Luxury & Fashion Biz News: January 6th, 2012 (Holiday sales may sparkle, but profits look dim; plus, Raf Simons for Dior and Designer Lawsuits everywhere!)

1.) Holiday Sales are Strong, but Profits are Questionable:
“Retailers posted strong sales numbers in December, but at-times extreme discounts tapered good feelings, profits and earnings outlooks for the full year. Stores used discounts to entice shoppers during the vital holiday shopping season, which led to record-setting days. But those deep discounts also led to missed expectations and left analysts wondering if such discounts will continue to be needed to get shoppers to stores.”

Stores like Macy’s, Saks Fifth Avenue and Costco posted “impressive” sales gains for the season, while other retailers, like Gap, JC Penney and Sears were down, with Gap posting a 4% loss.

*NOTE 1: Sears announced that it will be closing as many as 120 stores as sales have declined much more drastically than expected.

*NOTE 2: Saks may have reported increased sales, but at what cost? Utter Chaos Ensued at the Saks 60% Off Shoe Sale Yesterday“There were too many people. They were pushing and shoving. It was a zoo . . . security guards came in to ‘put a lid on the shoppers’ rage.'”

Other news sources confirm the worrying Discount Or Die reality for many retailers:

CNN Money: “A holiday season that kicked off with record-setting shopping days on Black Friday and Cyber Monday and ended with a stampede for post-Christmas sales made one thing clear — many Americans needed those discounts and promotions to salvage the season.”

The Wall Street Journal: “Even though consumers are willing to spend, they will only spend when there is huge discounting . . . A number of retailers couldn’t bring in enough dollars in that environment.”

Bloomberg Businessweek: “Many retailers sacrificed their bottom lines by pushing heavy discounts to shoppers bent on getting a good deal in a challenging economy. That created a sharp divide between stores that won the battle for wallets, and those that didn’t . . . Consumers have limited time, money and attention, and they’re investing in a smaller subset of retailers.”

Boston Globe: “Many merchants rang up strong sales in December, but the deep price cuts that lured shoppers took a toll on profits during the holiday season . . . There are too many retailers chasing after frugal and fatigued shoppers.”

Just Style (subscription required): “While many retailers seem to have benefited from the highly promotional landscape, the reported sales growth may come at a cost to the bottom line. Indeed, its full impact will become more apparent in February, when companies report their earnings results for the period.”

In other words, retailers earnings matter more than their sales. A lot of companies hyping positive year-end sales numbers may very well be singing a more mournful tune come February. And if it took aggressive discounting to get consumers to buy for the holiday season, then that could spell trouble for all of 2012. Like Dan Burrows wrote in the linked article, “Consumers have been trained (to expect) — and now demand — sales and specials.”

*Related news: Business is booming for British pawnbrokers“The financial crisis is starting to squeeze the rich as wealthier families hock classics cars, yachts, jewelry and works of art at Britain’s booming pawnbrokers. Borro, a ‘personal asset’ lender, said one customer took out a £1m loan against a collection of fine art, while others pawned bullion and fine wine.”

The reason that the wealthier banking class may be relying on pawnbrokers for cash and loans is because, even in the world of finance, the ground is getting a little shifty. Year-end bonuses for London’s bankers were the lowest in a decade, with global financial firms laying off over 200,000 workers in 2011.

New York banks and investment firms are also laying off workers, with BNP Paribas, Societe Generale and Credit Agricole “looking to axe around 1,000 jobs overall in the US, mostly in investment banking” and Morgan Stanley announcing that “580 of the 1,600 job cuts announced earlier this month (December, 2011) may come from New York City.”

So keep all that in mind when you read the next round of “Luxury Brands are doing great!” in the news. With slowing economic growth across the board, even in once white-hot markets like Brazil and China, it’s going to take more than a well-known name to coax nervous consumers to splash out on pricey goods.

And if customer service continues to suffer at the expense of rapid growth, even the once reliable Chinese consumer may say enough is enough: “In recent years, questions regarding the quality of highly sought-after goods and the customer service provided by some well-known brands have marred the image of some of the world’s biggest names in luxury goods . . . For these leading brands, fulfilling the rights of Chinese consumers comes long after emptying their wallets.”

With big brand attitudes like that, it might not be long before China experiences its own artisan revival. Cuz, you know, Luxury is Dead, Long Live Excellence!

2.) More News on the Dior Head-Designer Front:
“Women’s Wear Daily reported that Dior is closing in on a deal with the Belgian designer Raf Simons, who designs for Jil Sander, as well as for his own menswear label . . . Simon’s tailoring skills, sophisticated designs and knowledge of couture techniques and shapes make him a perfect candidate for the job … and he’s the opposite of the uber-romantic Galliano, which is what the house needs: a clean slate, a new direction.”

Raf Simons is reputedly the fifth choice on the list of designers to replace the disgraced Galliano, with Marc Jacobs having recently exited the picture of likely candidates over differences in salary and staff requirements (he reportedly wanted to take his entire Louis Vuitton design team with him if he made the move).

There’s some question as to whether Raf Simons is up for such a big job (two haute couture collections, four ready to wear collections and scads of accessories), and if his crisp lines and tailored, minimalist aesthetic can successfully translate to the more feminine and traditionally romantic Dior, especially after the outsized capes, furs and organza-fueled drama of the Galliano years.

