1.) Those High-End Labels Apparently Need Those Low-End Dollars:
“It’s hard to translate high fashion into mass retail; sometimes it works (Karl Lagerfeld for H&M), and sometimes it doesn’t (Matthew Williamson for H&M). But this will be the ONLY opportunity for us regular folk to own Rodarte anything . . . Rodarte for Target … hits shelves and online December 20th.”
Rodarte is a relatively new cutting edge, super luxe New York brand run by Sisters Kate and Laura Mulleavy, specializing in nearly couture like detailing that elevates their work above your average luxury Ready To Wear collection — while also, mind you, elevating the prices for their pieces into the stratosphere. The Mulleavy sisters have been awarded the 2008 CFDA Swarovski Emerging Womenswear Designer award and the 2008 Swiss Textiles Award. A look at their Fall 2009 collection below:
Unfortunately, the Mulleavy sisters have bills to pay, rent checks to cut and sustenance that must be fetched from the local vegan co-op, and while critical acclaim and compliments from the likes of Elijah Baggins-Wood are all well and good, it’s a licensing deal/collaboration with very down-market, non-couture, no-detailing, cheap foreign labor Target that might keep them alive to see another season and maybe produce another collection.
But my question is: If it doesn’t involve couture-like detailing, intricate hand stitching and exceptionally fine materials, is it still Rodarte? Because all those qualities are what Rodarte *is* — and what Target isn’t.
But it’s not just Rodarte that’s selling its name for cash: Coming soon — Jimmy Choo For H&M! Plus there was the aforementioned Karl Lagerfeld and Matthew Williamson collaborations with H&M. Other luxury designer brands that have stooped to collect paychecks from the fast fashion industry (which they might otherwise dismiss and/or sue for copyright infringement): Alexander McQueen, Zac Posen, Jovovich Hawk, Anya Hindmarch, Thakoon, Jonathan Saunders, Richard Chai, Roberto Cavalli, Rogan, Erin Fetherston, Stella McCartney, Comme des Garcons, Viktor & Rolf . . . the list is dizzying, and I’m sure I’m even missing a few.
I suppose there’s a certain “They’re going to copy our stuff anyway, so we may as well profit from it” logic to these collaborations, but there’s also a danger in associating your very high-end, high-quality reputation with low quality material, cheap-labor goods that fall apart in six months. The problem isn’t that the designers are working with Target and H&M — the problem is that Target and H&M have a vested interest in promoting their own names and their own bottom lines, so it doesn’t make a darn bit of difference to them if their Vietnamese factories churn out what amounts to assembly line goods under a famous name.
The collections are for one season, the hype sells them out and then they move on. What do they care if they leave a designer’s reputation for gorgeous fabrics and quality craftsmanship in tatters? With the dismal sales numbers the way they presently are for the luxury industry, the designers themselves are often backed into a corner: license your name to Target/H&M and live to see another collection, or stick to your principles and watch your label die a quiet, dignified death due to lack of finances.
Of course, that doesn’t explain Karl Lagerfeld — but maybe his association with Chanel has made him so bulletproof that it doesn’t matter?:
2.) Adidas Reports a Staggering 93% Drop in 2nd Quarter Profit:
“German sportswear and equipment maker Adidas … reported a 93% drop in second-quarter net profit as sales fell, it was hit by the weakened Russian rouble and it upped spending on promotions ahead of the 2010 soccer world cup . . . The Herzogenaurach, Germany-based company, one of the world’s biggest sportwear makers, has been hit hard by the recession, as well as rising input costs and lower revenue from Russia because the rouble has fallen in value against the euro. Adidas says Russia is one of its most important markets in Europe.”
When the likes of LVMH report a 23% drop in profit, that still means they’re making money, just not as much as they used to — but a 93% drop in profit for Adidas? That’s uncomfortably close to negative territory. But drops in profit are an unfortunately common occurrence this business cycle. For example:
The House of Christian Dior (presently designed by theatrical frontman John Galliano) reported a decrease in profits for the first half of 2009: “The Paris-based company said net profits dropped 27% … in the six months ended June 30 … on sales down 0.2% to 8.13 billion euros, or $10.8 billion (U.S.).”
Okay, first, can I just say how kind of shocked I am that Dior, all on its own, managed to rake in over $10 billion in sales in just six months . . . during a period of economic contraction! How many shoes and bags and bottles of perfume is that, do you think?
But second, that’s a fairly steep profit drop for a rather slight sales drop. I’m thinking a good number of products were pushed out the door at steep discounts. The Dior people sniff that profit numbers are higher in their own boutiques than in retail settings they don’t directly control, but I would counter that the great majority of Dior merchandise is sold outside the purview of any and all Dior boutiques, so that’s not a particularly relevant bit of information.
