Skadden Arps Slate Meagher & Flom, Shearman & Sterling and NCTM are all advising on the proposed listing of the cashmere clothing fashion brand, which comes after Italian brands Salvatore Ferragamo and Prada concluded listings last year in Italy and Hong Kong respectively.

The brand’s founder Brunello Cucinelli filed a request earlier this month to list a third of the company’s total stock on the Borsa Italiana, Italy’s central stock exchange in Milan. A value for the listing has not been disclosed, although the company recorded total sales of around “246m (£206m) in 2011.

Skadden and NCTM are acting for Cucinelli, with London capital markets partner James Healy leading for the US firm, while NCTM senior partner Paolo Montironi, Milan M&A partner Giuseppe Labianca and Milan tax partner Federico Trutalli advised from the Italian firm.

Meanwhile, US firm Shearman has the lead bank role for global coordinators Mediobanca and Bank of America Merrill Lynch, with a team led by Italy managing partner Domenico Fanuele.

Cucinelli has said the planned listing is part of a bid to give his company greater financial stability, as well as raise its profile to attract new managers and grow the business overseas.

Last year saw Prada go public in a $2.1bn (£1.3bn) Hong Kong listing in June, handing roles to Slaughter and May, Bonelli Erede Pappalardo and Davis Polk & Wardwell, while Clifford Chance acted for the underwriters.

Meanwhile, luxury Italian brand Salvatore Ferragamo was valued at around “2bn (£1.7bn) by its Milan listing last year.

Winnipeg Free Press – PRINT EDITION

By: Staff Writer

Posted: 02/18/2012 1:00 AM | Comments: (including replies)

Data released by the World Luxury Association reveals that Chinese people’s overseas spending on luxury goods totaled US $7.2 billion during Chinese Spring Festival, up 28.57 percent from a year earlier.

This is also higher than the $5.7 billion expected before the Spring Festival, creating a record high.

During the Spring Festivals of 2011 and 2010, Chinese people spent $5.6 billion and $4.9 billion respectively, on luxury goods outside China.

The Association believes that Chinese people have become one of the consumer groups that have the strongest overseas purchasing power on luxury goods during holidays.

During the Dragon Spring Festival, total sales of European luxury goods increased by 12 percent compared with 2011 Spring Festival.

During the festival period, Chinese consumers accounted for 62 percent of the total sales of European luxury market.

In North American market, Chinese spending on luxury goods accounted for nearly 33 percent.

In Hong Kong, Macao and Taiwan markets, the consumption share of Chinese consumers on luxury goods was even larger at 69 percent.

The Association monitored luxury consumption in China from January 1 to February 1, 2012 and found that total luxury consumption in China reached US $1.75 billion, mainly concentrated in Beijing and Shanghai.

Of the $7.2 billion spent on luxury goods outside China, 46 percent of this was spent in Europe, 19 percent in North America and 35 percent in Hong Kong, Macao and Taiwan.

The Chinese consumers mainly bought clothing, fashion goods, watches, leather goods and cosmetics and perfumes.

The back story to LULU is certainly an interesting one. Many are unable to understand the almost rabid demand among the company’s devotees for $100 yoga pants, and logically question the growth of this niche luxury market. Moreover, LULU has encountered some recent negative publicity. On March 11, 2011, an Apple (AAPL) store employee overheard the cries for help of a LULU employee who was murdered by another co-employee. Brittany Norwood was eventually convicted of the first-degree murder of Jayna Murray. This horrendous incident, while obviously not condoned by management and the act of one individual, does lend itself to creating a murky side to the LULU.

Further, LULU management strongly suggests that its employees attend Landmark Forums, which many skeptics have derided as akin to brainwashing. It has been reported that employees are rewarded with admission to a Landmark forum after their first year on staff. LULU founder Chip Wilson has used the concepts taught by the Landmark forums and other sources – such as those from the popular book “The Secret” – to create an almost cult-like following for his company’s products. In addition, LULU has focused on grass roots marketing with its local ambassadors program, which allows it to establish a strong presence in communities. So far, the company’s approach appears to be working.

