The Luxury and Fashion Biz: 07/17/10 (Of Burberry, Armani, ethics and cultural moments)

1.) It’s a Mad About Burberry World:
“Burberry Group Plc, the U.K.’s largest luxury retailer, posted a 27% gain in first-quarter sales, beating analysts’ estimates, led by growth in Asia and deliveries to wholesale customers . . . Burberry, known for its plaid designs, plans to increase capital spending by 86 percent this year, opening 20 to 30 stores in the Americas and Asia-Pacific regions, Chief Executive Officer Angela Ahrendts said . . . Wholesale revenue, which accounts for about 30 percent of sales, gained 46 percent, excluding Spain and currency swings, the company said. That represented a rebound from the fourth quarter’s 20 percent drop.”

A 27% increase in sales is such bright news in these dark retail times that NYMag’s The Cut could hardly restrain themselves from jumping up and down in their chairs, squealing with glee from the excitement of it all: “Isn’t it lovely when people make money by selling clothes?” they cried.

Well, okay, but I do think it’s important to point out that Burberry announced a 27% increase in sales, not a 27% increase in profit. So who’s to say, with what must be significant expenses from their relentless digital media campaigns, 3-D runway and ad campaigns, celebrity spokespeople and continued, rapid global expansions, if they’re actually making money.

Though, yes, admittedly, it’s nice to see a company reporting sales growth in double digit terms as opposed to another woeful story of plunging revenue.

Lydia Dishman at BNET, however, isn’t quite so sanguine over the positive effects of the new Burberry 3D campaign hosted on their website: “On the heels of its groundbreaking 3D global fashion show, British luxury brand Burberry’s Fall ad campaign is going to another dimension as well. No special glasses are required to view the ads, whose clickable images and videos can be rotated, paused, and dragged 180° to display items in the collection. Is it interactive? Yes. 3D? No. Will it help sales? Probably not.”

But business analysts and investors are pleased with the company’s recent move to buy back all its franchise licenses in China — giving Burberry greater control over its own stores, image and sales: “Shares in Burberry rose sharply Friday after the U.K.-based luxury fashion house continued its strategy to take greater control of its worldwide brand with the 70 million (GBP) acquisition of 50 stores in China. The cash deal to buy the stores from its existing franchise partner in China will allow Burberry to better control its brand and implement its own customer services, IT, public relations and marketing campaigns to boost profits, the company said.”

A look below at what wholesale and internet buyers are responding to with such enthusiasm:

Not just for chavs anymore

But even though Burberry sales are up, retail clothing and footwear sales in the U.K. slowed for the month of June, while the consumer mood in the U.S. took a July swing to its lowest level since last August.

A few journalists were a bit quick to jump on the “Burberry is doing great so the whole luxury sector must be in recovery!” wagon, but Motoko Rich writes in the New York Times: “Late last year those households started buying with much more confidence, while other consumers held back. Now, even the rich appear to be tightening their belts. ‘One of the reasons that the recovery has lost momentum is that high-end consumers have become more jittery and more cautious,’ said Mark Zandi, chief economist for Moody’s Analytics.”

The hoped-for luxury retail recovery had its roots in the stock market recovery earlier this year, but the months of June and July have revealed further weaknesses in the retail sector, if not the overall economic scenario, and the stock market responded in kind: “The summer doldrums continued into Friday for retail stocks, and analysts predict they still haven’t yet reached bottom. An assessment of the economy from Mattel Inc.’s CEO and a report showing a drop in consumer confidence in June sent shares of purveyors of nonessentials tumbling, extending a slump that started in May . . . Investors were already growing more cautious about retailers’ stocks after Americans slowed their spending in recent months, but fresh data offered more evidence of difficult times ahead just as stores head into the critical back-to-school season.”

And remember, whither the stock market goes, so go the fortunes of the luxury brands: “‘In June, for the first time in 2010, there was a decline in year-over-year sales in the luxury sector,’ said Michael McNamara, vice-president of research and analysis for SpendingPulse. ‘This was the first decline since November 2009. The performance of the luxury sector is closely tied to the performance of the capital markets.'”