Below is a video clip of Dior’s Fall/Winter 2009/2010 collection that will be hitting the stores any day now (if it’s not there already):
I wonder if the profit margins will still be falling.
And speaking of falling profits (still, and seemingly always): Puma’s 2nd quarter profits fell 16% on sales that were actually 4% higher than last year; trendy clog maker Crocs reported a 2nd quarter loss, and said that “while Internet sales climbed 25% (and) Asia sales rose 31% … Americas and Europe sales slipped 19% and 42%, respectively”; Bennetton profits plunge 60% (allegedly due to restructuring); Gap posted an 8% decline in same store sales for the month of July, Banana Republic posted a 7% decline and Old Navy reported an 8% drop, as well; Polo Ralph Lauren 1st quarter profits take a 19% tumble while projecting that the rest of 2009 will see continued losses; and Kenneth Cole reported a 15.5% decline in net revenue.
And Coach, considered the largest U.S. producer in the luxury handbags market, “said fourth-quarter profit fell 32 percent as revenue faltered in the recession . . . Half of Coach’s handbags now are priced less than $300, including items in its new Poppy collection, compared with 30 percent previously, Chief Executive Officer Lew Frankfort said on a conference call.”
The new Coach Poppy line is decent for its price point. Very Coach in style, which tends toward conservative, but they’re jazzing things up with some bolder colors, a peppy logo pattern and more overt hardware. I wonder who their target market is? Oh, wait, let’s find out:
Any questions?
But hey, True Religion seems to be doing okay: “The Vernon, Calif.-based company said late Wednesday its second-quarter profit rose 18 percent, better than analysts expected, as the company expanded distribution and sales rose 12 percent to $72.1 million.”
Oh, only $72 million? *yawn* That seems like mere pocket change next to Dior’s $10 billion in sales, doesn’t it?
3.) J.C. Penney Moves into Manhattan, Stares Down Macy’s:
“J.C. Penney Co. unveiled its first Manhattan store on Friday, marking a milestone in chief executive Myron E. Ullman III’s five-year attempt to turn his company into a stylish alternative to the giant down the road, Macy’s Inc . . . Their struggle is playing out across the country as a long-term reshaping of the retail industry, combined with an unrelenting recession, blurs the lines between retailers that never used to compete. Specialty shops like Gap Inc., discount chains such as Wal-Mart Stores Inc., and traditional department stores are now all descending from different parts of the industry to lure the same shoppers.”
JC Penny, Macy’s, Bloomingdales, Target, Wal-Mart (with maybe a soupçon of TopShop and H&M) — they’re all hunkering down and positioning themselves to pitch to the same consumer market: the consumer that wants to save money while still having access to a variety of products, some of them trendy and fashion forward. It can’t be long before one of them goes down.
For his part, Macy’s chief executive, Terry Lundgren, says he’s not worried: “Macy’s flagship store is an icon of New York life, occupying an entire city block, with more than a million square feet of selling space. Penney’s is a tenth of that size, and located inside a mall.” Oh, ouch!
And have you ever heard of a JC Penny Thanksgiving Parade? No, I didn’t think so.
4.) Move Over Russia & Asia, it’s Time for the Middle East to Shine:
“Middle Eastern-inspired fashion is currently en vogue around the world from the streets to the catwalks . . . While adaptability is the draw for fashion consumers all over the world, the region’s strong purchasing power is attractive to many western fashion businesses even in a downturn . . . It’s also one of the few places that’s seeing a number of store openings rather than closings, a prevalent occurrence everywhere else. The region is integral to the survival of the couture business and is probably a commercial reason why Givenchy chose to do such elaborate pieces in its recent show.”
Only a few years ago, it was Japan and China that drove stylistic choices on the catwalk. Designers briefly flirted with Russian motifs when oil prices rocketed and Russians began pouring into boutiques like hungry, wealthy wolves, but after oil bottomed out and the Asian markets cooled, the design houses floundered for a direction — and what better direction than the Middle East, with its still wealthy clientele and its history of highly embellished clothing and jewelry? Not to mention all those layers!
Designers love layers. They can get you to purchase five light pieces instead of just one heavy item. Score!
Video clip below of Givenchy’s Fall/Winter 2009/2010 haute couture collection, created with the wealth of the Middle East in mind. Note the elaborate jewelry, the head scarves, the long flowing layers and the geometrical embellishments:
5.) The Fragrance Industry Takes It On the Chin:
“German fragrance and food-flavours maker Symrise said second-quarter net income dropped 44 percent on high feedstock costs and as demand for high-margin fragrances for luxury cosmetics and perfumes declined.”
Swiss based Givaudan also reported a weaker than expected profit, with its fragrance division taking the largest loss: “Givaudan’s fragrance division posted a 6.6% decline in sales in the first half due to inventory destocking, but with a slight recovery in the second quarter, the company said.” IFF (International Flavors a
nd Fragrances) reported that “its second-quarter profit fell 28 percent as weak consumer spending hurt retail sales of perfumes.”
