MILAN/LONDON/HONG KONG (Reuters Breakingviews) – Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
An Ocado delivery van is driven along a road in Hackney, London, Britain, as the spread of the coronavirus disease (COVID-19) continues, April 2, 2020.
– Agnellis buy luxury
– Ocado slows
– Hong Kong hunkers down
UP AND DOWN. The Agnelli family is swimming against the luxury M&A tide. While LVMH and Moncler have scooped up Western brands in the pandemic, family scion John Elkann is looking east. Holding company Exor, best known for its investments in carmakers Fiat Chrysler Automobiles and Ferrari, said on Wednesday that it will invest 80 million euros in Chinese high-end brand Shang Xia. Exor will replace French heavyweight Hermès International as the companys largest shareholder, although the Birkin bag maker and founder Jiang Qiong Er will stay as investors.
Its a good way for Exor to diversify while deploying some of its cash. Chinese shoppers have been the motor of the luxury industrys growth, despite being grounded by the pandemic. Buying into a mainland brand gives Exor a foothold at the heart of the future of fashion. Yet, despite spending 10 years under Hermès wing, Shang Xia has yet to break even, Jiang said in June. Challenging Western brands dominance may take time. (By Lisa Jucca)
GROCERY GRUMBLE. The pandemic-fuelled craze for online groceries may be running out of steam. Ocados latest trading update shows that the UK e-commerce groups sales in the 13 weeks to the end of November were up 35% versus the same period last year. Thats still impressive, but less than the 52% year-on-year growth Ocados brightly coloured vans delivered in September. The companys shares dropped 5% on Thursday morning, though theyre still up more than 70% this year.
Investors are assuming Ocado will hold on to most of its new customers. Yet as Britain and other countries roll out vaccines, demand for bulky grocery orders may dip. That would make Chief Executive Tim Steiners decision to expand capacity by 40% next year look excessive. And although Ocados financial prospects depend mainly on its ability to sell its warehouse technology to international retailers, a slowdown might make these customers reconsider how many expensive sheds they need. (By Aimee Donnellan)
STOCKING STUFFER. Hong Kong kick-started another round of restrictions to fend off a fourth wave of Covid-19. The rules are provisionally set to be lifted on Dec. 23, in time for the festive season. Everything from gyms to karaoke bars is being shuttered, and fines for those who break the regulations on group gatherings more than doubled to HK$5,000 ($645).
The measures will be hard on local companies and consumers. Retail sales already tumbled 27% through October. It is a reminder that even in places such as Hong Kong that have managed the virus relatively well, the risk of a resurgence always looms.
Maybe this round of pain will be short-term and worthwhile. With Christmas, New Years and Februarys Lunar New Year on the horizon, Chief Executive Carrie Lam may be able to get a nascent economic recovery back on track and, for once, avoid being the Grinch. (By Katrina Hamlin)
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Breakingviews – Corona Capital: Agnelli M&A, Ocado, Hong Kong – Reuters