A video clip of Simons’ Fall 2011 collection for Jil Sander below:

Jil Sander Fall 2011 — a study in sleek sportswear modernism

Compare that to Galliano’s Fall 2011 collection for Dior, his last collection before he was fired:

Dior Fall 2011 — because nothing exceeds like excess

There’s no question that Raf Simons would be a decisive turn in a new direction for the global brand, whose design team still relies heavily on the Galliano archives as they await the appointment of a new leader. But personally, I like the rumor of Raf Simons for Dior far better than I ever liked the idea of Marc Jacobs.

*Other juicy brand news: The YSL vs. Christian Louboutin legal tussle is still in motion, with a group of eleven law professors recently filing a brief in support of YSL“The law professors’ filing argued that if the 2nd Circuit permitted trademarks on colors that serve an aesthetic function, it would be muddling the distinction between trademark and patent law. Trademarks aren’t supposed to confer the same sort of monopoly power as design patents, and Louboutin’s broad assertion of its trademark right on the color red was anticompetitive, the brief said. The professors, like YSL’s lawyers, distinguished between Louboutin’s red soles and Tiffany’s blue boxes, which don’t impinge (on the) design choices of other jewelers.”

*Speaking of designer lawsuits: Rolex sues Brooklyn deli over name and logo“Shawqu Ali, a father of seven, said he named his business Rolex Deli because ‘it’s a name that’s associated with quality and prestige’ — adding he was proud to be wearing what he described as a ‘Rolex’ on his wrist. ‘Of course, it’s real,’ said Ali, who had clearly swallowed the baloney dished out by a street vendor. ‘I paid $200 for it.'”

I hardly know what to say. I didn’t think that people honestly believed they were buying the genuine article off of street merchants.

*Even more designer lawsuits: Cartier sues watchmaker Raymond Weil“A German judge approved an injunction taken out by Cartier against fellow watchmaking company Raymond Weil. Cartier argues that Raymond Weil’s line of “Jasmine” watches are “illegal imitations” of their “Ballon Bleu” design.”

Speaking of watches, I ran across this unique watch company out of New York (and Kyoto), Dedegumo. They hand make all the watch cases and bands, though the watch interiors are pre-fab Seiko quartz movements.

Nonetheless, I think they’re really cool, and like this terrific article about indie fragrance brands in Antenna Magazine says (an article that features the stellar Soivohle brand by artisan perfumer Liz Zorn, so, win-win!), it’s a valid point that if you shop at indie producers, you’re unlikely to run into the kind of Cartier vs. Raymond Weil copycat issues cited above.

Dedegumo — a steampunk’s dream come true

Besides, I like Antenna Mag’s motto for independent brands — “Never worn by Aunt Irene or your ex-therapist.”

*Strange, but maybe true: Luxury brand retailers will miss Kim Jong Il“During his nearly 18-year reign, Kim’s fondness for Mercedes-Benz cars was reported widely. It’s always been a bit [disconcerting] that he was able to flaunt the country’s treasure in such a fashion, considering UN sanctions have long banned the sale of luxury goods to the country.”

*Stranger and truer: How The House Of Chanel Quietly Made A Fortune In A U.S. Chain Store“The House of Chanel, the French fashion company specializing in luxury goods, is sitting on a $750 million asset stemming from an investment in a U.S. chain store that it may have tried to keep quiet.”

Though, considering Karl Lagerfeld’s latest penchant for churning out budget clothing lines, the above news shouldn’t surprise anyone.


A.) Joe Jackson’s tribute perfume gets new launch date: “Joe Jackson, who was left out of the “Thriller” singer’s will on his 2009 death, first promoted the “Jackson’s Tribute” and “Jackson’s Legend” fragrance line at the Cannes film festival in May. But the launch was scrapped when the company that owns the commercial rights to sell products under Michael Jackson’s name filed a lawsuit seeking to ban sales and asking for damages.”

If you visit Avery Gilbert’s blog, you can read all you need to know about Joe Jackson and his ill-fated Michael Jackson fragrance. Which is probably way more than you ever really wanted to know in the first place. But entertaining!

I think that’s my new catch-phrase for 2012: It’s a new year, same as the old year . . . but entertaining!

B.) Jewelers have one of the least stressful jobs of all, or so says Career Cast.

Daniel Ford, editor of JCK online, a web magazine for the Jewelry industry, begs to differ.

You mean, a jeweler’s daily routine isn’t filled with glamorous, sexy women? Say it aint so!

Running away (with a bag full of Solange Azagury-Partridge)

*Speaking of sparklies: Elizabeth Taylor Jewelry Auction Shatters Records, Fetches Nearly $116 Million” The sale of some of Elizabeth Taylor’s most precious jewels took in nearly $116 million, a world record for a private collection of jewels . . . The auction broke six other world records, including the price achieved for a pearl jewel, the per carat price for a colorless diamond, the price for an Indian jewel, and a ruby per carat.”

But, you know, there’s a big difference between placing a record-breaking bid on an auction item and actually *paying* when the bill comes due. Turns out those high-flying bidders seem to get carried away with the excitement, but suffer bidder’s remorse later:

Art Dealers get tough as auction items go unpaid“The difficulties of dealing with Asian clients are summed up by an anonymous poem currently circulating in the trade: The Chinese bid with verve and skill / And hence rack up a mighty bill / “The money’s coming soon” they cry / But oh, my friend, they lie, they lie.”

I’m sure this isn’t limited to just their Asian clients, but it’s the recent explosion of high-bidding Chinese that have exacerbated an already underlying problem in the high-end auction world. What I didn’t realize, though, is that you could just walk away from a multi-million dollar bid without, seemingly, too much of a problem.

Seems like the lessons to be learned here are: #1) The auction industry is overdue for reform, and #2) One should never trust headlines with exclamation points, especially when those headlines are trumpeting record-breaking auction prices.


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