Giorgio Armani Fall 2012 | Source: IHT

Military, Front and Center (IHT)
“Is it the bitter, battling winter following the Arab spring that has created a march of the military in men’s fashion? A soldierly influence was an undercurrent in the winter 2012 Milan men’s show, which closed Tuesday. The idea of smartening up and shaping up may be a response to Europe’s gloomy economic situation”

LVMH fund looks to stitch a deal with Fabindia (Business Standard)
“The last word in luxury is wooing the most marquee ethnic wear chain in India. L Capital Asia, the private equity arm of the world’s biggest luxury conglomerate, LVMH Group, is in discussion with Fabindia, to acquire a minority stake in the retailer.”

French luxury firms seeking Italian menswear – Armani (Reuters)
“French luxury groups are on the prowl for promising Italian menswear brands after France’s PPR bought Italian tailor Brioni this month, fashion doyen Giorgio Armani said on Tuesday adding that his business was not for sale.”

Organizers Settle Dispute Over Fashion Week Dates (On the Runway)
“Just as the men’s runway collections came to a close in Milan on Tuesday, organizers of the shows in New York and London announced that they have settled, for now, a dispute over the dates of the women’s runway shows planned this September. The New York and London collections will not overlap with those of Milan, as had been risked by a standoff between the cities over when the season should begin.”

What it takes to be a teenage editor-in-chief on the web (BBC News)
“Tavi Gevinson started her first blog ‘Style Rookie’ when she was 11. She was shopping at thrift stores, taking pictures of her outfits and writing about music, images and movies that inspired her… Now Tavi is 15 and has started her own web magazine for teenage girls, RookieMag.com, that counts 4 editors and 40 writers, illustrators and photographers.”

Savigny Luxury Index December 2011 | Source: Savigny Partners

LONDON, United Kingdom — While the luxury industry entered 2012 with an overall outlook that remain uncertain, the sector remained resilient.

Big news

• The Savigny Luxury Index (SLI) lost 2.6 percent in December, whilst the general market index MSCI gained 3 percent over the period.  The cause for this divergence was a temporary sell-off in luxury stocks in mid-December.  Two factors contributed to this: the Italian sovereign debt crisis prompting an exodus from Italy-based stocks and the finalisation of Hermès’ defensive structure, which sent its share price down 7 percent in the days following the announcement.

• Despite treacherous capital market conditions, Michael Kors’ listing in New York on 15^th December was a resounding success.  Kors sold more shares than expected, achieving a valuation of close to $4 billion, or 3.8x LTM sales.  Shares jumped 25 percent on their debut and have since climbed a further 8 percent.

• In contrast, the listing of Chinese jeweller Chow Tai Fook in Hong Kong on 9^th December was received with lukewarm interest, which may be attributable to high valuation expectations.

• A Swiss court ruled that Swatch Group can cut down deliveries of watch parts to third parties from next year.  This will create supply issues for a number of watch brands and has already prompted luxury groups such as PPR and LVMH to snap up small watch component manufacturers.

Going up

• Both Hermès and Swatch share prices gaining around 3 percent over the last four weeks as a result of the events mentioned above.

Going down

• Ferragamo continues its downward slide, losing another 12 percent, and now a tad under the sector average, in contrast with its lofty IPO valuation.

What to watch

• The luxury sector has proven resilient to date despite the difficult economic environment, but investors are looking at the year ahead with caution.  Sector growth continues to be highly dependent on the Chinese customer at home and abroad.  Insight into the growing importance of the Chinese tourist versus lacklustre traditional developed markets will be key in shaping our outlook for 2012.

Sector Valuation

Pierre Mallevays is a contributing editor at The Business of Fashion and founder and managing partner of Savigny Partners, a corporate advisory firm focusing on the retail and luxury goods industry.

Hong Kong skyline | Source: Flick River

Across Asia, an Engine of Growth for Luxury Firms (IHT)
“Europe is struggling to contain a spiraling debt crisis, the U.S. economy is beset with high unemployment, and emerging Asian economies are growing less rapidly. But none of this is killing off Asian shoppers’ taste for luxury goods. Companies like Burberry, Hugo Boss and Prada have continued to strike an upbeat tone on Asia in recent weeks, despite the havoc that debt woes in the euro zone have wreaked on investor sentiment.”

