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.
Hello BoF Professionals, your exclusive 'This Week in Fashion' briefing is ready, with members-only analysis on the key topic of the week and a digest of the week's top news.
For three months, some of fashion’s biggest players have been locked in negotiations over a new suite of sustainability goals to present to world leaders at this week’s G7 summit. The resulting “Fashion Pact,” unveiled in a carefully stage-managed press briefing in Paris Thursday, contains a set of commitments rich in ambition and light on detail.
Signatories have agreed to take actions that will mitigate fashion’s profound negative impact on the climate, biodiversity and the world’s oceans. Though the industry has long presented a glamorous image to end consumers, its supply chain belches huge volumes of carbon into the atmosphere, spews toxic waste and creates products that shed microplastics that end up in the ocean, degrading ecological systems.
Now, fashion is facing increased pressure from consumers and regulators to clean up its act, resulting in a moment of unprecedented political exposure for an industry that has historically avoided such scrutiny. No matter, the “Fashion Pact” is certainly a PR coup, lining up some of fashion’s biggest names behind a major consumer cause at a global political event. And yet, how companies intend to actually reduce their impact, while continuing to successfully operate as demand for new product continues to grow in a sector now said to generate €1.5 trillion a year ($1.66 trillion), is not yet clear.
To be truly sustainable, brands may have to consider producing less at a time when consumers want more. Perhaps this is part of the reason why the pace of progress toward sustainability has been slowing.
More than thirty companies have signed on to the pact, wrangled together by Gucci-owner Kering's Chief Executive Francois-Henri Pinault at the request of French President Emmanuel Macron. The signatories represent some 150 brands and an impressive 30 percent of the fashion industry by volume of products. They include many of luxury's biggest names, though LVMH Moët Hennessy Louis Vuitton, Kering's arch rival and the world's largest luxury group, is notably absent from the pact.
LVMH did not respond to a request for comment.
We have an obligation for results. We want to show that the fashion pact is making a difference.
Prada, Hermès and Chanel, who rarely participate in industry-wide initiatives, have signed up, as have sportswear brands like Adidas AG and Nike Inc, fast fashion giants H&M Hennes and Mauritz AG and Inditex SA, as well as retailers like Selfridges and Nordstrom.
Manufacturers and suppliers, who operate far from the eyes of consumers further down the supply chain where most of fashion’s climate impact takes place, are noticeably under-represented. Members of the fashion pact intend to work closely with their suppliers to influence their operations, and over time the group’s membership is expected to expand, Kering's Chief Sustainability Officer Marie-Claire Daveu said.
"It’s a starting point... we are over 30 percent of the fashion industry; of course, I would like to increase that to 40 and 50 percent, but we need a little bit more time to engage conversation," Daveu said.
But therein lies one of the key challenges: brands actually have fairly limited direct control over their environmental impact. And, while a growing number are eager to sign on to high-profile initiatives that play to mounting consumer concerns about sustainability, the industry has yet to tackle the fundamental trade-off between improving its environmental footprint and maximising growth.
Kering serves as a prime example. The company has already gone further than many of its rivals to understand and mitigate its climate impact. Yet, even after nearly a decade of effort, its environmental scorecard is getting worse, as rapid growth offsets any improvements. Daveu said the company is focused on efficiency and that its impact as a proportion of revenue has come down.
Cleaning up the sector is vital if the world is to meet targets to prevent catastrophic climate change, and the Fashion Pact does offer some glimmers of hope. It will report annually on its progress and signatories are expected to set measurable targets around emissions and on biodiversity. As and when such initiatives are implemented, they could provide much-needed data and accountability about the state of play within the industry. More details are expected after October, when Pinault will host a meeting of the signatories to hash out action plans.
"We have an obligation for results," Daveu said. "We want to show that the fashion pact is making a difference."
When you're in fashion, the best 'police officer' is not the state, but it is the consumer.
Cynics point to the litany of initiatives that already exist within the industry with equally lofty goals. For instance, the UN-backed Fashion Industry Charter on Climate Action established just last year has many overlapping signatories and comprises a pre-existing commitment to cut the industry's emissions 30 percent by 2030.
