Archive for May, 2008

Luxury firms hope to sail through global slowdown (Reuters)

Friday, May 30th, 2008 | Finance News

TOKYO (Reuters) -
Luxury goods makers are hoping to weather
a consumption slowdown in the United States and Japan, their
two biggest markets, with the help of shoppers in emerging
economies and super-rich clients who do not feel the economic
pinch.

Industry experts have questioned how long fashion
companies, yacht and sports car makers and other luxury goods
makers can resist the wider consumption slump. The very
wealthy, after all, comprise a small group of people, and
China, India and Russia are not yet spending enough to replace
U.S. shoppers.

But chief executives at a luxury goods conference in Tokyo
showed optimism, saying that sales were holding up.

"The luxury business has grown faster than the general
economy and I think that trend is here to stay," said Toni
Belloni, managing director at LVMH (LVMH.PA), the world's
largest luxury group.

So far, the evidence has been mixed. LVMH reported solid
first-quarter revenues, but others have seen slower sales.
Bulgari (BULG.MI), the jeweler, saw sales rise 3 percent in the
third quarter, while net profit was down.

Ermenegildo Zegna, chief executive of the eponymous Italian
suit maker, said his company was expanding into sportswear and
accessories but also made-to-measure services for wealthy
clients to woo new customers.

"Despite the crisis, we've been able to sustain
single-digit sales growth. We can still grow despite the
slowdown of two of the most important luxury goods markets," he
told reporters at the conference.

"The business model has to be changed. We are adding
leather accessories, glasses, perfumes."

Zegna is also the latest European fashion group to invest
in a huge new flagship store in Tokyo. Armani, Bulgari and
Gucci have already built glitzy retail towers in Ginza and
Omotesando, Tokyo's main luxury playgrounds. With sparkling
facades, designer restaurants and spas, the shops attract
luxury fans from all over Asia -- most crucially, rich Chinese
tourists who would rather shop in trendy Tokyo than in Beijing
or Shanghai.

While Tokyo is turning into Asia's most popular shopping
centre, Japanese consumers themselves have become less
enthusiastic.

A tepid economy and an ageing population have led to the
demise of the classic luxury goods consumer here: the "office
lady" in her twenties who lives with her parents and spends a
large portion of her income on luxury goods.

Economic data points to persistent weakness in Japanese
consumption. Overall household spending in April fell 2.7
percent from a year earlier, a much bigger decline than
expected. Rising grocery prices, stagnant wages and a stalling
job market are hitting consumer sentiment.

In the United States, consumer sentiment was likely stuck
at a 28-year low in late May due to record gasoline prices and
a deteriorating job market, a Reuters/University of Michigan
poll showed on Friday.

Not that this matters to the most religious of luxury
clients, the super-rich.

While more accessible luxury goods brands such as Gucci are
reporting flat sales in Japan, Italian fashion company Bottega
Veneta
, one of the most expensive labels around, saw sales rise
31 percent in the first quarter.

"Japan is a market that any intelligent luxury brand has to
take into consideration," Patrizio di Marco, president and
chief executive of Bottega Veneta, told Reuters on the
sidelines of the conference. "China is where Japan was 20 years
ago."

Bottega Veneta's signature woven leather bags and
discreetly elegant clothes, without any visible logos, appeal
to slightly older, more sophisticated wearers. Its success in
recent years shows that there is still room for growth even in
a mature market that has tired of more obvious status symbols.

"You have to explain the story behind the product," di
Marco said. "The customer is hungry for information."

Other executives have also noticed stronger demand for
their high-end, hand-crafted shoes and clothes and personalized
products.

Vincenzo Cannatelli, CEO of Italian yacht maker Ferretti,
said the company expects double-digit growth in revenues this
year, with sales of their biggest and most expensive yachts
outperforming the middle section.

(Editing by Bill Tarrant)

Source

Dell eyes two-thirds of sales from outside U.S. in 5 years (Reuters)

Thursday, May 29th, 2008 | Finance News

BEIJING (Reuters) -
Dell Inc (DELL.O), the world's No. 2
personal computer maker, said on Friday sales outside the
United States were growing much faster than its home market and
could account for two-thirds of total revenues within five
years.

