Savigny Luxury Index January 2012 | Source: Savigny Partners

LONDON, United Kingdom — It’s been a strong start to 2012 for the luxury good sector, as equity markets made significant gains in January.

Big news

• The Savigny Luxury Index (‘SLI’) outperformed the benchmark MSCI World Index (‘MSCI’) by 6 percentage points, gaining 11 percent over the month of January, relative to an increase of close to 5 percent for the MSCI.

• Investors have been exposed to continued good news.  Indeed almost all luxury groups have announced outstanding Christmas trading and 2011 year-end results driven mainly by growth in Asia excluding Japan.

• However, uncertainties have not dissipated.  Although the US market seems much better, Europe remains a concern, with sector sales highly dependent on tourist spending.

Going up

Joe Fresh Autumn/Winter 2011 | Source: Mens Models Talk

New wave of Canadian fashion brands is looking to build a worldwide presence (FT)
“Canada has many assets – commodities, natural resources, space, poutines – but most people would not count fashion among them… Yes, the Canadians are coming. And no, it’s not all lumberjack shirts and ice hockey jerseys. Their arrival marks a sense of maturity for retailers on both sides of the border.”

France and Italy: ‘Ready-to-War’? (NY Times)
“Against all the odds of the flailing euro, mountains of sovereign and personal debt and a general economic uneasiness, men’s wear is booming. As Ermenegildo Zegna opens the Milan winter 2012 men’s season on Saturday, the company has recorded a 14 percent increase in sales in 2011, pushing total revenues to €1.1 billion, or $1.4 billion.”

Italian Luxury Clothiers Say Euro Crisis Won’t Stop 2012 Growth (Bloomberg)
“Ermenegildo Zegna and Raffaele Caruso are among Italian luxury goods makers that say they are optimistic for 2012 even as Europe’s sovereign-debt crisis weighs on demand in the region and growth slows in Asia.”

Richemont Third-Quarter Sales Rise on Increased Asian Demand (Bloomberg)
“Richemont, the world’s second-largest luxury-goods maker, reported 24 percent growth in third-quarter revenue, boosted by sales of Vacheron Constantin timepieces and Cartier jewelry in Asia. Revenue rose to 2.62 billion euros ($3.31 billion) in the three months through December from 2.12 billion euros a year earlier, the Geneva-based company said today in a statement.”

Prada Displays Its Star Power (IHT)
“It was a red carpet, and it had to be, given the stellar lineup on Prada’s runway Sunday: From Adrien Brody in a rich red coat to Gary Oldman in a spiffy black morning coat, and the rest of a star-studded cast… What the designer seemed to be saying, after her dynamic but simplistic racing car theme for her last women’s collection, was that if men like cars, they like power, with all the trappings of formal tailoring and linear coats even more.”

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

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.”

World Trade Centre Memorial | Source: The Harrow Group

Fashion Week, 10 Years Later: A Bond Forged in Tragedy (NY Times)
“It is but a small footnote to history that the 9/11 terrorist attacks happened on what was to have been the fourth day of New York Fashion Week for the spring 2002 season… In the days that followed, many designers, as they struggled to make sense of their world and resume the daily business of fashion, arranged simple presentations… But for the younger designers… There was no viable way to show their collections to the buyers or press.”

Richemont Five-Month Sales Rise on Increased Demand in Asia (Bloomberg)
“Richemont, the second-biggest luxury-goods company, reported sales that beat analysts’ estimates as Asian consumers bought more Vacheron Constantin timepieces and Cartier jewelry. Revenue rose 29 percent in the five months through August from the year-earlier period, the Geneva-based company said… Sales rose 46 percent in the Asia Pacific region, where growing numbers of millionaires are fueling demand for high-end goods.”

Fashion Week’s Impact, by the Numbers (On The Runway)
“Since Fashion Week moved from Bryant Park to Lincoln Center a year ago, a lot of people (designers, journalists, locals) have debated the impact of relocating such an enormous media event. While the move has drawn significant complaints from area residents about the noise and pollution caused by the portable generators that power the tents, a new study released… Noted that the shows have had a positive impact in at least one regard, the local economy.”

