Financial Times Weekend 22-23Feb2020

22 February/23 February 2020 ★ FTWeekend 13

M Y L E S M C C O R M I C K

A relaxation of trade tensions between

the US and China has spurred an unex-

pected jump in profits at tractor maker

Deere & Co as farmers’ confidence

returned following a trade deal

between the countries.

The world’s biggest maker of agricul-

tural equipment, which had suffered

from the effects of the trade war

between the world’s biggest economies,

yesterday reported a 4 per cent rise in

net income in the three months to the

beginning of February. Analysts fore-

castadecline.

The results, which sent shares in the

groupup7percentinpre-markettrade,

come in the wake of a “phase one” trade

deal between the US and China, which

followed months of negotiations and

calmed to some extent the uneasy

relationship between Washington and

Beijing.

Among the contents of the deal was a

commitment to relaxing certain barri-

ers that should make it easier for US

farmerstoexportgoodstoChina.Hopes

that a deal between the world’s two big-

gest economies would be struck were a

factor in pushing US stocks to record

highsduringthefinalquarterof2019.

“John Deere’s first-quarter perform-

ancereflectedearlysignsofstabilisation

in the US farm sector,” said John May,

Deere chief executive. “Farmer confi-

dence, though still subdued, has

improved, due in part to hopes for a

relaxation of trade tensions and higher

agriculturalexports.”

The farming industry had been one of

the higher-profile casualties of Donald

Trump’s trade war with China, with Bei-

jing targeting US agricultural imports in

retaliation. Analysts polled by Refinitiv

had been expecting Deere to report a

drop in earnings per share to $1.26 from

$1.54 in the same period last year. But

EPSroseto$1.63duringthequarter.

Net income of $517m was up 4 per

cent from $498m previously. Net sales

slid 4 per cent to $7.63bn, but that was

lessthananalystshadexpected.

The improved agricultural picture

offset a drop in sales and profit in the

group’sconstructionandforestryunit.

Industrial goods

John Deere profits improve as

China trade war threat recedes

Many luxury stores in China have had to shut during the outbreak— Kin Cheung/AP

T I M B R A D S H AW
GLOBAL TECHNOLOGY CORRESPONDENT

Facebook is offering to pay its users
for personal information including
recordings of their own voice, in a rare
example of internet companies directly
compensating people for collecting
theirdata.
The recordings, made through its
new market research app Viewpoints,
will help train the speech recognition
system that powers Facebook’s
Portal devices, which rival Amazon’s
Echo speakers and its Alexa virtual
assistant.
Makers of smart speakers including
Facebook, Amazon, Apple and Google
faced criticism last year when it
emerged that they were routinely send-
ing users’ voice recordings to human
moderators, without revealing the
practice to customers or obtaining their
consent.
Facebook’s move also opens the door
toanideathatpoliticiansandregulators
have long mooted: that the data Face-
book and other online platforms collect

issovaluabletothecompaniesandtheir

advertisers that consumers ought to be

paidforit.

The social network’s Viewpoints app,

which was first released three months

ago to test new features and survey

users, this week began to invite users in

the US to say “Hey Portal” and the

names of up to 10 friends. Going

throughtherecordingprocessfivetimes

wouldearnpointsthatcanbeconverted

intoa$5cashreward.

Data, and how it should be valued,

have become a new focus for competi-

tion regulators in recent years. This

week the European Commission said

dominant tech companies would have

to share their data with smaller rivals

under “fair, transparent, reasonable,

proportionate and/or non-discrimina-

toryconditions”.

Critics of internet companies’ data

hoarding have long argued that con-

sumers are not being appropriately

remunerated for handing over vast

amounts of their most intimate details,

even though Facebook’s social network,

of examples to improve their accuracy

andperformance.

“Participants record phrases within

the app, which helps us improve name

pronunciation recognition in our prod-

ucts to better serve the people that use

them,”Facebooksaid.

AnydatagatheredthoughViewpoints

“helps us build better apps and services

and benefit the community”, Facebook

said on the service’s website. “We don’t

share your Facebook Viewpoints activ-

ity on Facebook or on other accounts

you’ve linked without your permission.

Wealsodon’tsellyourinformationfrom

thisapptothirdparties.”

However, the Viewpoints data policy

notes that some information collected

using the app, such as payment and

device data, can be used to personalise

other Facebook apps and target adver-

tising. Data during a Viewpoints

research programme may also be

sharedwith“researchpartners”,includ-

ing academics, publishers and advertis-

ers, though Facebook said participants

wouldbeinformedifthatwasthecase.

