1.) Versace Feels the Squeeze and Retreats:
"The fashion house, renowned for its garish and daring designs, announced ... that it plans to cut 350 jobs worldwide by the middle of next year . . . (CEO) Giacomo Ferraris said: 'Trading conditions in the wake of the global financial crisis have been severe and the company expects to make a loss in 2009. No organisation can allow a situation like this to continue.'"
350 jobs has been estimated to be 26% of Versace's workforce. This dramatic layoff is on the heels of the news that Versace closed up its remaining shops in Japan and is reviewing its overall global strategy.
Most analysts are attributing the floundering performances of fashion houses like Versace, Lacroix, Escada and Yamamoto to economic pullback and "luxury shame" (i.e. the guilt of extravagance during a recession), but there are others who take a less charitable view: "What's the last thing you remember about Versace? For me, it's that J.Lo slit-to-the-middle green dress, and Elizabeth Berkeley pronouncing the company name as "Ver-sase" in the horrific yet highly enjoyable Showgirls . . . So are plummeting profits really a result of the newly abashed wealthy choosing Forever 21 over designer labels? Or are Versace's poor sales simply a sign that nobody really wants to wear Versace?"
What does Versace stand for, anyway? When a consumer buys Versace, what is it exactly that he/she is purchasing? Their reputation appears to be about flash, sizzle and bling rather than quality (not to say that their products aren't well-made, that just hasn't ever been the main selling point) -- but if the Asian market is snapping up the likes of Hermes, Louis Vuitton and Gucci due to their long histories of leather craftsmanship and superior materials, how can a house like Versace, with none of that history but just as high a price tag, compete?
Video clip below of the Versace Spring/Summer 2010 collection that just recently showed in Milan. A lot of bright party colors and extremely short hemlines, with patterns that look directly lifted from the house of Pucci and silhouettes seemingly snagged from last spring's collections by younger, up and coming designers like Marios Schwab, Narciso Rodriguez, Christopher Kane and Olivier Theyskens.
Cribbing from other, more popular designers may make good business sense for Versace (finally, something will sell!), but doesn't bode well for the survival of the brand as its own stand alone entity.
The Wall Street Journal notes that "Versace's latest plan is a clear sign that the global cutback in spending on luxury goods is hitting small family-owned companies the hardest" -- the Versace company is 100% family owned, split between Donatella Versace (20%), her daughter Allegra (50%) and her brother Santo (30%).
In related news, luxury eyewear maker Luxottica reported a 21% drop in profit for the third-quarter. Luxottica owns the Lenscrafters retail chain, and is licensed to manufacture sunglasses and eyewear for brands such as Prada, D&G, Burberry, Ralph Lauren and Chanel. Oh, and Versace too, of course.
Not to be outdone, Swiss Watch exports fall 26%. Here's the breakdown: demand for watches under $200 drops 50%; in the $200-$500 range, demand drops 4% (maybe there wasn't that much demand in this price range to begin with?); the $500-$3,000 range drops 18%, and demand for timepieces priced at $3,000 and higher drops 26%. So, except for the anomaly of the $200-$500 group, Swiss watchmakers are having an abysmal year.
The diamond biz aint dancin' any jigs, either: "De Beers, the world's largest diamond mining company, is expected to end the year 2009 with rough diamond production levels at 50% of the previous year."
2.) He Rescues Me, He Rescues Me Not:
"The latest Christian Lacroix rescue bid has been put on hold as a French tribunal yesterday adjourned hearings on a bid by sheikh Hassan Bin Ali al-Nuaimi. The Emirati sheikh was due to take over the French couture label four months after it filed for bankruptcy. The Paris competition tribunal put the hearing off until November 17, citing procedural delays . . . The other contenders are reported to be turnaround investment group Bernard Krief Consulting and invested vehicle Financière Saint Germain. The tribunal is believed to favour Al-Nuaimi's bid because he has demonstrated a commitment to save jobs, address the company's debt and rescue the fashion house."
Meanwhile, the House of Lacroix is in limbo, not having made a profit in twenty two years of operation and without the credit/financing necessary to produce collections for future shows. Lacroix's last Haute Couture runway collection was produced utilizing materials and labor donated by colleagues and peers.
Lacroix himself estimated it would take approximately $95 million (U.S.) to successfully relaunch the label. Below, a look back at the House of Lacroix Fall 2009 haute couture collection, described by Style.com as "Lacroix at his most restrained and approachable":
Funny, but critics called Yohji Yamamoto's Spring/Summer 2010 collection (right before he declared bankruptcy) his most accessible ever, too. Why does it take the threat of collapse to get designers like Lacroix and Yamamoto to create collections that the public might actually buy and wear?
Sometimes I think it's not a terribly awful thing that corporate groups like LVMH control the fashion world -- at least we all get some wearable designs out of the deal.
3.) Sneak Peak at Jimmy Choo for H&M:
As my friend Louise says, "There is an inherent level of quality and a reputation for excellence that consumers come to expect from names like Jimmy Choo. Once the company messes with that by producing what are essentially cheap knockoffs of their own designs, forget about it. How angry do you think the Jimmy Choo clientele is going to be when they see the brand's name now associated with cut-rate materials and low-wage workmanship?"
My point exactly. Karl Lagerfeld can do an H&M collection without suffering a loss in perceived value because he's a personality, not a brand (even though he does have a brand under his own name). He's first and foremost "a designer" and so is free to design for whomever and wherever without any loss of cachet. Jimmy Choo, however, is a different story -- the brand's reputation was originally established on high-end workmanship and quality materials. The debut of the mass-market Choo+H&M collaboration is likely to rip the rug right out from underneath that perception.