Savigny Luxury Index July 2011 | Source: Savigny Partners

LONDON, United Kingdom — Over the past few days, international markets have plummeted in the face of growing uncertainty about the global economy, in particular the debt crisis in Europe and the downgrade of US treasuries by Standard & Poors. In this month’s Market Pulse, we analyse the market’s strong performance in July and provide a market update from the first few days of August.

Big news

• H1 results beat expectations across the board, prompting companies to upgrade their estimates for 2011.  In particular LVMH and Hermès both posted EBIT increases in excess of 20 percent, driven principally by growth in China and the USA.  Hermès upgraded its sales forecasts for 2011 to +12-14 percent, the only cloud on the horizon being its low inventory levels.

• PPR and LVMH step up their investment in the watch sector, respectively with an increase in shareholding to 50.1 percent in Sowind (Girard-Perregaux, JeanRichard) and the acquisition of La Fabrique du Temps, a specialist watchmaking workshop.

Going up

• Prada and Ferragamo stocks fared well, rising 7 percent and 28 percent respectively during the month of July, resulting in a very impressive increase of 24 percent and 48 percent respectively over their IPO prices.

• Hermès’ share price continues its near vertical ascent, gaining almost 20 percent in the month.

Going down

• Safilo is the SLI’s worst performer as its share price continues to lose ground based on company’s recent underperformance.

• Ports’ share price has been sliding down this month, owing to fears over an increase in tax rate for the current fiscal year.

• Swiss watch groups Richemont and Swatch take a hit mid-month as the Swiss Franc continues to climb and threaten exports.  Both stocks recovered some of their lost ground with Swatch ending flat on the month but Richemont’s share price still declining by 7.7 percent.

What to watch

• Continued uncertainties over currencies, with the Swiss Franc going in opposite direction to the US Dollar and the Euro.

Sector Valuation

Current Market Update:  Turmoil sends SLI in downward spiral

• Global markets have been sent in a tailspin in the first week of August, as concerns mount over a spreading debt crisis in the Eurozone and the USA loses its AAA rating.  The SLI drops 10.2 percent; this compares with a 7.7 percent decrease in the MSCI.

• Not for the first time, the SLI shows greater volatility than the overall market index in terms of crisis, with investors seemingly penalising the sector.  Yet the luxury industry continues to harbour better long term prospects than most other sectors.  Could this be an over-reaction by the market?

Savigny Luxury Index August 2011 | Source: Savigny Partners

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

Jane Pratt | Source: Crain's

Jane Pratt, Unbound and Ready for the Web (NY Times)
“With verticals on fashion; beauty; sports; entertainment; DIY; technology; New Agey; and Sex, Sex, Sex and Love, xoJane.com is the latest chapter in the Jane Pratt story, a saga that began almost 25 years ago… For now, Ms. Pratt is engaged in what is the struggle for celebrity editors (see: Brown, Tina): how to reinvent or reconfigure her personal brand for the digital age.”

All your brand needs is three little words (Marketing Week)
“It might seem like a minor detail, but what sets Polet apart from bog standard marketers is his appreciation for brevity… When Polet arrived at Gucci he recognised immediately that each of the brands was unsure of its own identity. So he set about working with each team to capture the essence of each brand with one clear proviso: no more than three words.”

LVMH’s Plan to Convert a Parisian Icon for Shopping and Social Good (Forbes)
“Renderings show that the spaces will include a department store, a separate Louis Vuitton boutique, 280,000 square feet of shops and 215,000 square feet of office space. This consumers’ mecca will coexist with 95 units of affordable housing and a day care… The good news is that the complex should create approximately 2,400 jobs. Look for completion around the middle of 2014.”

Richemont net profits surge 79 percent (FT)
“Richemont, the world’s second-biggest luxury goods group by sales, demonstrated the surging demand for expensive watches, apparel and accessories with sharply higher sales and earnings for its business year to the end of March… ‘We are actually facing more demand than we can cope with,’ said Richard Lepeu, deputy chief executive.”

