Financial results

So Mulberry interim executive chairman Godfrey Davis, still lacking a CEO and Creative Director, has announced a change in strategy: they are going more accessible. You’d think maybe they would wait until those two leadership positions were filled to discuss this sort of thing, but hey – a brand’s gotta do what a brand’s gotta do, at least when speaking to financial analysts about profit warnings. And generally, I think this is move in the right direction. After all, with Benard Arnault charging full-bore at the top end of the market with his stable of brands, wherein also resides Hermes, Chanel, and Bottega Veneta, and Ralph Lauren announcing his plans to go luxury, it’s looking pretty crowded up there. On the other hand, ask those analysts the Mulberry folks were talking to about the success of, say, Michael Kors, and they will site the fact that Mr Kors was smart enough of take advantage of that great open high middle that Mr Arnault and co had left vacant. The space is still unpopulated enough that Mulberry may be able to find a home. Read more

ack from Prada’s investor day, analysts are musing over the future of the multi-billion euro Italian brand. To recap, after three years of scintillating growth, Prada (which is run by Patrizio Bertelli, center left, and his wife, Miuccia Prada, near left — both pictured with Italian Vogue editor Franca Sozzani) last year succumbed to the malaise that’s hit the luxury goods industry at large. Net income was flat last year compared with a 45 per cent growth in 2012, and declined in the fourth quarter. So what’s the suddenly-beleaguered brand to do? According to the Prada people: let them eat cake! No, that’s not a joke. Prada plans to help shrug off its slowdown by tapping a new trend in luxury and expanding its recently acquired Milanese coffee house Marchesi. Read more

All that stuff we’ve been hearing about the Chinese market moving toward the exclusive, the subtle, and the non-logo? It’s happening in beauty too. The other day I was chatting to Christophe Robin, the Paris hair colourist, and he mentioned that his line of products had really taken off in China. They’re called “Christophe Robin.” Heard of them? No? Well, that’s the point. “Last year sales were up 53%, and this year we think it will be 70%,” he said. Given that Bain reported luxury market growth of about 2.5% in China last year, that’s saying something. Read more

Just after Burberry’s nice third quarter results prompted a rash of headlines (including in this paper) about positive returns “easing [the industry’s] China slowdown fears,” especially when combined with similar happy stories from Swatch and Tiffany, today we came down to earth with a bump courtesy of Richemont. In their third quarter trading statement, things looked not so rosy in China. In fact, they looked pretty doldrum-like. Read more

The analysts are not happy. Chairman Yves-André Istel’s statement at the Richemont earnings report today that “No disposals are under consideration at this time or for the foreseeable future.” has been met with grim reaction in the city, which was hoping that Johan Rupert’s sabbatical, and the new leadership of co-CEOS Bernard Fornas and Richard Lepeuwould opt for a rationalisation of the Group, where the fashion brands – Chloe, Alfred Dunhill, Lancel, Shanghai Tang, Alaia – have always seemed an anomaly. Clearly, there’s something of a perception gap here between internal and external players. Why? Read more

The announcement that came along with Richemont’s 2012 annual results this morning that chairman Johan Rupert (left), is taking a year off from running the world’s second biggest luxury company starting this September is by far, to me at least, the most interesting part of the statement. For a man who has built the largest watch and jewellery Group to take a year off at age 62 – which, let’s face is not so old — at a time when the exponential growth trajectory of the luxury sector has started to slow is a little, well, surprising. And leads to all sorts of interesting speculation.

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Yesterday Kering, the group-formerly-known-as-PPR, announced their Q1 results, and, as with rival LVMH, they were a little…slimmer than usual: up only 3.1% on a comparable basis and 1.0% on first-quarter 2012 (the luxury was up 6.4%, but the sports lifestyle side was struggling). To paraphrase the reaction: shock, horror, luxury slowdown! Except for one thing: the bright spot in the presentation was YSL. This is, of course, the first test of new creative director Hedi Slimane, and despite a large amount of angst surrounding his debut, at least on the part of the industry, he seems to have passed it pretty well. So how did everyone (except the guys who hired him) get it so wrong?  Read more

Ledbury Research is releasing its latest Luxury Market Insights report, which includes a CEO Outlook study tomorrow, and guess what? Those chief execs aren’t totally convinced the Chinese consumer demand for luxury, which has been slowing, will zoom back, despite what they often say.

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The rest of the luxury world may be quailing in the face of an Asian slowdown; Cassandras may crying doom! as the new Chinese political regime cracks down on bribery and obvious bling; Europe may be seeing flat or no growth, but you’d never know it to look at the Prada Group’s results. Today the Italian luxury Group, which includes Prada, Miu Miu, Car Shoe and Church’s, and is listed on the Hong Kong stock exchange, reported consolidated net revenues of Euro 3,297 million, a 29% increase (+23% at constant exchange rates) over 2011, making its earnings per share — up 41% in 2012 (from Euro 0.17 in 2011, to Euro 0.24) – the highest in luxury according to a recent report from HSBC.

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Lew Frankfort, CEO of Coach. Getty Images

Today the Harvard Business Review has come out with a new ranking of the 100 best-performing chief executives around the world, as measured by shareholder returns and growth of market capital over their leadership tenure, and guess what? Despite all that ballyhoo about the absolutely extraordinary unprecedented growth of the luxury market, etc, etc, only three luxury CEOs actually make the list. Oops.

