☀️☕️ Mango, Stores and The Shein Defence

📝 Focus

• Mango, Stores and The Shein Defence

📊 In the Markets

• Criminal Boeing?; bitcoin 73k; RDDT IPO; Japan avoids recession; China dodges deflation (for a month)

📖 MoneyFitt Explains

• 🎓 PCE and CPI Inflation measures

💸 Personal Finance Corner

• Give Back and Save on Taxes: How Singapore's Tax-Deductible Donations Encourage Charitable Giving

📝 Focus

Mango, Stores and The Shein Defence

Mango, the giant Spanish fashion retailer that isn’t Zara (or the smaller, private equity-owned Desigual), beat their own forecasts with record sales of €3.1 billion ($3.39 billion) in 2023, boosted by its expansion in the United States to compete with its much larger Spanish rival Zara (owned by Inditex, which generated $38bn in 2023.) 

Mango opened 20 of its 130 stores in the US last year, aiming to make it its third-largest market by 2026. Sales surged 19% as the brand focused on party wear and upscale fashion pieces to attract less price-sensitive customers. While maintaining prices for many individual items, Mango's strategy was to shift up the mix across the collection overall, which, in combination with a physical store opening strategy, seems to be the smartest defence against the online shopping onslaught from the likes of Shein and its archrival PDD’s even cheaper Temu, with TikTok Shop also lurking menacingly nearby. 

The approach mirrors Inditex’s offensive strategy against online rivals: prioritising fewer but larger stores. Over the last decade, the company has closed smaller outlets while increasing the number of flagship stores, driving the average store size up from 500 to 750-800 square metres. This improves efficiency, requiring fewer deliveries, and enables the display of a broader range of products, tempting weaker-willed customers to spend more (and more) per visit. Larger stores also make it easier to arrange for customers to collect online orders in-store.

[MFM: H&M runs from Shein, Temu & TikTok Shop?; Embracing Change: The Vogue of Sustainable Fashion; Zara Not Fastest Fashion (Shein)]

..... ▷ The Barcelona-based company reported a net profit of €172.1 million, doubling from €81 million in 2022, with a gross margin near 60% and zero net debt. 

Unfortunately for regular investors, Mango has no intention of going public or seeking new investors despite planning to invest €600mn by 2026 on its expansion plans.

..... ▷ Unlike publicly listed companies, privately-owned companies like Mango are not legally required to publicly disclose their quarterly figures and other financial statements.

However, some private companies, including Mango, choose to do so for one or all of the following reasons:

• Transparency and Investor Confidence: Even though private companies don't have public shareholders like public companies, they may still have investors, lenders and other stakeholders. By sharing financial information, private companies demonstrate transparency and build stakeholder confidence. 

• This can attract potential investors and strengthen existing relationships, and of course can build a track record for a future public listing (vehemently denied by Mango management.)

• Publicly sharing financial data allows private companies to showcase their financial health, which can be beneficial when forming strategic partnerships, seeking collaborations, or negotiating deals with other businesses.

• Talented professionals often consider a company's financial stability before joining, so publicly available financial data can help attract skilled employees who seek job security, even without any significant chance of becoming a shareholder.

• Publicising financial results generates media coverage and enhances a company's public image as a marketing tool, reinforcing the brand's credibility.

📊 In the Markets

The S&P 500 and Nasdaq closed slightly lower on Monday as investors awaited this week's consumer and producer price data to gauge the potential timing of Federal Reserve interest rate cuts. 

Tuesday's February headline annual and monthly CPI inflation is expected to remain steady at 3.1% and 0.4%, with the "core" rate easing to 3.7% from 3.9% in January. Just to be clear, the Fed does care about overall (headline) CPI inflation as well as its main target measure of inflation, the PCE🎓, it’s just that “core” rates show trends more clearly without the “noise” of more volatile energy and food prices. 

Boeing hit a 3% airpocket after Transportation Secretary Pete Buttigieg said he expects the plane maker to cooperate with the Justice Department’s criminal investigations into the mid-air emergency in January when a door (plug) fell off an Alaska Airlines 737 MAX 9 and explain why required documents that should have shown how to remove a key part that failed were never even created.

Last week, the National Transportation Safety Board criticised Boeing for its lack of cooperation and failure to disclose some documents and the names of 25 workers on the door plug crew. Meanwhile, the Federal Aviation Administration has made clear to Boeing the importance of “assembling the aircraft in the proper order."

Reddit aims to raise over $500 million in its initial public offering, potentially valuing the social media company at between $5.8 and $6.4 billion. The IPO seeks to sell 15.3 million shares at $31-$34 each. Despite a “downround” pricing from its $10 billion peak private valuation in 2021 (and even the $6.4bn earlier that same year), Reddit's IPO could open the gates for other startups eyeing public listings in 2024 after a couple of drab years for new issues. [MFM: Seen it, Heard it, RDDT]

Chip stocks extended recent declines, with AMD tanking 4.3%, followed by Nvidia and Broadcom falling 2.0% and 1.2%. 

European markets, led by their own tech names, dipped on Monday, echoing Wall Street's soft Friday. The Stoxx Europe Technology index fell over 2%. 

On Monday, EU ministers ratified rules to clarify the employment status of approximately 28 million gig economy workers. While the directive grants workers access to labour rights like paternity leave and holiday pay, it stops short of establishing uniform regulations across the bloc, leaving regulation fragmented.

Austria’s Raiffeisen Bank fell 7.4% on concerns it could face sanctions for doing business with Russia, which shouldn’t be a massive surprise as Russia was touted as its key business strength prior to the 2021 invasion of Ukraine. 

Bitcoin rose to hit another record close to $73,000, pulling ether up through $4,000.

Japan led losses in Asia on Monday after the country avoided a technical recession, with upwardly revised GDP data showing a 0.4% expansion in the October-December quarter. (A technical recession happens when economic growth is down two quarters in a row from the previous quarter.)

Markets read this as potentially allowing its central bank to raise interest rates from the current ultra-loose policy. BOJ policymakers are reportedly considering ending negative interest rates at their March 18-19 meeting. Tech stocks led the decline, and the yen strengthened. 

Meanwhile, China saw its first month of inflation in four, with the consumer price index rising 0.7% year-on-year in February, a reversal from January's 0.8% decline. How much the Chinese New Year holiday affected the data remains to be seen, but China dodging yet another month of deflation was met with buying in Hong Kong with tech names rallying, while mainland China’s CSI 300 rose 1.25%. (A 2.7% drop in producer prices, often a guide for consumer prices, was conveniently ignored.)

And today, a quarter of the world’s population starts Ramadan, the month-long period of fasting followed by Eid al-Fitr or Hari Raya Puasa.

📖 MoneyFitt Explains

🎓️ PCE and CPI Inflation measures

In the US, the core PCE index is the price of a basket of goods and services, excluding food and energy prices, and is the Fed's favoured measure of inflation.

It's similar to the better-known CPI, the Consumer Price Index, except it includes a wider range of goods and services (including employee benefits) and includes more rural data by using GDP data and manufacturers surveys rather than just urban household surveys. It also has a slightly different methodology. 

One big difference is the substitution bias, where the PCE measures what you actually buy instead of measuring a fixed basket. In a way, it reflects reality better, but it also understates actual same-item price increases that consumers face as it won't account for consumers buying a cheaper product because prices of their preferred items have gone through the roof.