Luxury giants battle it out in menswear (Reuters)
“Buoyant demand for luxury menswear, driven by China’s male-dominated market, has prompted big industry players such as LVMH and PPR to step up their investments in the fast-growing market. Consultancy Bain & Co estimates the luxury menswear market, which makes up 40 percent of the global market, is worth 180 billion euros ($240 billion) and growing at about 14 percent a year, nearly double that of luxury womenswear at 8 percent.”

Indian Fashion Expands Online (NY Times)
“Last June, the Web site Exclusively.in debuted in the United States with much fanfare. The concept seemed promising: Indians and Indophiles stateside could choose from a range of India-style clothing, art and home furnishings in a flash-sale format similar to Gilt.com’s… Now its founder and chief executive, Sunjay Guleria, is going back to the drawing board.”

Vogue’s New Archive Site Costs $1,575 for a Yearly Subscription (The Cut)
“Vogue’s much-hyped archive website goes live today, and as promised, it contains every single page from every issue dating back to the magazine’s American debut in 1892… However, accessing the archive is not quite so simple: For now, it’s only available via subscription through WGSN… And an individual subscription costs a whopping $1,575 per year.”

Mencyclopaedia: Oliver Spencer (Telegraph)
“Spencer, now 43 and this month pipped to the British Fashion Award for best menswear designer by Kim Jones (of Louis Vuitton), was born in Coventry and started in the rag-trade selling second hand clothes on Portobello Road… His eponymous label, started in 2002, is the downstairs to Favourbrook’s up.”

Savigny Luxury Index November 2011 | Source: Savigny Partners

LONDON, United Kingdom — As the luxury and fashion sector enters the critical holiday shopping period on the back of strong results for the first half of the year, there are growing signs that executives are worried about what the future holds for the luxury market in 2012.

Big news

• This has been another month of record results for the luxury sector, with Hermès, Richemont, Ferragamo, Burberry, Tiffany, Prada and Ports all posting outstanding numbers for their first half or third quarter period.  Buoyant growth in Asia continued to lift sales; Richemont in particular shone with revenues in the region soaring by 60 percent in its first half report.  Growth was also present in mature markets, notably in the USA where Burberry’s first half sales and Tiffany’s third quarter revenues rose by 25 percent and 17 percent respectively.  This was confirmed by recent news of a very strong Thanksgiving weekend, with US retail sales estimated at a record $52.4 billion.

• Yet worries are growing over 2012.  The global markets rebound which took place towards the end of November following news of concerted action to solve the eurozone debt crisis did not happen for the luxury sector, with our Savigny Luxury Index resuming its downward slide.  Some market participants have issued thinly veiled warnings over next year, notably Richemont and Tiffany (see below).  Retailers are keeping inventories low into the end-of-year season; we have heard reports of some of them asking leading fashion brands not to deliver too early, a shocking role-reversal mode.  Industry CEOs are hoping for the best but quietly making contingency plans.  Overall, the SLI has lost 4.9 percent over the month of November, compared to an increase of 1.8 percent in the MSCI general index.

• The long-rumoured acquisition of Italian tailor Brioni by PPR finally crystallised, evidencing the importance of the menswear segment for the sector’s growth expectations, especially in China.

Going up

• Luxottica’s share price is the only one to have risen during November, attributable to recent M&A activity.  The world’s leading eyewear group continues to expand geographically its successful vertical integration model to emerging markets, namely Latin America.

Going down

• Tiffany’s candid statement that trading was starting to be difficult in Europe and on the East Coast in the US caused its share price to tumble, taking US luxury peer Ralph Lauren down with it.

• At nearly 12 percent down, Ferragamo’s share price performance for the month ranks near the bottom of the sector, despite strong third quarter results and sales momentum.  Investors’ concerns seem to centre around the Italian’s group relative lack of scale compared to most of its peers and on Ferragamo’s already large Chinese presence, potentially signalling a lesser upside.

What to watch

• Investors are hanging on to every piece of news in anticipation of the Christmas results. Sector outlook has rarely been so uncertain.

Sector Valuation

Pierre Mallevays is a contributing editor at The Business of Fashion and founder and managing partner of Savigny Partners, a corporate advisory firm focusing on the retail and luxury goods industry

Alexander McQueen Spring/Summer 2004 | Source: Fashionist

They Shoot Fashion, Don’t They? (Huffington Post)
“The fascination with the spectacle of fashion that McQueen (amongst other designers) brought to the catwalk arena lies at the purposeful core and messages of the exhibition. If one may doubt the intentions behind exhibiting clothes and photos related to the current phenomenon that is the catwalk fashion show, the clever irony of such a display is certainly not lost on those that see the mirroring value and critique of celebrity and glamour in the same way that Pollack or McQueen did.”

