• Olivier Moingeon

W03 - Richemont, Burberry, Alber Elbaz, Hermes, Pomellato, Nike, Judith Lieber

Updated: Feb 1

Your Luxury Podcast transcript, for the week of January 17, 2021

  1. Richemont posts a modest recovery in the 3rd fiscal quarter

  2. Burberry’s 3rd quarter results

  3. Alber Elbaz launches new company, AZ Factory

  4. Hermes opens a digital storefront on Tmall

  5. China relaxed regulation on animal testing for cosmetics

  6. Bytedance launches e-payment service

  7. Judith leiber customized fragrance

  8. Pomellato upcycled broken stones through Japanese Kintsugi art

  9. Mytheresa IPO exceeds expectations

  10. Nike opens 4th Nike Live store

1. Richemont released their 3rd fiscal quarter results, covering October to December 2020, and they posted a modest recovery, with sales rising 5% at constant exchange rates, or 4.2 billion euros, over the same period a year before. These results helped improve the YTD performance where sales are now down by only 14% in the 9 months of 2020, as opposed to being down 38% in the first 6 months.

OK by now you know what I am going to say, right: the growth came from a robust demand in Asia, but also the Middle east and Africa. Looking at performance by regions: Asia Pacific grew by 25%, driven by China where demand grew by 80%, and Taiwan where it grew by 29%. The Middle East region received a boost thanks to tourist spending in Dubai as flights resumed and domestic spending in Saudi Arabia. Sales in Americas rose by 3% and 1% in Japan. Sales in Europe declined by 20%.

In terms of Channels, Online grew by 17%, and it’s comprised of Watchfinder and Yoox Net a Porter. Wholesale’s revenues declined by 8% whereas Retail sales increased by 8%, driven by a great performance in the jewelry division. In terms of product categories, sales in the Jewelry Maison rose by 14% whereas watch brands’ sales declined by 4%.

2. Burberry also reported their 3rd quarter fiscal results covering October to December 2020, and despite strong sales in China and Korea, global sales declined by 5%, to $937mm. Comp sales were down 9%.

If we look at the regional performance, Asia Pacific sales rose by 11%, while sales in EMEA declined by 37% and in the Americas by 8%.

Online sales grew by more than half in the third quarter, with a triple-digit rise in mainland China, but the continuing impact of store closures is dragging the overall performance down. Burberry reported that 15% of their stores were closed and 36% operating with reduced hours. A set of measures has been implemented to lower the impact of Covid, such as cost savings, gross margin improvement and inventory reduction. Burberry also focused on selling full-price items and launching new products meant to attract a younger audience. A bright spot is the potential for growth in digital channels, as well as the opening of new store concepts, especially in China, combining a strong social component to their physical locations.

3. French designer Alber Elbaz officially returns to the industry with the highly anticipated launch this week of his new venture, called AZ Factory. The brand was announced in 2019, as a joint-venture with Richemont, and the industry had been eager to see what it would consist of. Elbaz describes it as “A digital luxury brand based on innovation, technology, and, above all, a place to experiment and try new ideas” .

The launch is really innovative as products will be presented this week through a film format released during Paris Haute Couture fashion week. The brand will then launch on its own eCommerce website, but also globally through exclusive partnerships with Farfetch and Net-a-Porter. The launch will feature distinct interactive and entertaining experiences on each pure player’s platform. On Farfetch the initiative is called AZ Factory World Tour, and will consist in an immersive experience where shoppers will be able to virtually tour the AZ Factory, explore the products in 3D and virtually try them on using Farfetch’s own Augmented Reality technology powered by their start up partner Zeekit.

Then, Net-a-Porter will host a live talk show with Elbaz and friends on their Insta and Youtube channels. ‘The Talk Show’ will celebrate the launch of AZ Factory, and its plans on creating “fun, innovative solutions for womenswear,” as well as looking at “why chasing society’s beauty standards doesn’t work, and how the simple act of dressing up makes us feel our best,” added AZ Factory.

4. In China, Hermes quietly opened an online storefront on Alibaba’s platform Tmall. The product assortment is currently limited to perfumes, with 66 skus from it’s perfume, bath and body as well as gift boxes product range. The brand has not communicated on its future plans. So far, Hermes digital distribution in China consists of its own website as well as a wechat mini-program offering the full product range. An interesting fact is that Hermes registered their Tmall store on March 30th of 2020, in the middle of the pandemic, which shows it’s had plans to expand its digital footprint in China for months. It also gives a good idea of the timeline required to launch on Tmall.

5. Still in China, the local cosmetics regulatory agency introduced a fundamental exemption this week, which might be game changing for the beauty industry. The measure allows certain products to enter China without undergoing animal testing on arrival. So far, the products covered by this exemption are classified as “ordinary” cosmetics and include Fragrance, Mascara, and Shampoo. France has become the first European country to qualify for these exemptions. There is now a dedicated platform in France which allows manufacturers to get the necessary documents and certifications. Other European countries are now racing to take advantage of this new rule. Why is it important. So far, China has always requested animal testing before a brand could physically warehouse and sell products in mainland. Cruelty-free brands found a way around that thanks to cross border ecommerce. By joining platforms like Tmall Global, wechat mini programs or Little Red Book to just name a few, brands could sell directly to end consumers located in mainland china and ship from warehouses located in the zone. It had been rumored for a while now that the Chinese government would remove the need for animal testing, and thus open up its market even more to an entire wave of cruelty free cosmetics brands. This is the first step towards that and I am curious to see what the next steps will be!

6. Finally, to close the China chapter, Bytedance, which owns Tik Tok, is rolling out a payment service to Douyin, which is the chinese version of Tik Tok. Through this service, users will be able to connect their bank accounts and pay to buy products or tip creators without leaving the app. It’s the first step towards making commerce a more seamless and integrated experience.

7. Judith Leiber launched a customized fragrance this week called More is More. The bottle has a very unique shape, which holds 3 separate scents. Each fragrance can be sprayed individually, or also mixed with 1 or 2 others, for a unique and personalized experience.

8. Another cool product innovation came from Pomellato. The Italian jeweler launched a collection inspired by the Japanese art of Kintsugi. This ancestral technique consists of repairing broken objects by using melted gold as the glue between each piece, thus elevating and celebrating the fracture line as opposed to trying to hide it. In the case of Pomelatto, they are using a gold paint to mark the separation line. This is a really elegant effort by Pomellato to upcycle their broken stones and give them a new life.

9. Last week I mentioned the upcoming IPO of Mytheresa. It happened this week and was more successful than expected. It started trading on the NY Stock Exchange and raised $407million, valuing the company at $2.2b. Founded in Germany in 2006, the luxury marketplace sells more than 250 brands in 140 countries.

Still on the IP front, the brand Hims and Hers went public this week, also on the NY stock exchange.

10. Finally, a cool concept to finish the week, coming from Nike. The sneakers brand opened its 4th small format store called Nike Live. After New York, Tokyo and Los Angeles, this store is located in Eugene, Oregon, which is the birth place of Nike. The concept revolves around catering the assortment and services to the local community, as opposed to having a more standardized approach to merchandising, events, and community engagement. The essence of these stores is to also be heavily digital, with popular features such as BOPIS or curbside pickup. But also some vending machines which can only be unlocked through the app to get access to free gifts, as well as connect directly to store associates through the app. Nike had announced a few years ago that it was moving from a wholesale model to a DTC one, through its own stores and digital experiences. Nike has plans to open 200 stores in this new format.

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