GFC gloom surrounds Milan Fashion Week

Posted on February 23, 2012 by MO

No longer is Europe the place to be…

If your not showing your collections or having a presence in China, your probably falling behind.

Milan Fashion Week used to have the fashion follies bobbing around in the front row and then mingling with the fashion pack after a show, but that could be a thing of the past with doom and gloom reported for the event that kicks off on Wednesday.

With Italy still suffering from a blues of the GFC, the National Chamber of Fashion said the situation was “worse than in 2008″ when the global fashion crisis began.

AFP reports that Italian fashion’s hopes that last year’s revenue trend — up 5.5 per cent from 2010 — could be sustained, were dashed last week when the industry forecast a 5.2-per cent drop for 2012 to $US79 billion.

Revenues went down 4.0 per cent in 2008 and a record 15 per cent in 2009.

“It has become essential to focus attention on Asian and American markets,” said Mario Boselli, head of the chamber which organises fashion week.

A manager at a top fashion house said, “The situation is dramatic. The Italian market is a disaster, just like the French market. No one is buying anything! In Europe, there is a real crisis.”

The National Chamber of Fashion is trying to make the most out of a bad situation with first time buyers attending the shows and fashionistas unable to attend the whirlwind of parties this year will have access to the fashion chamber’s website in a Chinese language version.

Seventy-two fashion houses will showing their latest collections across Milan, with Gucci opening, followed by the other fashion heavy hitters.

With luxury taking a dip in the European markets, it’s not just the luxury houses feeling it with the head of international textile association Milano Unica seeing the slowdown in orders.

“This year will be complex and full of uncertainty, while 2011 was positive overall. This is a time for our companies to have a global vision and to focus on exports to countries where the values of Made in Italy count a lot.” Unica said.

Whilst consumer spending is expected to slow down in China this year, there is no sign of that just yet.

The MO Down only hopes that Europe returns to it’s stellar self soon.

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Sonia Rykiel snapped up by Hong Kong investor

Posted on February 22, 2012 by MO

Europe was once the powerhouse for luxury companies and the place to be seen..

Times have changed with the Asia Pacific region putting up a fight against Europe and coming out on top.

China, Japan, India and Australia are now the places to be seen and with the news that luxury brand Sonia Rykiel has been snapped up by Hong Kong investors confirms that.

The Economic Times reports that Fung Brands, an investment company backed by Hong Kong billionaires Victor and William Fung has acquired 80 per cent of Sonia Rykiel with the founding family buying the other 20 per cent stake.

With China and the US performing better than the European markets, the investors will be injecting a much needed financial boost to enter the new markets.

Apart from Hermes, French-based Sonia Rykiel was one of the last French fashion luxury brands still to be owned by its founding family.

The remaining French brands are owned by luxury powerhouses PPR, Richemont or LVMH.

“We had to open our eyes to the fact that we had come to the end of our family (business) model,” Nathalie Rykiel, daughter of founder Sonia Rykiel and chairwoman of the company, told Reuters in a phone interview.

“I took the brand as far as I could alone. But the family needed the financial, strategic and human resources to make this brand what it was destined to become, which is a global brand.”

Sonia Rykiel was created in 1968, when France was rocked by violent student riots, with the aim of creating a counter-culture to stiff, bourgeois dress codes with inside-out stitches and extra-short skirts. Later, it produced sex toy collections. Ooh la la we say.

Rykiel said several potential buyers had shown their hand, including big groups, but she chose to shock once more by selling control to Hong Kong investors.

“That one of the last family-owned French luxury brands lets Hong Kong investors come into its capital amuses me a lot,” she said. “And I prefer to be the flagship brand of a company like Fung Brands than just one of many brands within a large group.”

Sonia Rykiel will sit alongside shoemaker Robert Clergerie and Belgian fine leather goods maker Delvaux, both acquired by Fung Brands last year.

Nathalie Rykiel, who will be vice chairman, will give up the day-to-day running of Sonia Rykiel, leaving it to Fung Brands Chief Executive Jean-Marc Loubier, a fashion veteran who used to run luxury brands Celine, Louis Vuitton and Escada.

The Fung family is behind the Li & Fung trading house , which is the parent of Hong Kong-based luxury menswear maker and distribution group Trinity, in turn the owner of Italian menswear brand Cerruti since 2010.