Sowind Reaps Fruit of Merger With PPR (NY Times)
“François-Henri Pinault’s PPR, the owner of a number of high-fashion brands including Gucci, Yves Saint Laurent and Alexander McQueen, increased its stake in the Sowind Group to 50.1 percent from 23 percent over the summer, gaining a controlling stake in the Swiss family-owned watchmaker group. For Sowind, which owns the high-end watch brands Girard-Perregaux and JeanRichard, the benefits of coming into the PPR fold were “huge” in terms of growth capacity and marketing.”

On the front row at the inaugural Tel Aviv Fashion Week (Telegraph)
“It was a scrum just when it seemed that the British journalists’ reflexive line-forming would be trounced by the natives’ more rambunctious approach, Dorit Bar Or, the designer of Pas Pour Toi, appeared… And ushered us past the bouncers…. You won’t find Miuccia Prada or even Christopher Kane pushing their own rails or haranguing journalists, however good-naturedly. Eventually, Israeli designers may learn to play the international game, but meantime, their way is far more entertaining.”

Dolce & Gabbana head back to court in tax evasion case (Telegraph)
“Italy’s equivalent of the Supreme Court in Milan has overturned a judge’s decision from April this year not to proceed with a trial, and to dismiss accusations against Domenico Dolce, Stefano Gabbana and five other defendants over alleged tax evasion offences totaling €416 million.”

Big Small Business: Maria Cornejo Talks Staying Small (Style.com)
“American Express’ Small Business Saturday (11/26), which returns for its second iteration this year to bring awareness (and hopefully, customers) to local businesses, may be the weekend’s best shopping bet… It’s important for me, for my own creativity, to have our own point of view in the whole market. Being a small business, you’re offering a different a point of view that hasn’t been offered everywhere else.”

A Marriage of Economic Convenience (NY Times)
“More than a decade since Target first popularized collaborations between high-end designers and mass retailers, and seven years since H&M introduced a collection with Karl Lagerfeld, there is still allure in the concept of cheap and chic… Such collaborations are proving to be both a reliable business model for retailers and a business in themselves.”

Marc Jacobs’s Entire Spring / Summer 2012 Collection Stolen (The Daily Beast)
“Call it the case of the missing dresses. Marc Jacobs’ entire Spring/Summer 2012 collection has been stolen from a train en route from Paris to London for the brand’s European press day, the company has announced. According to the e-mail circulated to press on Wednesday morning, the PR team wrote ‘our press day tomorrow in the Marc Jacobs store is cancelled, due to the theft of the spring/ summer 2012 collections during its transfer from Paris.’”

PPR to follow PUMA’s green accounting lead (Business Green)
“The parent company of some of the world’s biggest luxury and sporting brands, including Gucci, Yves Saint Laurent, and PUMA, is to embark on one of the world’s most ambitious green accounting programmes, after announcing it will create a group-wide environmental profit and loss statement (EP&L)… By placing an economic value on its environmental impact, the company hopes to improve its reporting of a wide range of green metrics.”

Missed profit forecasts hurt Abercrombie (FT)
“Shares in Abercrombie & Fitch plunged more than 13 per cent as the US teen fashion retailer missed Wall Street profit forecasts and was put on the defensive over its strategy in Europe. Abercrombie executives were grilled by analysts over falling sales at its international flagship stores after it reported a 1.8 per cent rise in net income to $50.9m, or 57 cents per share, which fell short of market expectations of 72 cents a share.”

Benetton Retries Provocation (WSJ)
“Italian clothing chain Benetton is trying to drum up attention for its flagging brand with ads showing global leaders kissing… Now, after having lost ground over the last decade to competitors such as Inditex SA’s Zara and Hennes & Mauritz AB’s H&M, Benetton is trying for publicity.”

Albert Kriemler of Akris | Source: Estilo Moda

The Discreet Charm of Akris (WSJ)
“Perhaps it is Kriemler’s understated, reluctant approach to anything overt or loud—fashionable or otherwise—that attracts women as powerful and talented as Condoleezza Rice, Angelina Jolie, Susan Sarandon and Nicole Kidman to his clothes… Kriemler works extensively with artisans from Akris’s hometown of St. Gallen. The town is renown in the business for its skilled craftsmanship in linen, cotton and embroidered fabrics, and has long been a focus for fashion houses including Chanel, Marc Jacobs and Giorgio Armani. Akris has proper form and heritage, too.”