But Kylie Minogue will save them all! Kylie Minogue to Launch Inverse for Men Fragrance: “This is Minogue’s sixth fragrance in three years. Her first, Darling, was released in September 2006 and, according to industry sources, the Minogue fragrance franchise generates sales of more than $100 million at retail globally . . . While executives declined to discuss sales projections, industry sources estimated Inverse could do about $10 million at retail.”
Here these global conglomerates have been wasting time with master perfumers and top notch chemists when all it really takes is Kylie!
6.) Gucci Sues Credit Card Processors for Encouraging Fraud:
In a novel, and what seems exceptionally desperate, twist, Gucci has slapped a lawsuit on several credit card processing companies in their increasing attempt to battle product counterfeiting: “Gucci America said in the lawsuit filed in U.S. District Court in Manhattan that by processing transactions on counterfeits, the companies ‘not only supply the necessary marketplace for such transactions, they are full partners in those counterfeiting activities.’”
At first glance, I’d say bulls*** on this lawsuit, since how is a credit card processing company supposed to know whether the product being purchased is genuine or a fake, but this particular lawsuit stems from an earlier lawsuit in which Gucci successfully sued the Laurette Co, which owns the website TheBagAddiction.com.
Now Gucci is going after the credit card processing companies who worked with the Laurette Group and profited off the sale of the fake goods. If Gucci can dig up evidence that shows the companies were aware that the goods being sold were fakes, Gucci might have another victory on their hands. It’s a long shot, and highly unlikely, but it’s an interesting development in the fight against counterfeiters.
As long as we’re on the topic of lawsuits and counterfeiters, Chanel is in a growly mood and isn’t letting up one iota regarding producers and sellers of fake Chanel branded goods and Chanel “inspired” goods : Chanel sues Vegas company over alleged counterfeit products — “Chanel filed suit in U.S. District Court in Las Vegas on Wednesday against Marc Giovanni, Top Modea Purses Inc. and Web sites Chanel says are associated with Giovanni and Top Modea: boutiquelebon.com and boutique-marcella.com . . . Chanel says the defendants are infringing on its trademarks by advertising and selling counterfeit products including handbags and wallets bearing copies of the Chanel trademarks. The products are likely of inferior quality in comparison to Chanel products, the lawsuit says.”
And poor Ebay is getting smacked again, this time by the Steve Madden company: “Footwear and accessories maker Steven Madden sued online marketplace giant eBay … over purportedly fake watches being sold on its web site . . . According to the complaint, Steven Madden representatives allegedly sent cease and desist letters to eBay, requesting they remove the unlicensed watches from their website. ‘Instead, eBay, for its own convenience and profit, has failed to take any steps to police the eBay auction site to the detriment of Madden,’ the complaint says.”
With one lawsuit after another, it’s a wonder eBay makes any money at all.
Oh, and one last word about Gucci: “In an order Wednesday, U.S. District Judge Richard M. Berman in Manhattan issued a permanent injunction prohibiting the sale in the U.S. of coffee, bedding, housewares, cosmetics, hosiery, handbags, wine and gelato under the names of Jennifer Gucci – the widow of former Gucci chief designer Paolo Gucci – and her daughter, Gemma, who works at investment bank Jefferies Group Inc. They may be able to license their names to other products in the future but must include disclaimers that unambiguously state that they’re not affiliated with Gucci products, the judge ruled.”
So much for the power of a famous name. Who wants something from a Gucci if it’s not affiliated with Gucci? No one, that’s who; hence the lawsuit. The Gucci Group isn’t amused by non-affiliated, non-board member Gucci family members attempting to coast through life on the back of its marketing muscle (while arguably working to dilute the Gucci brand name).
7.) Wave of Store Closures Expected to Blight the Retail Scene:
“As of April, retailers were on track to close 4,600 doors this year, according to a report from the International Council of Shopping Centers. That’s on top of 6,913 closures last year . . . Among the recent cuts laid out: Jones Apparel Group Inc. said it would shut 225 units, AnnTaylor Stores Corp. plans 163 closures, Abercrombie & Fitch Co. axed its 29-door Ruehl concept and Pacific Sunwear of California Inc. shuttered its D.e.m.o. and smaller One Thousand Steps divisions. This comes on top of the liquidations of Mervyns, Gottschalks, Steve & Barry’s, S&K Famous Brands and others.”
Analysts are suggesting that companies looking to prop up their profit margins should carefully evaluate their need for retail space. A modestly performing store can be shuttered, and the savings from no more rent payments, insurance payments, employee salaries and inventory could be a welcome boost to a struggling company’s bottom line.
