Financial results

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