But who are these unmasked men? (They are all men.) Lew Frankfort, CEO of Coach, who leads the industry pack by a wide margin at number 21 – the only luxury name in the top 50 (by standard definition); Sidney Toledano of Dior, at 68; and Patrick Thomas, CEO of Hermès, who is retiring this year, who comes in at 72. Chapeau, guys. Read more

Two interesting announcements this morning, both of which are worth examining: First Labelux announces instead of embracing (and chasing) hard luxury, it is exiting the segment to focus entirely on leathergoods; then Mulberry rejects the outlet model to take its bags and other products further up-market. The moves are complementary, in the context of general industry strategy. They both indicate that in the highly competitive world of leathergoods, current theory says it’s the most special, elaborate, highly worked pieces that sell.
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There’s an interesting little nugget in today’s Hugo Boss Q3 results: part of the reason for the 14% fall in net profit of the German powerhouse was due to “the switch to four equally sized collections a year,” according to chief executive Claus-Dietrich Lahrs. Yes they also talked about the slowdown in China, but they didn’t seem that bothered by it, and this seemed more significant. It made me think, once again, about the gap between the fashion show system and the shopping system – and wonder if the current financial system is not, after all, responsible for the gulf. Not because it demands constant growth (though that’s part of it), but because it gets people thinking in quarters as opposed to halves.

The conversion had associated manufacturing and delivery costs, and, of course, they had to educate the consumer about the fact there was new stuff in store. Of course, in the long run this should actually up revenues in all quarters. As Mr Lahrs said, the idea is to “incentivize customers to visit their shops regularly.” And he and his gang expect winter collection sales to be up.

It did make me think, once again, about the gap between the fashion show system and the shopping system – and wonder if the current financial system is not, after all, responsible for the gulf. We tend to see it as a creeping moral corruption, but maybe it’s simply straightforward numerical congruency: if you are reporting four times a year, it makes sense to have four collections to report on.

Granted, this is extrapolation, because not every brand is public. However, it seems to me that since most of the big, industry-driving brands are listed, it’s only logical to assume their behaviour will influence everyone’s behaviour.

Indeed, I wonder if it’s this development that is really behind the all-deliveries-all-the-time situation we are in, as opposed to the fact that everyone can see stuff on-line as soon as it is shown, that early adopters all demand the ability to buy winter coats in July, and shopping has turned into a social activity.

Maybe, instead of blaming culture and shameless marketers for our transformation into serial shoppers, we should look to the need for quarterly reports to explain the evolution from the two-show system to the four-collection cycle. It’s not nearly as sexy or morally provocative to discuss financial reporting as consumption, but – well, Occam’s razor, and all that.

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There’s a really interesting study out today from the Digital Luxury Group. Based on data from over 31 million searches on Google, Bing, Yandex and Bai du, as conducted in Brazil, China, France, Germany, India, Italy, Japan, Russia, the UK and US, it looked at which American luxury brands were the most popular globally (based on search, natch, not sales). The results would probably surprise you, especially when it comes to who’s on top, and emerging markets. Read more

For anyone still chortling over the end of the It bag – the laugh’s on you, if the folks at LVMH (who know their accessories), are to be believed. On the Q3 results conference call today both spokesperson Chris Hollis and CFO Jean-Jacques Guinoy specifically referred to handbags as engines of growth for not one but three—count ‘em! – of their brands. Read more

Today Bain released its 11th annual Luxury Goods worldwide Market Study, projecting that the luxury market growth will slow to about 10% a year, and then perhaps 4-6% for the next two years, and that all the slack won’t be picked up by China, which is also slowing. When Burberry first noted this trend, the reaction was largely “shock, horror!”, and their stock dropped 20%. However, I wonder if long-term this slowdown might not actually be a useful thing.
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Today Ledbury research is publishing their “CEO Sentiment Indicator,” an exciting document in which they chart the words of luxury execs as they reveal the thoughts of said execs about how things are shaping up for the future. They gave us an exclusive peek at it before release. And guess what? They are not feeling the love.

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Take that, PPR! You’re not the only luxury player on the block that’s recognised the potential of “sports lifestyle” brands (though you may be the only one with an entire division, and strategy, dedicated to the sector). Compagnie Financiere Richemont, the Swiss luxury group that is normally known for its watch and jewellery expertise – they own Cartier, Van Cleef & Arpels, Piaget, Jaeger LeCoutre, and so on – just announced it has acquired US-based high-end casual clothing/golf brand Peter Millar. The move raises so many interesting questions! Read more

The sky is falling! The sky is falling! This tends to be the reaction lately every time a luxury brand reports worse-than-expected earnings. It happened last June with Mulberry, and now it is happening with Burberry. Yet I am not convinced it’s time to call the end of luxury. Read more

Reading my newspaper over coffee this morning, I almost fell out of my chair while perusing a tech story on Google, Amazon et al, which ended with the following observation: “Google, Microsoft and Amazon all have the potential to adopt Apple’s vertical model of combining software, services and hardware to gain complete control over the design and function of future mobile devices.” Because the thing is, dear reader, it’s not “Apple’s approach” exactly – or it is, but Apple got it from somewhere else first. And where would that be? Fashion, of course.
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Last May, Johan Rupert, Richemont’s chairman, issued what is still my favourite quote on the subject of China and luxury, the implication of which was: China is a volcano, and it’s gonna blow. But when? This is, numerous luxury brand H1 results now in, the question bedevilling analysts, investors, and the brands themselves. Read more