The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LONDON, United Kingdom — China's appetite for luxury goods is still strong and featured prominently in this month's results announcements from major luxury players. Kering posted record 2018 profits on the back of a 29 percent increase in sales for the year, with chief executive François-Henri Pinault stating, "In terms of the momentum with Chinese clients, it's very strong."
Hermès' organic sales growth topped 10 percent in 2018, as the group remained impervious to any slowdown in China. The same sentiment was echoed by Moncler, which confirmed that trading in China was strong through the beginning of 2019, and by Estée Lauder in its quarterly results, which prompted the beauty group to upgrade its forecasts for the full year.
In other news, Italian fashion label Marco De Vincenzo, — whose eponymous founder is also head designer of leather goods at Fendi — sold a 35 percent stake to Marco Panzeri, a private Italian investor with holdings in fashion. Marco De Vincenzo received investment from LVMH in 2014 (the luxury group will retain a 45 percent stake in the business).
Elsewhere, JAB Holdings, the Reimann family’s investment vehicle, announced plans to increase its stake in Coty from 40 to 60 percent with a share tender offer worth $1.7 billion. The management team of Italy-based luxury leather goods manufacturer Bottega Manifatturiera Borse SpA bought out the company from German mid-market private equity group Halder.
ADVERTISEMENT
The Savigny Luxury Index (SLI) continued its ascent in February, ending the month just over 7 percent up, whilst the Morgan Stanley Capital International index (MSCI) gained 3 percent. Nevertheless, the SLI has not recovered the ground lost since its peak last June: our index is still 8 percent in the red, versus a flat performance for the MSCI over the same period.
SLI versus MSCI
SLI Graph February 2019 | Source: Courtesy
Going Up
Going Down
What to Watch
The industry's ethics are under increasing scrutiny, a shift that is bolstered by the current reality of trial by social media. This season, Coach stopped using fur and Victoria Beckham Ltd banned exotic skins from its collections. LVMH also announced it would boost measures to ensure responsibly sourced crocodile skins, having faced criticism by PETA for its supply practices in the past.
There have nevertheless been a series of blunders in recent months, from Dolce & Gabbana's insulting "eating with chopsticks" videos to Prada and Gucci's blackface fiascos and, most recently, Burberry's "noose" hoodie. In response to backlash, Prada set up a diversity council to "elevate voices of colour within the company and fashion industry at large."
ADVERTISEMENT
Sector Valuation
SLI Table February 2019 | Source: Courtesy
The luxury goods maker is seeking pricing harmonisation across the globe, and adjusts prices in different markets to ensure that the company is”fair to all [its] clients everywhere,” CEO Leena Nair said.
Hermes saw Chinese buyers snap up its luxury products as the Kelly bag maker showed its resilience amid a broader slowdown in demand for the sector.
The group’s flagship Prada brand grew more slowly but remained resilient in the face of a sector-wide slowdown, with retail sales up 7 percent.
The guidance was issued as the French group released first-quarter sales that confirmed forecasts for a slowdown. Weak demand in China and poor performance at flagship Gucci are weighing on the group.