Similarly, as with most of fashion’s joint initiatives, the Fashion Pact is purely voluntary. It even includes a disclaimer footnote that states that it is “based on the collective ambition of CEOs to commit to sustainability targets,” and is not legally binding.
Already, there are signs that it may be challenging align so many brands. During discussions, Kering pushed for a commitment to ban plastic bags by 2025, a goal seen as too tight for some signatories who would not have joined as a consequence. The voluntary deadline to eliminate single-use plastics was set for 2030. Daveu said the compromise was a sign of the group's commitment and desire to set serious and achievable goals.
"We aren't about regulations, we aren't about legislation,” Daveu told Thursday's press briefing. “I would say when you're in fashion, the best 'police officer' is not the state, but it is the consumer.”
The French Ministry of Ecology, at least, has faith in the approach. “The sanction is reputation,” according to a ministry statement made at Thursday’s press briefing. “It can be destructive for a brand."
It certainly seems like high-profile voluntary initiatives are helpful in front-running tighter external oversight. But genuine government regulation may ultimately be the only real solution to fashion’s climate catastrophe.
THE NEWS IN BRIEF
FASHION, BUSINESS AND THE ECONOMY
Nordstrom men's store | Source: Nordstrom
Nordstrom reports better than expected results. The upscale retailer reported a better-than-expected quarterly profit, as its heavy investment in its online business and loyalty programmes helped offset weaker sales in its brick-and-mortar stores, and helped beat back competitions from department store rivals. The 118-year old retailer has also improved offerings and worked on its inventory management as part of a turnaround plan to boost profit. Shares were up 13 percent in extended trading as a result.
Hudson's Bay soars after private equity firm Catalyst buys stake. Canadian private equity firm Catalyst Capital Group Inc bought a 10 percent stake in Hudson's Bay Company (HBC) as part of its efforts to block a takeover by HBC Chairman Richard Baker. The stock jumped 9 percent in Toronto at the news, the biggest gain in more than two months. Catalyst said it had bought about 18.5 million shares in HBC for roughly C$187 million ($141 million). Catalyst argues HBC, which also owns Saks Fifth Avenue, has valuable real estate that could be unlocked.
Tod's founder Diego Della Valle raises stake to 81.2 percent. Chairman Diego Della Valle has raised his stake in the luxury goods group he founded to 81.2 percent, making good on a pledge to buy shares after disappointing first-half results earlier this month. Della Valle has been buying more Tod's shares as they come under pressure due to sliding sales. But the group CFO denied during an earnings call on August 7 that Tod's could be taken private.
Victoria's Secret slumps again as Bath & Body Works keeps growing. L Brands Inc gave investors mixed news as profit beat estimates in the latest quarter but Victoria's Secret continues to struggle. The group has long been burdened by weak sales and calls to evolve in the #MeToo era, as well as dragged down by long-time leader Les Wexner's close ties to disgraced financier Jeffrey Epstein. VS same-store sales fell 6 percent last quarter, missing estimates, whereas comparable sales for Bath & Body Works rose 8 percent, outpacing expectations.
Great Bowery acquires Coveteur. Fashion and lifestyle digital media company Coveteur has found a buyer in Great Bowery, the parent company of several talent and photo licensing agencies that represent makeup artist Pat McGrath, photographers Tim Walker, Juergen Teller and more. Great Bowery — founded by Matthew Moneypenny, who exited two years ago — is acquiring Coveteur to better compete in the evolving talent representation business. The companies declined to share the terms of the deal, but market sources estimate the price at around $15 million.
Pandora's restructuring efforts show small signs of recovery. The jeweller's like-for-like sales in Britain and Italy were down 8 percent and 10 percent respectively, compared with first quarter slumps of 13 percent and 22 percent, after a pick up in marketing spending. Pandora is struggling after new lines failed to entice shoppers but is buying back older ranges from franchises and slimming down collections to try to improve its performance.
G7 and fashion houses join forces to make clothes more sustainable. This year, G7 leaders will be joined by more than 20 fashion retailers and brands, including Gucci-owner Kering, H&M and Zara-owner Inditex for a global pact to fight the climate crisis and protect biodiversity and the oceans. The deal to be concluded in Biarritz this weekend comes as the global fashion industry faces an unprecedented backlash from young people concerned about it's contribution to climate change.