World’s Biggest Fashion Brands Invest in The Fancy (BetaBeat)
“The Fancy, one of the consumer facing projects under the thingd umbrella, has secured a $10 million round of financing at a valuation north of $100 million. Interestingly, the big bucks don’t come from a typical venture investor, but from a new lead investor PPR, the $16 billion French multi-national run by Francois Henri-Pinault, which owns the globe’s biggest fashion brands… The Fancy is about visual discovery and has become a natural home for fashion brands, which see a high level of engagement from tastemakers around their goods.”

Richemont cautious after H1 beats expectations (Reuters)
“Richemont, the maker of Cartier jewelry and Jaeger-LeCoultre watches, struck a cautious note for the luxury goods industry outlook as growth rates are starting to ease from the strong performance seen in its first half. Between April and September, sales at the world’s second biggest luxury goods group jumped 36 percent at constant exchange rates and October sales were up 26 percent, in a sign consumers could be turning more hesitant about treating themselves to pricey timepieces.”

Nordstrom full year profit outlook below St view (Reuters)
“Upscale department store operator Nordstrom Inc did not raise the upper end of its full year profit forecast even as it reported a jump in sales and profit in the third quarter, and its shares fell more than 3 percent… The department store chain said it now expects fiscal 2011 sales at stores open at least one year to rise about 6 percent, up from an earlier range of 4 to 6 percent.”

Versace: What’s the bright idea? (Independent)
“‘Iconic pieces for young people – the essence of Versace’ is how Donatella Versace describes her collection for H&M… H&M’s link-ups with some of fashion’s biggest names began in a blaze of publicity in 2004 with Karl Lagerfeld – and that sold out in a matter of hours. Its creator – who starred in the accompanying advertising campaign – has since said the experience was responsible for making him a household name.”

São Paulo skyline | Source: Museyon

Exactly How Hot Is Brazil? (IHT)
“Compared with the other so-called BRIC countries — Russia, with historic department stores rising from gray streets; India, with its chaotic New Delhi markets; or China with its sprawling, often empty, shopping malls — São Paulo seems like a hive of glamorous commerce… Compared with China, Brazil has had far less attention from the big brands, although their stores are present in São Paulo, lining the streets in the upscale Jardins area.”

The Three Musketeers of Condé Nast Ride Again (WWD)
“Graydon, Anna and David have their other projects, of course.For the last few years, these three have been targets of some whispered criticism in the media world: How much time do they actually devote to editing their magazines anymore? Are these editors, a combined 55 years into their jobs, starting to get a little bored? Are their best days behind them?  Apparently not. The three are having career years — or at least years that should go down as All-Star seasons on their Hall of Fame plaques.”

PPR and Brioni: After the deal, the implications (FT)
“So it all came true, and PPR did, indeed, buy Italian men’s wear luxury brand Brioni. So far, so rumoured. But what does it mean? It seems to me there are two main implications to the deal… Given the state of the rest of the Italian economy, you’d think the government might not be so thrilled about the prospect of yet more foreign ownership, but then again, maybe in the short-term, they need the tax money.”

An Eye on Sustainable Fashion (NY Times)
“There is a new luxury fashion consumer in Brazil. And it’s not just the lower middle-class shopper with greater purchasing power, as seen everywhere in the country’s media in the last couple of years. These consumers are seeking products that go beyond modern design and new runway trends — looking for an eco-friendly kind of “quality seal” and now, thankfully, they can find what they are looking for. In the last couple of years, some Brazilian brands have begun to invest in collections whose manufacturing is less harmful to the environment.”

Meet Carmen Dell’Orefice, the 80-year-old supermodel (Telegraph)
“That point is 80. And the life is extraordinary; a film waiting to be scripted. Impoverished immigrant parents (mother a Hungarian ballerina, father an Italian violinist; she was born in New York); foster homes; rheumatic fever at 12, which put paid to her own balletic ambitions; modelling at 13 (she made her first Vogue cover by the time she was 15); three husbands of varying unsuitability; numerous spectacularly catastrophic financial scenarios, of which depositing most of her life savings with Bernie Madoff is merely the most recent.”

Brioni Autumn/Winter 2011 | Source: Luxos

PPR set to buy men’s wear brand Brioni (FT)
“PPR, the French luxury goods group, has confirmed it will acquire Brioni, the Italian high end men’s wear group that has dressed Vladimir Putin and the fictional character James Bond in several movie outings. In a statement on Tuesday, PPR said it would be buying 100 per cent of the family owned group for an undisclosed sum… PPR is reorienting and expanding its business in two segments: luxury, which includes Gucci, Yves Saint Laurent and Bottega Veneta; and lifestyle, which consists mainly of a majority stake in Puma, the German sportswear company.”