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Python attracts luxury customers to Gucci

Posted on February 22, 2012 by MO

Luxury companies are always looking at ways to look after their clients.. Once upon a time, a bag that was lovingly created by an artisan would have been enough… but clients now want more.

Gucci CEO Patrizio Di Marco is understandable of this situation and is looking at ways to attract and retain wealthy clientele.

Di Marco moved over from Bottega Veneta in 2009, where he was familiar with precious materials and craftsmanship.

“In any possible psychological swing, you’ll always have the upper tiers of the pyramid that stay there, that keep on being wealthy, and they stick to you,” Di Marco told Business Week.

With Gucci producing bags in python and adding crocodile and leather trim to printed fabric purses as it seeks to appease its wealthiest and demanding clients as well as others like them. About 5 per cent of the luxury house’s customers account for ‘a good deal’ of sales, the CEO said, declining to elaborate.

“If you look at the price and you look at the products, you say that this is definitely worth more,” he said. “Noone has a crystal ball and we try to do our best with consumers, but they are the kings and they decide.”

With the increased use of exotic skins in the handbags and other accessories it provides another layer of options for the ultra high net worth and HNW clients, providing them with something even more rare and in many ways with a more discrete handwriting… perhaps!

With Gucci knowing that they are onto a good thing, the $US4,100 green python shoulder bags seeing sales increase of 19 per cent to a record $US4.16 billion in 2011.

Di Marco said that Europe isn’t ‘a picture of health and happiness’, which is a concern. With sales down in Italy, Chinese tourists and Russia is helping boost European sales.

With other companies praising their marketshare in China, Di Marco was more reserved in saying that sales were ‘fine’.

For 2012, Gucci are expected to open 45 stores, of which 20 will be in the Asia Pacific region, excluding Japan.

Di Marco said of the Chinese expansion that the focus will be on the second and third tier cities, whilst Gucci will look to renovate or relocate some stores in Beijing and Shanghai.

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A possible IPO for Graff Diamonds

Posted on February 20, 2012 by MO

There is definitely a sense of IPO’s in the air..

We reported earlier this year that Italian cashmere specialist Brunello Cucinelli were looking at listing on the Milan Stock Exchange.

London-based jeweller Graff Diamonds Ltd are looking to also list on the stock exchange, but rather than list on any volatile stock exchanges in Europe, they are opting for the Hong Kong Stock Exchange.

Graff, the fabulously chic fine jeweller was started by Laurence Graff. This ‘modern’ luxury British fine jewellery house that is less than 50 years old has an incredibly iconic handwriting and global appeal.

But as the old saying goes, nothing is set in concrete just yet with speculation and sources just being used at the moment about the possible IPO.

Bloomberg reports that Graff may conduct an initial public offering to raise as much as $US1 billion in Hong Kong in the second quarter of this year.

A number of fund groups including Morgan Stanley declined to be identified because the information is private.

Mr Graff has quite a keen eye when it comes to jewellery and hitting the auction floors.

He paid a staggering $US49.6 million for a diamond in 2010 and earlier parted $US25.7 million for a 35.56 carat Wittlesbach Diamond at Christie’s International in London in 2008.

We will keep an eye on this possible IPO.

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“PPR’s results for 2011 are excellent…”

Posted on February 17, 2012 by MO

We are always delighted to see strong figures as it reassures us (and all those operationg within) that brand history, strength, quality and at times rarity still make up some of the key ingredients to ensure brand loyalty resulting in robust sales and bottom line performance.  So on that note we have extracted key points from the PPR provided press release for your review below.  The key brands in the PPR stable are: Gucci, Bottega Veneta, Yves Saint Laurent, Alexander McQueen, Balenciaga, Brioni (new addition), Stella McCartney, Boucheron, Girard-Perregaux, JeanRichard, Sergio Rossi, Puma, Volcom, Cobra, Electric, Tretorn and Fnac.