Facebook offers to pay users

for the sound of their voice

3 Bid to improve speech recognition 3 Value of personal data under new scrutiny

N E I L H U M E

NATURAL RESOURCES EDITOR

Rio Tinto will finally have more women

on its board than men named Simon.

The Anglo-Australian miner yesterday

appointed three female non-executive

directors, moving to address a lack of

diversity that was becoming a cause of

concern for investors.

Rio, one of the world’s biggest miners,

has a long-term target for women to

makeupone-thirdofitsdirectors.Ithas

a similar target for its executive com-

mittee. However, following the depar-

ture of Moya Greene last year, it had just

one female director, Megan Clark. In

contrast it had three directors named

Simon: chairman Simon Thompson and

non-executive directors Simon McKeon

andSimonHenry.

That is all set to change after the

miner named Hinda Gharbi, an execu-

tive vice-president at Schlumberger;

Jennifer Nason, a global chairman at

JPMorgan Chase; and Ngaire Woods,

Professor of Global Economic Govern-

anceatOxforduniversity,asnon-execu-

tive directors. Rio said the appoint-

ments would bring its board back to full

strength with 12 directors, a third of

them women — in line with recommen-

dations of the UK government-backed

Hampton Alexander review. Ms Gharbi

and Ms Nason will join in March and

ProfessorWoodsinSeptember.

Mining is among the industries where

women are the least represented, with

men occupying most positions globally

from the coal face to executive commit-

tees and the board room. Not one of the

companies in the FTSE 350 index of

minersisledbyawoman.

However, attitudes are starting to

shift. BHP, the world’s biggest natural

resource group, has set itself an “aspira-

tional goal” of achieving a 50/50 gender

balance by 2025 across all of the com-

pany — from truck drivers in Chile to its

boardroominMelbourne.

The goal has been sniffed at by many

who said it would be impossible to

achieve in such a short time. The com-

pany says it has added 2,070 women to

its payroll since 2017 and today almost

oneinfourofitemployeesisfemale.

Rio Tinto gets on board

with push for diversity

Speaking out: critics of data hoarding by internet companies have long argued that consumers are not properly rewarded for handing over their details— Alamy

Google’s search engine and similar tools

areofferedfree.

“Competition problems may result in

consumers receiving inadequate com-

pensationfortheirattentionandtheuse

of their data,” the UK’s Competition and

Markets Authority said in a report into

digital advertising in December.

“Althoughmanyonlineservicesarecur-

rently provided for free, in a well-

functioning market, consumers might

be paid for their engagement online, or

offered a choice over the amount of data

theyprovide.”

Facebook said this week that its

latest Viewpoints feature was designed

to “improve speech understanding”,

by training machine-learning algo-

rithms, which rely on a large amount

Ngaire Woods is

one of three new

female board

members at

Rio Tinto, bringing

the total to four

ETrade dealMorgan Stanley move fuels

talk of further consolidation— ANALYSIS, PAGE 15

Socially responsible funds‘Monstrous’ gains

for green stocks stir bubble fears— MARKETS, PAGE 17

L E I L A A B B O U D— PARIS
J O N AT H A N E L E Y— LONDON

The coronavirus outbreak has kept
as many as 1,000 Chinese fashion
buyers from Europe’s top fashion
showsthismonthastheluxuryindustry
faces its biggest threat since the
2008financialcrisis.
China has become all-important to
the luxury and fashion industries as a
driverofsalesandacoremanufacturing
hub. Chinese consumers accounted for
40 per cent of the €281bn spent on lux-
ury goods last year, according to Jeffer-
ies, but drove 80 per cent of the growth,
powering sales increases at companies
suchasLVMHandKering.
The outbreak has started to disrupt
supply chains for more mid-
market apparel, with retailers and
fashion brands expressing concern
about whether China factories will be
able to deliver autumn-winter collec-
tionsasplanned.
Companies such as LVMH, Kering
and Richemont are less vulnerable
because they are not as reliant on
China for manufacturing as those
apparel makers, or industries that have

integrated global supply chains such as

carsorsmartphones.

But Luca Solca, analyst at Bernstein,

said luxury sales in the first quarter

could be “heavily impacted” and con-

sidered it possible that revenues would

fallby“lowtomid-teens”digits.

“If all goes well, then maybe the sec-

ond half will come roaring back. But for

now, we need to take into account that

the situation is really very negative

whenitcomestoChinesedemand.”

US-listed luxury companies are

dependent on China. Coach and Kate

SpadeownerTapestryhasbeenincreas-

ing revenues in China about three times

faster than the group overall and Tiff-

any almost twice as fast, according to a

reportfromMoody’sonThursday.