THE BUSINESS OF BEAUTY
Source: Estée Lauder
Estee Lauder beats estimates and heir joins world's 500 richest people. The cosmetics group forecast full-year revenue and profit above expectations after beating estimates for quarterly earnings — net sales increased 9 percent to $3.59 billion, beating expectations of $3.53 billion. Bolstered by booming demand for premium skincare products such as La Mer, sales in Estée Lauder's skincare business rose 15 percent to $1.59 billion in the fourth quarter, while sales in Asia-Pacific region, which includes China, grew 18 percent. Following the strong earnings, shares jumped and heir Jane Lauder joined the ranks of the world's 500 richest people. Her net worth rose $1.5 billion this year, including a $447 million gain Monday, bringing her fortune to $4.3 billion. She's ranked number 461 on the list.
Actress Millie Bobby Brown moves into beauty. Netflix show "Stranger Things" star Millie Bobby Brown announced the launch of her beauty line, Florence by Mills, this week. The 15-year-old's brand will be clean, PETA-certified, cruelty-free and vegan, in keeping with her Gen-Z demographic. The line will comprise skincare and make-up, including under-eye gel pads, a skin tint and a face mist.
Mickey Drexler in his office | Photo: Ethan Scott for BoF
Mickey Drexler steps down as Outdoor Voices chairman. At a recent board meeting, former J.Crew CEO Mickey Drexler stepped down from his role as chairman of activewear brand Outdoor Voices, although he is set to remain on the board, according to a source with direct knowledge of the matter. President and Chief Operating Officer Pamela Catlett, a veteran of Nike, also exited in 2019 after less than a year in the position. Such significant changes in leadership are among the questions surrounding the brand which, despite unexpected success and raising close to $60 million, has a way to go in terms of scaling.
Condé Nast's head of finance and HR to exit in leadership restructure. Condé Nast's new Global Chief Executive Roger Lynch announced leadership changes at the publisher last week as part of a global integration. This week the company announced two executives will leave the publisher by the end of the year: Chief Financial Officer David Geithner and Chief Human Resources Officer JoAnn Murray, after five and seven years at the company, respectively. Both positions will be filled by Lynch in a strategy to globalise these corporate functions now that Condé Nast is operating as one business worldwide.
Walmart CMO to exit. Barbara Messing is leaving Walmart after serving a year at the company as senior vice president and chief marketing officer. According to an internal memo, Messing plans to step down by the end of the month and return to the San Francisco Bay Area to be with her family. Some of her duties will be temporarily passed on to Michael Francis, former chief marketing officer of Target and consultant to Walmart since 2015, who will be joining the retailer on a full-time basis.
MEDIA AND TECHNOLOGY
Thredup gets $175 million in funding. The online resale store has said it received $175 million in funding which it will use to expand its platform to offer resale clothing services to retailers. Last week, department store chains JC Penney and Macy's announced partnerships with San Francisco-based Thredup intended to lure younger, more environmentally conscious shoppers into stores and to provide retailers fresh inventory of secondhand clothing and accessories. The funds will bring Thredup's total capital raised to more than $300 million.
Alibaba reportedly postpones Hong Kong listing amid protests. China's biggest e-commerce company has delayed its up-to-$15 billion listing in Hong Kong amid growing political unrest in the Asian financial hub. Alibaba's Hong Kong-listing plans are being closely watched by the financial community for indications on the business environment in the Chinese-controlled territory and provides a window into Beijing's reading of the situation. While no new timetable has been formally set, Alibaba could potentially launch the deal as early as October, still seeking to raise $10 billion to $15 billion.
Zalando expands to third-party logistics and delivery. The e-commerce platform has launched a pilot to deliver orders placed by customers in Paris on Adidas' website as it moves to allow brands to use its logistics network. The pilot is the first time the German company is delivering goods not ordered on its own site and marks an expansion of its platform strategy under which it charges brands a commission to list on its website rather than selling the products itself. The move is a bid to tackle competition by its growing rival Amazon's delivery service.
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