• Olivier Moingeon

W04 - L'Occitane, LVMH, Swatch, Vans, Tod's, Burberry, Neiman Marcus, Off-White

Your Luxury Podcast transcript, for the week of January 24, 2021


1. L’Occitane USA filed for chapter 11, with the objective to reduce its physical footprint in the US. The company currently operates 166 stores in the US, and it plans on immediately closing 23 unprofitable locations. On an annual basis, l’Occitane pays $30m in rent in the US, and since the pandemic, it has $15m of unpaid rent and 500K in security deposit held by its landlords. Through bankruptcy protection, l’Occitane is hoping that negotiating rent concessions and early store closures will help accelerate the business transformation initiated during the Pandemic, promoting digital channels and reducing its exposure to physical retail. In the chapter 11 filing, l’Occitane describes that their brick-and-mortar revenue declined by 56% from April to December 2020, whereas eCommerce sales increased by 72% during the same period, representing now more than 42% of its total sales in the zone.


2. LVMH reported their 4th quarter results, and posted a 3% decline in comp sales, to reach 14.3 billion euro, which was in line with forecasts. For the full year 2020, revenues reached 44.6 billion euros and declined by 16% vs 2019 if we exclude acquisitions and currency effects. Net profits for the entire year 2020 reached 4.7 billion euros and were down by 34%.

The Fashion & Leathergood division performed exceptionally well, with sales rising 18% this past quarter and declining only -3% for the full year. Louis Vuitton and Dior drove the performance, delivering double digit organic growth in the last 2 quarters thanks to a strong performance in Asia since April 2020 and a positive recovery in the US since July. The Perfumes and Cosmetics division saw its revenue decrease by 22% during the full year 2020, after being impacted by the sharp decline in international travel and in make-up.

The Watches and Jewelry division recorded a 23% decline for the full year 2020. It was impacted by destocking across retailers but benefited from a significant improvement in the second half, especially the 4th quarter with sales down only by 2%. Finally,

The Wine & Spirits division’s organic revenue declined by 14% in 2020. Most champagne and Cognac houses showed a strong recovery in the 2nd half of the year, especially in the US.

Bernard Arnaud expressed his confidence in the Group’s ability to keep performing in the short term despite uncertain market conditions, and to accelerate the growth post-Covid crisis.


3. VF Corps released their fiscal Q3 earnings and reported a 6% decline in revenue to reach $3billion dollars, in line with forecasts. These results were driven by store closures and lower consumer demand. As a reminder, VF Corps owns Vans, The North Face, Timberland, Dickies and it acquired Supreme a few weeks ago for 2.1 billion dollars. If we look at brands performance, Vans posted disappointing results with a decline in sales of 8%, below expectations, whereas all the other brands in the portfolio either met or surpassed forecasts. By regions, as you can imagine, Apac was up 6% and China in particular was up by 15%, whereas all the other regions posted sales decline, from 11% in the US and 4% in EMEA. By channel, DTC was down by 2% despite eCommerce being up by 49% and Wholesale was down by 12%. Overall, these results are seen as positive and the Group raised guidance for the last quarter of their 2021 fiscal year ending in March.


4. SWATCH Group published their 2020 results and they posted a net loss of $60m, which is the first time since their foundation almost 40 years ago that they are in the red. THe pandemic is obviously the number 1 cause as the group reported that there were some moments during the year when almost 80% of their worldwide distribution channels were forced to close. Its travel retail stores continue to suffer due to a lack of travels and tourism. They closed 384 retail stores in 2020, out of which 54 were in Hong Kong alone. The group also reported that Omega shut down its production for 10 days after being victim to a cyber attack, which led to delivery delays and lost sales. However, the group’s management is expecting demand for jewelry and watches to surge in 2021 and that there is a good chance sales return to pre-pandemic levels by then.


5. Finally, the last earnings report for this week. Tod’s released their 4th quarter and full year results, and reported a 30% decline in sales for the full year 2020, to reach 637million euros. It is the fifth year in a row that sales have fallen. A strong growth in China and in Online channels were not enough to offset the negative effects of the multiple lockdowns throughout the year. Sales actually worsened in the 4th quarter, declining by almost 23% whereas the decline was only 12% in the 3rd quarter. Tods initiated a brand repositioning back in 2017 to make the brand more relevant and attract a younger clientele. While the pandemic slowed down their progress, the brand’s management expressed confidence that the benefits of these efforts will be seen post-pandemic, when they expect a strong growth cycle to begin.