François-Henri Pinault, Chairman and Chief Executive Officer, commented: “PPR’s results for 2011 are excellent. They reflect the compelling appeal of our brands, the peerless quality of our products and the unerring commitment of our employees. Thanks to our Group’s unique combination of attributes, we can look to the future with confidence. Our Luxury and Sport & Lifestyle brands command leading positions in the fastest-growing segments of the apparel and accessories market and are well placed to respond to and anticipate new consumer trends in both mature markets and emerging countries. The transformation of PPR into a more cohesive, integrated group will make us stronger and enable us to fully exploit the huge growth potential of each of our brands. In the uncertain economic climate of early 2012, the core strengths underpinning PPR’s robust 2011 results will continue to propel our performance this year. PPR is confident that 2012 will be another year of sustained revenue growth and improvements in our operating and financial performances.”

The excellent performance in 2011 yielded the following:
· Recurring net income, Group share* up 26.4%
· Recurring operating income up 16.9%
· Revenue up 11.1%

Some key highlights for 2011:

· Acquisition of Volcom – the iconic skate and snow board brand to add to their Sport & Lifestyle division.
· Acquisition of a controlling interest in Sowind Group one of the last independent Swiss watchmaking manufacturers, with a 50.1% ownership interest.
· Launch of PPR HOME - evidently an ambitious new sustainability initiative. PPR HOME is setting new standards in sustainability and business practice in the Luxury and Sport & Lifestyle segments.

· Other changes in the Group’s business portfolio included working towards sellling the Redcats group.

Operating performance -Revenue in the last three months of 2011 climbed 11.2% as reported and 7.7% on a comparable basis versus the  same period of 2010. The combined revenue figure for the Luxury and Sport & Lifestyle divisions (think Puma and Volcom as a few existing in this category) was 17.3% higher in full-year 2011 than in 2010 based on comparable data (20.2% as reported). In the fourth quarter of 2011, combined revenue growth for these divisions came in at 16.6% on a comparable basis (23.4% as reported). The main financial indicators for 2011 as a whole reflect the Group’s highly satisfactory performance during the year. Consolidated revenue from continuing operations amounted to €12,227 million in 2011, up 11.1% on 2010 as reported and 9.3% based on comparable Group structure and exchange rates.

In 2011, the Group continued to expand the proportion of its revenue generated by international operations, which rose to 72.6% of the Group total during the year versus 69.5% in 2010 (on a comparable basis). PPR continued its expansion in emerging economies, where in 2011 revenue generated by the Group’s Luxury and Sport & Lifestyle divisions advanced 25.2% on a comparable basis and accounted for 36.8% of these divisions’ total revenue in 2011, representing a 230 basis-point increase on 2010 (based on comparable data). The Asia-Pacific region (excluding Japan) was one of the main contributors to these brands’ sales during the year, not suprising, representing 24.3% versus 22.5% in 2010 (based on comparable data).

Group EBITDA advanced 15.9% year on year to €1,911 million. This led to an improvement in the EBITDA margin, which rose to 15.6% from 15.0%. At constant exchange rates, EBITDA increased by 14.2% and the EBITDA margin was 40 basis points higher than in 2010. Earnings per share stood at €7.82 in 2011, up 2.6% on 2010. Excluding non-recurring items, earnings per share from continuing operations amounted to €8.36, 26.9% higher than in 2010.

Solid financial structure – In 2011, PPR once again strengthened its financial position, recording an increase in equity and a reduction in net debt. The Group’s net debt totalled €3,396 million as of December 31, 2011, representing a decrease of €385 million or 10.2% compared with the previous year-end. In November 2011, Standard & Poor’s affirmed PPR’s “BBB-” rating with a “positive” outlook.

Another significant event for the group was a reorganisation of its Luxury division. This division now reports directly to François-Henri Pinault, Chairman and CEO of PPR, and the PPR and Gucci Group teams have been combined to better support brand growth. The reorganisation marks a new phase in the Group’s strategy to further integrate its structure.

Additionally the Acquisition of Brioni On November 8, 2011, PPR announced that it was to acquire 100% of Brioni’s share capital which was finalised on January 11, 2012, after having received approval from the competition authorities. Brioni is one of the world’s most reputable men’s fashion houses, owing to its exceptional and unique sartorial know-how. It is a profitable and growing business with its own sartorial workshops, the largest of which is located in Penne in the Abruzzo region (Italy).

By acquiring this prestigious brand synonymous with Italian masculine elegance, PPR is expanding its collection of luxury brands in the strong-growth high-end men’s fashion segment. Brioni has significant intrinsic growth potential and offers an excellent strategic fit with other names in PPR’s Luxury division. Brioni will be fully consolidated in PPR’s financial statements as from January 1, 2012.