LULU revenue has grown from $148 million in 2007 to $711 million in 2011. Net income grew from $52.28 million in 2010 to $121.85 million in 2011. With its rapid revenue growth, LULU appears well on its way to becoming a billion dollar revenue generator. LULU opened 27 new stores through the end of the third quarter, for a total of 165 stores, with plans to move into new markets as appropriate.

Still, the question becomes, how much further can LULU expand? As others have commented on the site, it would seem that this luxury market can only sell so many pairs of expensive yoga pants. LULU may need to move into other product offerings and markets to continue its explosive rate of growth. LULU has a current market capitalization of over $9 billion, compared with a market capitalization of $3.98 billion for competitor UnderArmour (UA). While significantly less than industry leader Nike (NKE), with its market capitalization of $47.97 billion, LULU needs to seriously consider expanding into other lines of athletic clothing, either through new product innovation, or acquisition of smaller athletic clothing/fashion retailers. Chip Wilson has a background in the surf and ski industry business; LULU should take a page from Nike’s playbook and consider expansion into the skateboard and snowboard industries. Although LULU appears to be expanding into the girls’ gymnastic area with ivivva athletica, continued growth of LULU may depend on the company dipping its toes into other product lines and markets.

So, where does LULU’s share price go from here? As noted previously, LULU’s stock price has ranged from $34.02 to recently hovering near its 52 week high of $64.51. The current price is significantly above the 50, 100, 200 SMA. The price seems to be hitting some resistance at $64.50, having touched that level a couple of times within the last trading week. We may be seeing the formation of the down-side of the head in a bearish head and shoulders pattern. Other contributors on this site have noted that LULU is trading with a high p/b ratio, forward p/e ratio, and beta, compared with UnderArmour, thus subjecting it to increased volatility. The significant gap up in price from 1/9 to 1/10 makes it difficult to ascertain where longer-term price support lies, although there does appear to be short-term support around $60. The OBV appears to be decreasing generally from November to January. Short interest as listed by NASDAQ was 12,889,502 with 2.5 days to cover based upon the current trading volume. This is nearly 2 million shares lower than what was reported on 12/31/11. It appears that the buyers may be slowly leaving the market for this stock after extremely high volume on 1/10.

Short term analysis indicates LULU may be in for a price correction of some sort, although it is impossible to tell how much lower it may go. The long term prospects for LULU depend on its ability to intelligently expand its retail stores, market growth, and its ability to expand into other product lines. Chip Wilson has recently stated that he is leaving his management role for the company, but will keep his position on the board of directors. This may signify a sea change in management focus, whereby the next few years will prove pivotal for the future of the company.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The Centre for Retail Research recently published its 5th annual Global Retail Theft Barometer (GRTB) for the twelve-month period ending June 2011. Total global shrinkage cost respondent retailers $119.1 billion, an average of 1.45 percent of retail sales. The results are 6.6 percent higher than last year’s 1.36 percent, adjusted for the inclusion of first-time participant South Korea and currency exchange rate changes. Shrinkage rose in all geographic regions. A fifth geographic data subset, Middle East/Africa, has been added this year.

Global Shrinkage for 2011

Europe and North America remain the largest components. A three-year look at global totals indicates that the sharp increase in shrinkage in 2009 to 1.44 percent, no doubt caused by the recession, may not have been an anomaly after all. This year’s 6.6 percent increase in shrinkage to 1.45 percent places the global estimate at a level slightly higher than 2009. This is the fourth consecutive year that Latin America has recorded the highest shrinkage as a percentage of sales.

The countries with the highest rates of shrinkage as a percentage of sales were India (2.38%), Russia (1.74%), and Morocco (1.72%). The lowest rates of shrinkage were found in Taiwan (0.91%), Hong Kong SAR (0.95%), and Switzerland (1.04%). Twenty countries posted shrinkage rates that exceeded the global total, down from twenty-two in 2010. Twenty-three countries posted lower rates, up from twenty in 2010. Shrinkage was estimated at 1.30 percent in first-time participant South Korea, below the global total.