Revenue from international regions topped U.S. revenue for
the first time, with Brazil, Russia, India and China (BRIC)
leading the way with 73 percent shipment growth in the first
quarter, Steve Felice, president of Dell Asia-Pacific and
Japan, told reporters during a teleconference.

At the rate things are going "two-thirds could come in five
years," said Felice, referring to sales from outside the U.S.

The comments came after Dell posted higher-than-expected
quarterly profit, driven by cost cuts and strong demand from
consumers and foreign markets, pushing its shares up nearly 10
percent in after-hours trade.

Dell pointed to the strong performance as evidence that a
year-long turnaround led by founder Michael Dell, who returned
to the chief executive post in January 2007, was yielding
results.

However, Dell said U.S. corporate customers were still
cautious about buying given the uncertain economic outlook.

The firm's Americas revenue rose 1 percent in the quarter
ended May 2, although server unit shipments soared 20 percent,
four times that of the industry.

Dell has announced a plan to cut 8,900 jobs to reduce
costs, but said Asia -- with faster sales growth and a large
part of the company's supply chain -- would see more job
growth.

"You will continue to see continued head-count growth in
Asia," he said.

In March, the company said it would buy $23 billion of
components from China this year and $29 billion in 2009, rising
from $18 billion last year to help reduce costs.

($=6.94 yuan)

(Reporting by Kirby Chien; Editing by Anne Marie Roantree)

Source

United-US Airways merger talks suspended: source (Reuters)

Thursday, May 29th, 2008 | Finance News

NEW YORK (Reuters) -
United Airlines and US Airways (LCC.N)
have suspended merger talks due to concerns about labor
opposition and integration costs, while United draws closer to
an alliance with Continental Airlines, a source close to the
talks said late on Thursday.

United Airlines Chief Executive Officer Glenn Tilton told
his counterpart at US Airways, Doug Parker, at a meeting on
Thursday that it was best not to pursue a merger at the moment.
But he left open future possibilities between the airlines, the
source said.

Both United and US Airways declined to comment.

The two carriers have been in talks about a possible merger
for a few months, while United was also in talks with
Continental Airlines (CAL.N) for a full merger.

But United's merger talks with US Airways picked up steam
in late April, after Continental called off full-merger talks
with United.

The wave of talks come after Delta Air Lines Inc (DAL.N)
and Northwest Airlines Corp (NWA.N) said in April they planned
to merge and become the world's largest airline, seeking to
counter skyrocketing fuel prices, a weak economy and growing
competition from European carriers as trade barriers fall on
trans-Atlantic travel.

After racking up $35 billion in losses and finally emerging
from a 5-year slump in 2006, U.S. airlines are hoping mergers
or alliances could give them greater market power to reduce
flights and raise fares.

The airlines also face a renewed sense of urgency to cut
costs as jet fuel prices have more than doubled since the start
of last year.

CONCERNS

Both Tilton and Parker have been proponents of industry
consolidation but the pace of merger talks between United and
US Airways had slowed lately over concern about how they could
raise capital to fund the integration of the two carriers, the
source said.

At Thursday's meeting, Tilton also expressed concern about
United's pilots' opposition to the merger, the source said.

United's unions had said they would oppose a merger with US
Airways
. Pilots at US Airways were also wary of a potential
deal with United, and has said United's "financial health is a
major concern."

UAL lost $537 million in the first quarter. Wall Street
analysts
are concern it might not be able to comply with bank
covenant and loan agreements, though the carrier has said it
faces no such problems.

Airline mergers and the integration of fleets, labor and
infrastructure can be very expensive and time-consuming.

Integrating two labor forces could take years unless the
two unions agree to terms before a merger is announced.

US Airways, which merged with America West in 2005, still
operates its staff with two separate labor contracts and has
had trouble integrating its customer reservation systems.

ALLIANCES

United's Tilton told Parker on Thursday the carrier is
close to forming an alliance with Continental Airlines with
plans to seek antitrust immunity.

Continental, meanwhile, is also having similar talks with
AMR Corp's (AMR.N) American Airlines and British Airways
(BAY.L), other sources have said.

Airline alliances allow partners to streamline costs while
sharing revenues. Without antitrust immunity, the data and
revenue shared on the routes would normally be considered
collusive.

Source