H&M Sets Versace Goddesses of High Fashion to Low Prices: Retail (Bloomberg)
“Hennes & Mauritz AB, the world’s second-largest clothing retailer, next week starts selling apparel and accessories designed by Gianni Versace SpA, including floor-length ‘goddess’ gowns, dresses dotted with Grecian buttons and fluorescent micro-minis. The Versace for H&M line, the latest partnership between the Swedish retailer and a luxury designer that boasts high fashion at low prices, will give the Italian label ‘global visibility’ as it targets sales of about $700 million by 2014, Versace Chief Executive Officer Gian Giacomo Ferraris said.”

Hugo Boss ups 2015 targets on Chinese growth (Reuters)
“German fashion house Hugo Boss sharply raised its earnings outlook for 2015 on Tuesday as it increases its network of stores and eyes strong growth from China. The group… Said it now expects sales of 3 billion euros ($4.1 billion) in 2015, and earnings before interest, tax, depreciation, amortization and special items (EBITDA) of 750 million. That compares with a previous target for sales of 2.5 billion and core earnings of 500 million euros. Hugo Boss said it expected sales in Asia to almost triple by 2015 compared with 2010, mainly thanks to China.”

Upcoming Zappos iPad App Mimics a Fashion Magazine (All Things Digital)
“The new black this fall: Retailers producing content alongside their products, like an online version of a glossy fashion magazine. Zappos expects to launch its first attempt at recreating the catalog experience on the iPad in early December, just in time for the holidays… Instead of being generally available in iTunes, the Zappos app will be found on Apple’s Newsstand, which organizes magazine and newspaper subscriptions for those who use iOS 5. It will be free; a new edition will appear monthly.”

Alber Elbaz wants dramatic fashion (Belfast Telegraph)
“Alber Elbaz has announced plans to ‘bring back real drama’ to the fashion industry. The Lanvin designer staged a presentation of his Spring/Summer 12 collection at Carondelet House in Los Angeles recently. He’s already put on a similar event in Paris and explained he’s keen to get people interested in style again. ‘Geoffrey Beene told me that fashion is not show business, it’s just business,’ he said. ‘These days there are too many reality shows, and I watch many of them, but I am trying to bring back real drama to fashion.’”

Savigny Luxury Index October 2011 | Source: Savigny Partners

LONDON, United Kingdom — The market roller coaster continues, but the luxury sector has once again outperformed the general market. While questions remain about the ability for China to sustain the growth of luxury brands, investors seem to be on side again, at least for now. Analysts remain divided about the future of the luxury sector in 2012, amid much macroeconomic uncertainty.

Big news

• Renewed confidence in the sector prompted the SLI to recover the ground it lost from the mass sell-off in September.  The SLI posted an impressive increase of 21.9 percent over the month of October, versus an increase of 7 percent in the MSCI.

• Positive newsflow has boosted the sector, with LVMH, Burberry, PPR and Coach’s quarterly results beating market expectations.  Swatch announced that September was a record month for the group and that 2011 promised to be its best year ever.

• Investor concerns over a slowdown in China were addressed as all major sector players confirmed the Chinese market’s resilience.

Going up

• Up more than 35 percent, Tiffany’s share price rise over the last month is the strongest in the field.  Surely some savvy investors took notice of the termination of the Swatch partnership, which now makes Tiffany a more palatable target for the big luxury conglomerates?

• Prada posted the second strongest gain for the month underpinned by an 18 percent increase in the Hang Seng Index.  Its China-led growth strategy also appears to have regained favour with investors.

Going down

• With the whole sector bouncing back up, Hermès, Safilo and Luxottica look like they have been left behind.  Hermès’ newly implemented defensive structure has taken the bid-spec wind out of its sails, whilst the two eyewear companies’ share price performances were marred by lacklustre growth expectations.

What to watch

• The all-important holiday season is just around the corner.  Early signs will come from the USA as trading over the Thanksgiving weekend beginning 24 November is usually a bell-weather for Christmas sales.

Sector Valuation

Pierre Mallevays is a contributing editor at The Business of Fashion and founder and managing partner of Savigny Partners, a corporate advisory firm focusing on the retail and luxury goods industry