I'm all for the creation of better designs for the mass market (I'm a firm believer in the Tom Peters philosophy that just because something's inexpensive doesn't mean it has to be ugly), but high-fashion designers and luxury brands appear too willing to cash-in reputations that took them years (decades) to build -- the short term reward is obviously substantive, but what's the long-term damage?
4.) French Luxury Brands Launch Website to Promote Goods in China:
"A new Web site launched Thursday gives China's 1.3 billion people a chance to ogle French luxury, from designer clothing to diamond-dripping watches and glittering gold jewelry, as part of a bid by French houses to tap into the Asian giant's growing hunger for high-end goods . . . The site, which is in Chinese, English and French, was developed by the Comite Colbert -- a Paris-based organization that represents some 70 French brands -- and Sina, China's leading Internet provider, with some 260 million users . . . Speaking to The Associated Press, Dior CEO Sidney Toledano hailed the site as 'an extremely original, creative and I'd say state-of-the-art way to communicate,' with China's potential consumers."
It's an unusual website, with no ability for visitors to purchase any of the goods on display -- it's merely a way for French luxury labels to communicate their collective image to the Chinese consumer.
You have to download a special player when you visit the site, but it's worth checking out, not because the site is particularly fascinating (it's not, really -- it's just whizzing words and images with very little relevant information attached), but it's valuable for insight into how a contemporary conglomerate (LVMH is heavily involved) might go about introducing itself to a brand new consumer segment.
5.) The 80's Are Back From the Grave, But Prettier and More Toned:
"'Everybody was so afraid of the '80s coming back in,' says Anna Lassiter, co-owner of Eden Boheme. 'But now it's done with a modern twist, and I don't even think they're realizing they're loving it so much' . . . Stacy Smallwood of Hampden Clothing ... points the finger at a specific designer. 'Alexander Wang I think led up this whole '80s revival with the kind of oversized T-shirts,' she says. 'Everything's kind of oversized and messy, so I feel like a lot of designers were inspired by his look . . . The funny thing is, the people who are really into it don't really know it's '80s-inspired because they're so young.'"
I know I've been beating this drum for a while, but really, all you have to do is take one look at Lady GaGa and you can see that Cold War Fever is officially back in full pop-culture force, and where pop-culture goes is where designers want to party.
Video clip below of Alexander Wang's Spring/Summer 2010 collection. The fashion critics yammer on about how "different" Wang's style is, but it so clearly comes from the 1980's (zippers, asymmetry, slashes, knit layers, leather) that it only seems different if you spent that entire decade sealed up in an oil drum in Siberia:
But just in case you're feeling a bit too buffeted about by the ever changing winds of fashion revivals: Don't Follow the Trends, Start Them. But look at the photo collage the author uses to illustrate her article and try telling me that's not the 1980's all tied up in a neat bow.
And Lady GaGa gets a Stylemaker Award, so, there you go.
6.) Industry Quick Hits:
A.) Kenneth Cole Is Down on the Economy: "'People say that things will get better in a few months, but to be honest, I don't think it will get better for years," he said."
I tend to agree. There's a headline on Bloomberg News today about the potential for a "huge" commercial real estate crash and how damaging that will be for the already struggling economy: "U.S. office vacancies hit a five-year high of almost 17 percent in the third quarter, while shopping center vacancies climbed to their highest since 1992, according to the property research firm Reis Inc."
Analyst Craig Guttenplan notes that "commercial property prices are already back to 2004 levels."
A 2008 video clip below of thoughts from designer Kenneth Cole:
"To the degree I can effect how you look, that's powerful."
B.) Perfumers in the news: Forbes dubs Francis Kurkdjian a rock star; Jacques Polge opens up his home and lets us in; Thierry Wasser eats like a king.
In related news, IFF is laying off more workers.
C.) Street fashion mogul Mark Ecko sells off control to his brand name: "Some speculate whether it was out of desperation, since he had to layoff employees earlier this year, sell some his trademark brands, and pay off numerous creditors, (but) this week, the fashion mogul inked a deal with Iconix -- the brand which owns clothing lines like Rocawear, Mossimo and Joe Boxer -- giving up a 51 percent share in the Mark Ecko brand. In exchange, he'll receive $63.5 million cash and $90 million in financing for the joint venture with Iconix."
Both high and low fashion are taking a beating, but it sounds as though Ecko was a poor business manager, to boot.
D.) Prada calls laid off workers back earlier than expected: "Italian fashion house Prada is shortening temporary suspensions for some workers by three weeks after orders for its spring/summer 2010 clothes exceeded expectations by 10 percent."
Of course, there's no mention of how spectacularly low those expectations may have been. Video clip below of the Prada Spring/Summer 2010 collection that garnered a better response from retailers than even the people at Prada had hoped:
"The frayed edges of luxury."
E.) Cost cutting boosts Estee Lauder 1st-Quarter profits by 175%: "'We capitalized on our solid pipeline of innovative products, initial improvements in certain areas of our business and increased cost discipline, which led to a significant improvement in operating margin,' said Fabrizio Freda, president and chief executive officer. 'We believe we gained share globally in much of our distribution this quarter.'"
I'm still trying to process the "profits up 175%" bit. Now that's serious management -- and what must be a very strong portfolio of products. Didn't Lauder just release a new series of fragrances? They must be selling very well, indeed.
And along the lines of serious management + strong portfolio, I just read that designer Michael Kors has teamed up with the Estee Lauder company to develop a "Very Hollywood" cosmetics collection for Spring (Kors latest fragrance release is titled "Very Hollywood") -- both companies are known for being quintessentially American in style, so the collection should have big domestic appeal when it hits stores in January.
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