If I were Burberry (but thank god I’m not, I’d hate to have such a checkered history — get it? Burberry check, chequered history? I crack myself up), I might reconsider pushing that expansion meme quite so aggressively — Hedge-Funds Decline in June Amid Stock Market Slump: “Hedge funds fell for a second month in June as the stock market slump hurt managers investing in equities . . . Hedge funds, which returned an average 20% in 2009, are struggling amid signs of a global economic slowdown as governments pare stimulus measures, Europe faces surging budget deficits and China’s expansion slows.”

See also: Retail Sales Plunge In Italy On Surging Unemployment And Lack Of Confidence, and Teen Summer Job Market May Be the Worst Since 1951.

In related news, unlike Burberry, the house of Armani didn’t have such great sales figures to report: “Giorgio Armani SpA said yesterday its operating profits slumped 28% last year — in part because of recessions in the US and Japan, two huge luxury apparel markets — as revenue slipped by 6% compared to the previous year.”

Trouble spots outlined for Armani — a shrinking male customer base, an aging female clientele and stiff competition from fresher, lower-priced fashion labels. It’s too early to see any Lady Gaga effects, but Armani is hoping to woo the young, trendy spenders by teaming up with Gaga for her latest Emporio Armani tribute video, “Alejandro”:

“Yo, Giorgio! When do I get my affiliate check?”

Speaking of Giorgio Armani and Pay for Play, even the Guggenheim appeared unable to resist the juggernaut that’s the Armani advertising machine: “Former Guggenheim director Thomas Krens is infamous for obliterating ethical lines between exhibitions and corporations: The Guggenheim received an eight-figure donation from Giorgio Armani just as an Armani retrospective went on view at the museum.”

Nice gig if you can pay for it get it.

And we mentioned Lady Gaga back there somewhere, right? Well, the big rumor is that she’s in talks to produce a Gaga perfume. No word yet on who she’ll be working with specifically (Coty has denied their involvement). Curiosity over a Gaga fragrance abounds, but somehow, I think it’ll skip the vanilla train entirely. Lady Gaga and vanilla don’t seem to be a likely match.

Hmmm, maybe something with coffee? Coffee and lipstick, perhaps. And asphalt. But soothing, calming jasmine need not apply.

2.) How to Make High Fashion From Bacterial Slime (and no, we’re no longer talking about Lady Gaga):
“It may sound a bit like a Project Runway challenge, but according to the Bio-Couture website, the microbe-made clothes are meant as a sustainability project. The bacteria forms a congealing fiber which designers can roll into thin sheets to make the base of each garment. As reported by ecouterre, where we found this story, overlaying pieces of the sheets as they dry will ‘felt’ them together into a fashionable whole, without the need for stitching. Examples of the Bio-Couture’s latest pieces are currently on display as part of a nine-month exhibit called ‘TrashFashion’ at London’s Science Museum.”

I wanted to feature this article because #1) the headline is great, and #2) consumers are more and more interested in fashion options that aren’t resource intensive, don’t involve low-wage labor exploitation, and result in little to no toxic side effects to workers or to the environment.

As an illustration of “toxic side effects” to workers from fashion, take a look at this: Denim workers seek sandblasting compensation“Denim workers in Turkey are campaigning for compensation and access to medical treatment after contracting silicosis, a potentially fatal lung disease, in sandblasting sweatshops . . . The process involves blasting fabric with sand in order to give it a worn look, but can lead to workers inhaling dust and thus developing silicosis. The most fatal and irreversible form of silicosis can occur after only a few months of exposure. In the European Union this type of production has been banned for more than 40 years because of its danger to health”

Did you know that the sandblasting of fabrics, while resulting in wonderfully aged and softened finishes, has ill effects on the health of the workers? I didn’t. Did you also know that while European nations have banned the process, trendy fashion brands that sell to Western consumers simply move their productions to other countries and continue on?

Ugh. Between unsustainably low-wage labor practices and health endangering work environments in third world countries, I’m now looking at everything in my closet with increasing suspicion.