Outlook – Facing an uncertain economic environment in early 2012, the core strengths underpinning PPR’s 2011 results will continue to propel its performance during the year. PPR is confident that 2012 will be another year of robust revenue growth, and improvements in operating and financial performances.
* Recurring net income, Group share = Net income from continuing operations (excluding non-recurring items) attributable to owners of the parent

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Online shopping on the increase in China

Posted on February 16, 2012 by MO

If only shopping was an Olympic sport….China would win gold, that’s for sure!

There has been an incredible increase in consumer spending in China over the last year or so, but whilst we thought that was in stores and boutiques only, it seems that the Chinese are spending lots of dollars through their computers as well.

China Daily reports that the turnover of China’s online luxury goods shopping market has exceeded $US1.59 billion. Impressive figures, but it hasn’t stopped just yet with the expectation of a rise of 30 per cent over the next several years.

Internet analysis company iResearch Inc. released a report saying that the turnover of online high-end shopping hit 10.73 billion yuan last year. In 2010, 6.36 billion yuan was spent, but in 2011, there was an increase of 68.8 per cent.

“Current online luxury purchasing was confined to top-class brands such as Hermes, Gucci and Louis Vuitton. Many second and third-tier brands are not yet being sold in China. When they enter the market, online selling would be the best channel for them.” iResearch analyst Ding Jiaqi told China Daily.

Bags, jewellery and watches are the most-bought items, said Ding, who added that greater choice would boost demand.

In a separate report that iResearch released, it showed that 65.5 per cent of customers that bought goods online were male. The report also said that about 80 per cent of buyers of luxury products were younger than 35.

With many restrictions still in place over what websites the Chinese are allowed to view, online shopping still has room to grow.

We wonder just how big it can get.

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David Jones Live Streams their AW 2012 collection..

Posted on February 14, 2012 by MO

It’s no longer enough with the Australian department stores hitting the catwalks in a bid to attract customers with their new ranges.

With the digital world taking up more and more of our life, department stores Myer and David Jones will go head-to-head in their bid to attract clients through their computers. David Jones live streaming will commence at 7pm through their facebook page.

Whilst their fashion shows were once reserved for media and VIP’s, both companies will live-stream their autumn-winter fashion shows to the public.

David Jones is the first to show their range with the parade being held tonight from their newly renovated 7th floor.

The Sydney Morning Herald reports that the 7th floor of the Elizabeth Street store had hosted a state banquet for the Queen’s visit to Australia in 1954, and a Christian Dior couture show in the 1960s.

”We are delighted to bring back the iconic level seven space as a destination for special occasions for our customers,” David Jones CEO Paul Zahra told the SMH.

Whilst it’s a first for a department store here in Australia, they are a few seasons behind the international luxury mono brands with fashion week live streaming (think Burberry, Prada, Zegna etc…).

We are impressed with the terribly chic invitation that would rival with the international luxury houses for their fashion shows in London, New York, Paris or Milan.

The invite list is a coveted one and was reduced to ensure a more intimate and considered launch. DJ’s is ‘the’ premium department store and these more recent cues of luxury, exclusivity and nostalgia ensure consistency and a shift upwards in their luxury and premium brand offer, which we can only encourage, David Jones can truly own the prestige space and it will ensure their strategy really is differentiated and not too close to their rival.

The show commences at 7pm tonight (15th February). Much anticipation awaits.

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LVMH acquires a stake in Chinese casual-wear

Posted on February 13, 2012 by MO

Luxury groups are always on the look-out for a new company to add to their portfolio.

LVMH are just one of them.

Whilst other luxury companies such as PPR and Richemont have a number of European and US companies in their portfolios, they haven’t looked to any companies in China, whereas LVMH are on top of their game in keeping their eye out on any potential companies there.

The Wall Street Journal reports that a private equity fund backed by LVMH has bought a stake in Chinese casual-wear company Trendy International Group, highlighting the rise of Chinese homegrown fashion in one of the world’s fastest-growing apparel markets.