Sources of Shrinkage

Globally, customer theft, including shoplifting and organized retail crime (ORC), was thought to cause the greatest shrinkage in most countries-43.2 percent of total shrinkage-compared with 42.4 in 2010 and 42.5 in 2009. Employee dishonesty was estimated to be responsible for 35.0 percent of total shrinkage, compared with 35.3 in 2010 and 35.5 in 2009. Internal error and administrative failure, such as pricing, process, or accounting mistakes, accounted for 16.2 percent of total shrinkage, compared with 16.9 in 2010 and 16.4 in 2009. Suppliers/vendor fraud accounted for 5.6 percent of total shrinkage, compared with 5.4 in 2010 and 5.6 in 2009.

As in the previous years, there is an interesting divergence of opinion among respondent groups over the sources of shrinkage. North American and Latin American retailers regard dishonest employees as the biggest problem (44.1 and 42.6% respectively). Shoplifters and ORC account for 35.8 and 33.2 percent respectively. North American retailers have focused vigorously on ORC issues over the past few years.

European and Asian retailers, on the other hand, identify customer theft as the largest shrinkage component (47.7 and 53.3% respectively). Dishonest employees account for an estimated 30.2 and 22.7 percent respectively.

Most Stolen Merchandise

The study asked retailers for specific information about the average shrinkage rate of “high-risk” product lines in grocery/food, apparel/clothing/fashion, and health/beauty. Many of the most-stolen product lines are expensive, major national brands and retailers reported that between 10 and 30 percent of the most stolen lines had been put on the market in the last two years. This was particularly true of apparel and clothing and health and beauty.

For the grocery/food subset, six high-risk categories recorded shrinkage rates over double the global rate of 1.29 percent. The shrinkage rates in descending order were cheese (3.09%), fresh meat (2.79%), candy/confectionery/chocolates (2.78%), luxury cooked meat (2.74%), alcohol/liquors/whiskey (2.47%), and seafood/fish (2.46%). Other high-loss categories were infant formula (2.33%) and spices/seasoning/vanilla (2.02%). Infant formula is a source used to dilute illegal drugs, so its inclusion is no surprise.

The highest shrinkage rates in the apparel/clothing/fashion category were reported in accessories (3.55%), outerwear (2.94%), and fashion/tailored clothing (2.89%). The accessory shrinkage actually dropped from 3.84 percent in 2010, while fashion/tailored clothing rose from 2.81 percent. Outerwear didn’t reach the top five categories in 2010.

2011 marked the second year that health/beauty products were surveyed. They are sold the world over by many different types of stores. Topping the list for the second consecutive year is shaving products, rising to 3.66 from 3.57 percent the previous year. Other categories with significant losses are perfume/fragrances (2.82%, up from 2.73%), lipsticks/glosses/lip liners (2.69%, up from 2.60%).

The study also includes a table listing the reported shrinkage in the top sixteen retail business sectors. Five sectors exceed the global average shrinkage of 1.45 percent. They are apparel/accessories (1.87%), cosmetics/HBS/pharmacy (1.79%), hardware/DIY/automotive (1,77%), department/general merchandise (1.64%), and convenience/specialty foods (1.63%). Surprisingly, two vertical markets with high-risk products, video/music/game software (1.39%) and electronics/computer/electrical (0.97%), reported below-average shrinkage rates.

Scope of the Project

Funded by a grant by Checkpoint Systems, the GRTB is the most comprehensive study of its kind. The data is gathered from a survey prepared by the Nottingham, England-based Centre for Retail Research (www.retailresearch.org), under the guidance of its director, Dr. Joshua Bamfield, a well-known expert in retail crime issues.

The survey was sent to 4,750 of the world’s largest retailers, and usable responses were received from 1,187 companies with combined retail sales of $986 billion, representing a cross section of vertical markets in 43 countries, including South Korea reporting for the first time. There are currently two countries representing the Middle East/Africa-Morocco and South Africa. Plans call for an expansion in this area of future growth.

In addition to reporting on the magnitude and trends of shrinkage, the survey attempts to gather useful information about a wide array of important topics, such as:

• Apprehension rates and the average amount stolen by shoplifters and dishonest employees.
• Methods used to combat shrinkage, with a breakdown by type, and information about future implementation.
• Perceived best practices used by the top fifty global retailers.
• Retail loss prevention and security spending, with a percentage breakdown by type, and a calculation of total spending as a percentage of sales.

EDITOR’S NOTE: To listen to an archived webinar where Dr. Bamfield discusses the results of this survey, click here.