Is it any wonder that consumers are turning to artisan producers and small, independent brands? When you know who you’re buying your product from, then you know the materials that go into it and the conditions under which it was produced. The globalization of fashion has made designer style more affordable, but it’s also made the relationship between producer and consumer more anonymous, and it’s in this anonymity that brutal practices thrive.

Bring on the independently produced slime jeans!

3.) Excellent Interview with science author and scent psychologist Avery Gilbert over at Scent Hive. Check it out. Gilbert always has something interesting to say about the world of contemporary fragrance production.

Hey, I wonder what Avery thinks a Lady Gaga fragrance should smell like?

4.) China Fashion Industry Awaits Their Karl Lagerfeld:
“Though top fashion schools in New York and London are churning out design graduates in ever-greater numbers, and Chinese fashion brands like Shanghai Tang and JNBY are expanding into more international markets, as Jill Spalding of Vogue Living told Forbes editor Russell Flannery in an interview last week in Shanghai, the fashion world is still waiting for ‘China’s Karl Lagerfeld’ to emerge and take Chinese fashion global.”

Below is a video clip of Taiwanese label Shiatzy Chen’s Spring 2010 collection on the runway in Paris. Shiatzy Chen has been called “the Chanel of Taiwan” and described as “neo-Chinese chic”:

From Wikiepdia: “Designer Wang entered the Chinese market in 2003 in Shanghai and opened up further stores in Hong Kong and Beijing. Shiatzy Chen’s Shanghai flagship store,which opened in October 2005, exhibit a distinctively Chinese heritage amidst the parade of Western fashion marques that now dominate The Bund.”

And in similar (?) news, who knew that Islamic fashion could be a money maker in today’s Western world: “Fashion houses in Milan and Paris are waking up to the commercial potential for Muslim women’s clothing that respects religious values and sets new standards for style. The global Muslim fashion industry would be worth $96 billion if half of the world’s 1.6 billion Muslims spend just $120 a year on clothing, according to French Fashion University Esmod in Dubai.”

Okay, so does this mean that Islamic fashion is awaiting its Gaultier? And Gaultier’s free now, you know, unlike Lagerfeld, who will probably die at his desk drawing for Chanel.

5.) L’Oreal Announces Growth in Sales:
“L’Oreal SA, the world’s largest cosmetics maker, said second-quarter sales grew more than 12 percent, beating analyst estimates, as shoppers spent more on luxury perfume and demand increased in new markets . . . L’Oreal sales accelerated at the fastest pace in almost three years in the first quarter as shoppers spent more on Yves Saint-Laurent mascara and Lancome fragrances, and distributors ended inventory cuts. Growth continued in the second quarter, helped by the new Inoa hair colorant, a “renaissance” at Yves Saint-Laurent and strong growth at Maybelline, Chief Executive Officer Jean-Paul Agon said in today’s statement.”

Of course, none of this would have been possible without the generous help of consumers in China: L’Oreal Expects China To Become Third-Largest Market This Year.

But gee, maybe all this increased revenue is why so many execs and society people connected with L’Oreal are getting arrested in France? All that cash coming in, and so few places to hide it!

UPDATE (more more more!): 1.) Tiffany jumps back into the handbag game after a twenty year absence; 2.) Lanvin opens its first U.S. boutique on NYC’s Madison Avenue; 3.) Louis Vuitton opens its first shop in Lebanon (in the shopaholic’s paradise of Beirut); 4.) and the critics were right, haute couture is for losers — people who don’t seem to mind losing money, that is: “‘Haute couture is what gives our business its essential essence of luxury,’ says Bernard Arnault, the head of LVMH, which owns both Dior and Givenchy. ‘The cash it soaks up is largely irrelevant. Set against the money we lose has to be the value of the image couture gives us. Look at the attention the collections attract. It is where you get noticed. You have to be there. It’s where we set our ideas in motion.'”

And by “getting noticed”, he means “Look at how much perfume, lipstick, nail polish and handbags we sell because we continue to produce couture collections that fill consumers with desire!” Not too shabby.


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