to Wirecard, which had faced scrutiny over its accounting for years before admitting that 1.9 billion euros had gone missing from its accounts.(1) Wirecard’s shares soared more than 25% between the announcement of the tie-up and its signing.The outlines of this offering emerged in April 2019. It was eventually sold to Mubadala Investment Co. — Abu Dhabi’s sovereign fund, and the second biggest backer of the Vision Fund after Saudi Arabia’s Public Investment Fund — as well as a few senior SoftBank employees, according to the Financial Times.This instrument gave investors the option to convert their holdings into 6.9 million Wirecard shares, or 5.6% of the company at the time, at 130 euros per share — just over a 5% premium. To convince its existing holders to accept this dilution, Wirecard talked at length of the “economic benefits” of a strategic partnership with SoftBank, from geographic expansion into Japan and South Korea, to access to the Vision Fund’s vast portfolio, according to an invitation to Wirecard’s annual general meeting last June. “The potential on the equity side is much, much higher than the potential dilution,” then-CEO Markus Braun, who has since resigned, said at the time of the announcement. SoftBank echoed similar sentiments. But shortly after Sept. 18, 2019 — when the companies’ strategic tie-up was signed, and Wirecard’s stock was trading at 158 euros per share — Credit Suisse Group AG repackaged and resold those instruments, which were issued just hours before, to a broader group of investors at substantially less attractive terms. In other words, Mubadala et al got some of their Wirecard stake for free, thanks to SoftBank. Now that Wirecard has filed for insolvency, one can’t help wondering why SoftBank got involved in the first place. After a series of high-profile due diligence errors, SoftBank can ill afford any brush with a company battling corporate governance issues. This question is particularly relevant right now, because the Japanese tech giant is rapidly closing its conglomerate discount through aggressive share buybacks and sales of its most prized assets.On March 23, founder Masayoshi Son unveiled a 4.5 trillion yen ($42 billion) asset sale and an additional 2 trillion yen share repurchase over the next year. SoftBank’s conglomerate discount has since narrowed to just 29%, compared with 65% during its mid-March low, according to Bernstein Research. On average, SoftBank sported a valuation discount of 38% after the initial closing of the Vision Fund in 2017, using the firm’s methodology.SoftBank has more than doubled in market value since mid-March, and is now up 15% for the year. But once the company sells off its best holdings, its net-asset-value discount is only set to widen again. Such metrics reflect business behavior, history, strategy and vision, all of which are getting worse at SoftBank. As the Wirecard drama unfolds, it may well turn into this year's WeWork, another public-relations disaster for Son.(1) In early 2019, the Financial Times published a series of investigative reports questioning Wirecard’s internal controls.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • What Big Food Can Learn From Its Covid Bonanza

    (Bloomberg Opinion) -- You probably need only look inside your own pantry to have some idea of what a blockbuster spring it has been for the packaged food industry. General Mills Inc. reported Wednesday that organic sales, a measure that excludes currency fluctuations and other factors, shot up 16% in the quarter from a year earlier as people loaded up on Gold Medal flour, Cheerios, and Pillsbury rolls to ride out the pandemic. A day earlier, Conagra Brands Inc., corporate parent of labels such as Duncan Hines and Marie Callender’s, reported similarly robust growth, with quarterly organic sales rising 22% percent from a year earlier.My colleague Tara Lachapelle has written that this sector shouldn’t get too comfortable with these kinds of results, and she’s right. The panic-buying at the beginning of the U.S. Covid-19 outbreak was a one-off spasm of spending that won’t be repeated, and the long-term shift toward healthy eating and fresh ingredients isn’t going away. But the pandemic is bound to change our eating habits in some ways that stick. Many Americans will be keeping their new routines for months to come if their workplaces don’t reopen and kids don’t return to in-person schooling. That provides ample opportunity to reinforce habits that could outlast stay-at-home guidelines. The latest earnings results from Conagra and General Mills offer some clues as to where the industry may be able to build durable sales growth. General Mills saw an especially strong sales increase, 75% percent from a year earlier, in its U.S. meals and baking category. I’m not optimistic it can hang on to much of the growth in its Progresso Soup business, given that canned soup has generally proved an extremely tough sell to younger shoppers. But the company has products in this portfolio that aren’t necessarily out-of-sync with pre-pandemic eating values and make even more sense for families now that more meals are happening at home. For example, a shelf-stable Old El Paso taco dinner kit helps make a quick dinner that includes fresh beef and produce. With some marketing around that message, there’s no reason this product couldn’t become a go-to in many more homes. General Mills also reported that sales of Gold Medal flour, Pillsbury refrigerated baking items and Betty Crocker desserts were especially robust in the quarter – no surprise given the surge of interest in baking. There’s a chance General Mills could keep some of these newbie bakers engaged by pummeling them with recipe ideas on Pinterest and reminding them in commercials that baking is a way to spend time with their kids that doesn’t involve staring at a screen. Conagra, meanwhile, said Tuesday that retail sales of frozen vegetables, which includes its Birds Eye brand, surged 26.5% from a year earlier in the quarter. The company said the demand for such products outpaced supply in the quarter, which led it to seek out external manufacturing partners to ramp up production. This is a smart area of investment. Frozen veggies very much fit with a healthy eating ethos, so Conagra should be able to retain a piece of the recent sales growth it notched from new and lapsed customers.Packaged-food companies still face deep challenges in returning to relevance, but they should not resign themselves to thinking the pandemic is simply a temporary boon to their business. It is a time when longstanding eating habits are breaking and new ones are forming. They have only themselves to blame if they don’t leverage this moment to claim more permanent space in America’s cupboards and refrigerators.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.