It is understood that L Capital Asia invested about $US200 million for a 10 per cent stake in Trendy International Group. Based in the southern city of Guangzhou, the company owns 300 stores and hundreds of franchises of its four brands, including its largest, Orchirly.

Sales of clothing and apparel in China jumped to 460 billion yuan (AUD$6.8 billion estimate) in 2011, up 15 per cent from a year earlier, is expected to exceed 800 billion yuan by 2015 (AUD$11.8 billion estimate), according to Boston Consulting Group.

Chinais set to account for 30 per cent of the global fashion market’s growth in the next five years.

“Global investors’ attention (to the Chinese luxury market) has been strong ever since Hermes bought the Chinese brand ShangXia,” Yang Qingshan , Chairman of the China Brand Strategy Association and secretary-general of the China Brand Wealth Forum told China Daily.

“And now it’s just becoming a growing trend as more foreign capital eyes the booming market. Industry tycoons like LVMH merely need a Chinese brand that is full of potential that they can reshape and operate in a Louis Vuitton style, a plan that has been put into effect successfully in China.”

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Hermes resilient to financial crisis

Posted on February 13, 2012 by MO

Everyone needs a little Hermes in their lives we say.. and that has been substantiated by their latest financial results.

Aimed at the middle class to high class shopper, Hermes showed their resilience to the economic downturn with an 18.3 per cent rise in 2011 sales, which has left a confident outlook.

Reuters reports that the luxury group’s operating margin had exceeded 30 per cent last year, up from 27.8 per cent in 2010. This was fuelled by demand from Europe, the Americas and Asia.

Revenues had reached €2.84 billion last year, beating its own target for 15-16 per cent sales growth at constant exchange rates.

“The year was all the more exceptional given that growth was already very strong in 2010… We are entering 2012 with confidence.” Hermes Finance head Mireille Maury told Reuters.

These financial results prove that Hermes is one of the most resilient luxury groups in the face of the economic downturn.

We reported earlier in the year of LVMH’s and Richemont’s results which also look upbeat and positive for the industry.

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Third quarter sales soar for Ralph Lauren

Posted on February 10, 2012 by MO

American luxury group Ralph Lauren reported strong third-quarter results, with thanks to the holiday period.

Defying the downturn of the US dollar and any retail slump in the US, the results were boosted by double-digit sales growth at its own stores as well as increased sales to department stores, prompting them to raise their margin forecast.

Revenues for the third-quarter increased by 17 per cent to $US1.8 billion, whilst operating income rose 10 per cent to $US270 million.

“I am extremely proud of what we have accomplished in the first nine months of the fiscal year,” said Ralph Lauren, Chairman and CEO.

“Our design-driven culture is delivering highly desirable products across a growing range of lifestyle sensibilities and merchandise categories. We continue to support this innovation with best-in-class marketing, merchandising and distribution that not only distinguishes us in the marketplace, but also deepens our connection with our customers around the world. The progress we are making at our retail segment is very encouraging, particularly as we continue to invest in new stores and e-commerce worldwide.”

Wholesale sales were up 11 per cent with sales of $US750 million. Double-digit growth in theUS and Europe were supported by strong demand for core apparel merchandise, particularly men’s and childrenswear.

With international sales up by more than 40 per cent, sales in China had only been modest. It is reported that the company are in the middle of an overhaul of how it sells products in the highly competitive Chinese luxury market.

For the first nine months of Fiscal 2012, retail sales were up by 29 per cent, compared to the year prior with sales of $US2.7 billion. The sales breakdown reflected a 29 per cent growth at RalphLauren.com, an 8 per cent increase at Ralph Lauren stores, 14 per cent growth at factory stores and 19 per cent increase at Club Monaco stores.

“Our third quarter and year-to-date results affirm the resilience of our diversified operating model and the relevance of our strategic objects,” said Roger Farah, RL President and COO. “We’ve navigated through unprecedented gross margin pressure and challenging macro economic conditions while simultaneously supporting our global brand development efforts and maintaining excellent profitability. We believe sustained, disciplined investment in our growth initiatives, particularly our global retail and infrastructure development, will continue to yield strong returns for our shareholders over the long term.”

With the positive third-quarter results, Ralph Lauren expects consolidated revenue for Fiscal 2012 to increase by an estimated 20 per cent, compared with a prior forecast of a rise in the high teens or low 20 per cent range.

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