China is a big producer of cotton, fab-

rics and silk, and its factories churn out

everything from coats to swimsuits for

fashion brands from Hennes & Mauritz

and Next of the UK to higher-end

designerssuchasToryBurch.

FiveChinesedesignershavecancelled

fashion shows scheduled for Paris Fash-

ion Week next week, and Chanel

and Prada postponed separate events

plannedforMayinChina.

The National Chamber for Italian

Fashion said an “optimistic” estimate

would be for Italian exports to fall by a

minimum of €100m in the first quarter

and €230m “in the event of a prolonged

crisis”forthefirsthalfoftheyear.

To keep Chinese buyers engaged, Ker-

ing’s Gucci brand live-streamed the cat-

walk show for its autumn-winter

women’s collection in Milan, using

socialmediaplatformWeibo.

Before the event, viewers were

treated to a bird’s-eye view of the area

where models were being made up.

Once it began, they could see volumi-

nous ruffled dresses and military-

inspiredcoats.

Gucci, Kering’s biggest and most prof-

itable brand, started streaming fashion

showstoWeibolastyeartowinoverChi-

nese consumers, who buy more luxury

goods than Europeans or Americans.

LVMH and Chanel and the organisers of

FashionWeekinMilanandParisscram-

bledtosetupsimilarlivefeeds.

Luxury goods groups have activated

contingency plans that include closing

stores and offices in China, scaling back

product launches and advertising, and

clamping down on staff expenses. Some

haveinstitutedhiringfreezes.

With many workplaces and stores in

China still shut, there is a sombre mood

that does not lend itself to conspicuous

consumption. One executive described

Shanghai’s luxury mall Plaza 66 as

deserted on Valentine’s Day. The doors

toCartierandTiffany’swereclosed.

“We are now, brand by brand, reallo-

cating that inventory to other regions in

the world so that we are not too heavy in

stock in China,” Kering chief François-

Henri Pinault said last week. He

described the China environment as

“changed significantly” and i t remained

hardtosayhowitwouldevolve.

The crisis comes as the luxury

sector is trading near all-time highs

of about 26 times forward price-to-

earnings, according to Morningstar,

after years of strong growth driven by

Chinaconsumers.

Mid-market fashion brands have

more supply chain exposure to China

than luxury peers. Analysts said that

while rising labour costs meant China

was not as important a manufacturer as

it used to be, it was still a big source of

fabrics for garment makers in places

suchasBangladeshandVietnam.

For retailers, which follow a tradi-

tional two-season model with long lead

times, most stock for spring and sum-

mer will already have been dispatched

before the virus hit, and will been route

todistributioncentres.

The bigger issue is whether manufac-

turing and dispatch of autumn-winter

stock will be disrupted by a delayed

return to work in China after the lunar

newyear.

“Ourdiscussionswithcompaniessug-

gest factories remaining closed beyond

the end of February may start to impact

stock availability,” said UBS analyst

OliviaTownsend.

In the UK, Next told analysts recently

that it had about £20m of inventory at

riskinChina.

Delayed delivery to retailers means

the clothes arrive too late for the

intended season and must be marked

downtosell.

Fast-fashion operators such as

H&M and Inditex’s Zara usually have a

diverse supply base in north Africa and

Turkey, and their ability to shift

volumes from one supplier to another

providessomeinsulation.

Edited, a London-based retail data

analytics start-up, found that mass-

market brands have released 3.5 per

cent fewer new products in the US and

UKsofarthisyear.

Gary Wassner, whose New York-

based company Hilldun Corporation

provides supply-chain finance to

fashion brands and designers that

manufacture in China, said he was

hearingofdisruptions.

“We have already received new

schedules of delivery from some facto-

ries with delayed ship dates out of

China. In some cases, this will mean the

designers will miss their delivery dead-

lines with retailers, so they may have to

flyproductininsteadofboatitin.”

Hesaidtheindustrywasworried.

“The insecurity is mounting both for

factory owners in China and the brands

onthissideoftheworld.”

Megan Greenepage 11

Retail.Luxury goods

Fashion falls victim as virus poses biggest threat since financial crisis

Chinese consumers accounted

for 40% of €281bn spent last

year and drove 80% of growth

Going through the process

five times earns points

that can be converted

into a $5 cash reward

FEBRUARY 22 2020 Section:Companies Time: 21/2/2020 - 19: 41 User: julian.summers Page Name: CONEWS1, Part,Page,Edition: LON, 13 , 1