6. A few interesting news this week on the sustainability and positive impact front. First of all, Burberry was listed for the first time on Bloomberg’s Gender Equality Index. The GEI tracks the performance of public companies committed to disclosing their efforts to support gender equality. The 2021 Index represents 380 global companies spanning 11 sectors, headquartered across 44 countries and regions. Other fashion companies and retailers included in the Index are Nike, Kering and Lululemon.


Then, Stella Mc Cartney, Burberry and Kering are partnering with the Apparel Impact Institure to make Italian fashion more sustainable. Through this joint effort, the brands will work together to execute best practices and increase sustainability throughout the Italian supply chain, which is largely shared by all of them.


Kering ranked in the 7th place in the annual Corporate Knight’s top 100 most sustainable companies in the world, which is a well respected environmental index. Kering was also the number one company in the category of clothing and retail. The index looks at more than 8,000 companies, ranking their sustainability performance on various topics such as resource, employee, financial management,or supplier performance. Kering performed particularly well regarding clean revenue and clean investment.

Finally, Kering also announced this week that they were launching a new fund to turn 1 million hectares of farms and landscape producing raw materials for the fashion supply chain, to regenerative agricultural practices over the next 5 years.


7. It was revealed this week that Saks 5th Avenue has plans to spin off its eCommerce website, saks.com, and to make it a public company through an IPO. With more than $1.0b in sales, saks.com is a successful entity, and there would be some type of an exclusivity agreement which would still somehow link the eCommerce newco to the 40 Saks 5th Avenue physical stores, but it is unclear how. This is a very surprising plan which seems counterintuitive in the era of omnichannel retail, where it is all about clients being channel agnostic, and retailers providing a seamless shopping experience throughout physical and digital touchpoints. However, As a reminder, Saks 5th avenue is owned by Hudson Bay, which decided to delist from the Toronto Stock Exchange in March 2020 to become a private company. Some Analysts speculate that the strategy is to separate the digital assets from the brick-and mortar ones, in order to increase the stock price of saks.com, which would in return increase the overall value of the Hudson Bay portfolio. Wait and see.


8. Neiman Marcus announced a series of executive appointments, as well as an investment of $85 million dollars on systems and fulfillment centers, to strengthen its online business.

As a reminder, Neiman Marcus completed its bankruptcy reorganization last September, which allowed them to shed $4billion dollars of debt and $300 million of interest. However, in an effort to cut costs, they downsized their workforce from 14,000 employees a year ago, to 9,000.

They currently operate 38 full-line stores, five Last Call stores and a thriving eCommerce generating more than $1.5 billion in annual sales. Since the start of the pandemic, their eCommerce generated an additional $100m dollars, and it seems fitting that they are now investing heavily in this channel and in customer centric programs, through the creation of new positions, such as service ambassadors, personal stylists and digital client advisors.

They also plan on remodeling six stores in the next 18 months. An interesting metric they released this week is that their top customers shop the stores 44 times a year and online 112 times a year and represent 20% of annual sales.


9. On the investment side, Online retailer Boohoo will acquire the bankrupt British department store Debenhams for 55 million pounds. For that price, Boohoo is only acquiring the brand and its intellectual property, including customer data. It will not take on Debenhams’ stores, it’s inventory or its staff. If you remember, the 243-year old Debenhams filed for bankruptcy and was not able to secure a rescue plan, and ultimately started the liquidation process a few weeks ago, putting 12,000 jobs at risk. The stores will sell off the stock when lockdown measures in the UK ease down, and it’s 124 stores will ultimately shut down.

To shed light on this transaction, the Debenhams website receives 300m visits a year, making it a top 10 retail website in the UK by traffic. According to Boohoo’s chairman, debenhams will operate a digital storefront, promoting a wide array of brands, including boohoos’ own brands. This strategic deal brings its company one step closer to becoming the largest digital marketplace in the UK, and allows it to expand into new product categories such as beauty, sports and homeware.

To complete this news, one of Boohoos’s British competitors, ASOS, announced that they were in exclusive talks to acquire some brands from the bankrupt Arcadia group, including Topshop.


10. Finally, let’s finish the week with an interesting collaboration between Off-White and Amore Pacific, showing how fashion brands are trying to tap into the huge potential of the skincare category. The 2 brands are launching a skincare kit, meant to protect your skin from the effect of wearing Covid-19 masks.The "Protection Box" comes with cotton pads, "soothing and hydrating" sheet masks, a UV protective tone-up cushion, and moisturizing lip balm. There's also a face mask. The box containing the products is branded with Off-White's motif and has a strap allowing it to be worn as a side bag. For now,the kit will only be available in Korea, Japan, and China, with a launch on Amore Pacific’s website first before being gradually rolled out in wholesale in the countries until March.

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