The Twitter Trap (NY Times)
“Basically, we are outsourcing our brains to the cloud. … my inner worrywart wonders whether the new technologies overtaking us may be eroding characteristics that are essentially human: our ability to reflect, our pursuit of meaning, genuine empathy, a sense of community connected by something deeper than snark or political affinity.”

A burst of colour at Burberry A/W 2011 | Source: Style.com

In High Definition Color (IHT)
“Orange, marigold, lagoon blue and purple — the start of the Milan menswear winter season has been drenched with color. High Definition vision is the message from designers who seem determined to look forward… and to put a brighter perspective on autumn 2011.”

Publishing, Without Publishers (NY Times)
“Luxury brands have always advertised in the likes of Vogue, Esquire and Architectural Digest and tried… to get mentioned in the editorial pages… [But now companies] are reaching out directly to consumers — and cutting out the middlemen.”

Next big trend: virtual fitting rooms (FT)
“Augmented reality, also known as interactive video technology… is set to transform the consumer experience. ‘It’s the next step in creating a seamless experience for the consumer at home, closing the gap between the store and online shopping.’”

Richemont Sales Rise 33 percent (Bloomberg)
“Richemont SA, the world’s largest jewelry maker, said fiscal third-quarter revenue rose 33 percent, helped by Asian sales of watches and the acquisition of online fashion retailer Net-a-Porter.com. Revenue in the three months ended Dec. 31 increased to 2.11 billion euros.”

Robert Duffy charms Tokyo (TokyoWeekender)
“The success of American fashion genius Marc Jacobs is in large part due to early support from Japan. His namesake brand’s co-founder, Robert Duffy, was in Tokyo to talk about the new Aoyama flagship store and navigating his unique relationship with the designer.”

Richemont’s Focus on Saving Cash Pile Damps Hermès Speculation (Bloomberg)
“Richemont said the world’s largest jewelry maker needs its 1.88 billion-euro ($2.6 billion) cash pile to fund growth of its own brands, damping speculation the owner of Cartier jewelry may buy shares in Hermès.”

Social Commerce: A Luxury that Luxury Brands Can’t Afford? (Brand Channel)
“Welcome to the age of social commerce. Social media—specifically, a strategic social media presence—not only supports but also shapes consumer and brand behavior and increases brand and personal value.”

The New Food Groupies (WSJ)
“What qualifies these guys to dip their toes in the food world? What qualifies a lot of the self-appointed foodies, foodists and food bloggers out there? Often not much beyond a good eye, a strong opinion and a willingness to be exacting.”

Philippe Pourhashemi Interviews David Szeto (ASVOF)
“You don’t often meet individuals in the fashion world who are talented, friendly, open and humble. David Szeto is one of them, and he grows on you the way his clothes do.”

Vacheron Constantin Timepiece detail | Source: Vacheron Constantin

Richemont’s Earnings Rise 88 percent (Reuters)
“Cartier watchmaker Richemont said strong demand for pricey timepieces in Asia and the Americas boosted first-half profit, which beat expectations, adding the brisk pace of growth continued in October.”

Ermenegildo Zegna: Fashionably Alive (The Economist)
“Zegna has not been left unscathed by globalisation, an economic downturn and the capriciousness of fashion: sales fell by 8.4% to €797m ($1.1 billion) last year and net profits slumped to €17.3m from €62m in 2008.”

Tod’s sees excellent 2011 results, shares up (Reuters)
“The world’s fourth-biggest shoemaker by market value, which includes the Fay, Hogan, and Roger Vivier brands, reported… double-digit percentage growth in all markets where it is present, led by a 20.5 percent rise in Europe.”

Dior sponsors W magazine’s online Fashion on Film experience (Luxury Daily)
“Christian Dior has partnered with Conde Nast’s W for a sponsorship of the magazine’s online, interactive Fashion on Film festival [spanning] a number of different tactics such as traditional banner displays, video spots [and] a young filmmaker competition.”

Homegrown, With a World View (NY Times)
“Jesse Finkelstein and Katie King are not immune to the problems of young business owners — they are entrepreneurs as much as they are designers — but they have found a way around at least some of them.”