• Olivier Moingeon

W01 - Tiffany, Prada, Bottega Veneta, Jaeger LeCoultre...and more!

1. The acquisition of Tiffany by LVMH was completed this week. Tiffany is now part of the LVMH portfolio and no longer a public company. As expected, an executive management reshuffle was announced, with the nomination of my esteemed former colleague and boss, Anthony Ledru as the new CEO, Michael Burke as Chairman and Alexandre Arnault, the 28-year old son of Bernard Arnault, as executive vice president of product and communication. Tiffany also presented their holiday preliminary results, and their net sales reached record levels, being up 2% vs last year, thanks in large parts to China and online sales. In the Americas, sales fell by 5% and in Europe by 8% vs last year, whereas sales in Asia Pacific rose by 20% and by 8% in Japan.

2. Prada posted early results for the full year 2020 and things are looking brighter! After a terrible first half during which sales dropped by 40% and the brand posted a 196m Euro operating loss, sales significantly improved in the second half of the year to only decline by 6% . Retail sales in December actually went back to 2019 levels. These positive results happened despite on-going store closures affecting on average 9% of their network. I assume you will not be surprised to hear that the recovery was driven by, wait for it, China, with a massive 52% increase in sales in that second half.

What was more surprising was that Prada will post an operating profit in 2020. This improvement of their financial position was due to a tighter control on supply chain investments, inventory reduction and improved cash generation.

3. L Brands reported that their 9-week holiday sales significantly exceeded expectations, driven by a great performance at Bath & Body Works, which grew its comp sales by 17%, whereas Victoria Secret’s continued to struggle with comp sales decreased by 9%. At the group level, Net Sales only decreased by 1.8% to reach 3.8 billion dollars, but a really positive and unexpected sign of recovery came from same-store sales, which increased by 5% during that period vs a 3% drop in the same period last year. The group’s CEO reported that their push to digital, and their efforts to cut back on promotions and sell more products at full prices are paying off.

4. You know I like to report news and trends from China, as it is anchoring its position as the #1 market for Luxury. On January 5, the Chinese jewelry brand, Qeelin, which is owned by Kering, released a limited edition collaboration with Mr. Bags, and it sold out in one second after launching on Mr. Bags WeChat Mini Program store, Baoshop. For those of you who don’t know him, Mr Bags is one of china’s top KOLs, who has 9 million followers and has already done collaborations with Givenchy, Louis Vuitton, Burberry, Fendi to name a few. It was the first time he collaborated with a fine jewelry company and the first time he released an exclusive collab on his 2nd account called Mr Jewelry and Watches. A second drop of 300 limited edition necklaces will be released but this time they will be available in Qeelin’s boutique and the brand’s Tmall store. I wanted to highlight this collaboration to show the power of social commerce, collaborations and KOLs in China.

5. Business of Fashion released an in-depth analysis of the Beauty market following their annual report with mcKinsey on the State of Fashion. As expected, the overall Beauty market was pretty resilient during the pandemic, and is expected to fully recover by the first half of 2021, except in Europe and Japan, which might not recover before the first half of 2022. China has already recovered and is expected to grow by almost 9% in 2021 vs 2019 levels. The US market is expected to grow by 3 to 4%. The massive trend highlighted in the report is that demand for Beauty products has not declined, it has just evolved, with major shifts in regions, categories and channels. Beauty brands will continue to invest in digital, and have reported a stronger focus on skincare, naturality and promoting hero skus. Social Commerce will increase exponentially in the west for product discovery and shopping. Consumers will expect brands to be more conscious, both on the sustainability and social justice front. Amazon will continue to expand and already captures 10%, or 10 billion dollars, of beauty sales in the US. Finally, the role of the store is also evolving as an inherent part of the ecosystem instead of the ultimate end-point, with new features being developed in terms of product discovery, services or even warehouse for same day deliveries or click-and-collect.

If we look at categories, Fragrance and Colour Cosmetics decreased, whereas haircare, skincare and personal care will grow in 2021. Fragrance was particularly hit due to the drastic reduction in travel retail and the lockdown in Europe which is its biggest market. As consumers didn’t have occasions to wear fragrance, they shifted their consumption towards scented home, bath and body care, which is creating a challenge for the overall recovery of Fragrance. Colour Cosmetics is another category which suffered from the effect of the pandemic, from everyone wearing masks to the limitations of digital try-ons. The only bright spot, as expected, was eye make-up, which showed some resilience in the Zoom era. Consumers are gravitating towards self-care and wellness products, which are better suited for digital discovery and shopping, as well as cleaner and more natural formulas. The mental and physical stress induced by Covid also pushed certain products, such as hair-loss, dry hands, puffy eyes and mask breakouts. Do It Yourself products have also performed well during the pandemic, from nail polish to hair dye, but this trend is expected to fade away as beauty and hair salons start fully reopening.

6. Jaeger LeCoultre is the first watch brand to partner with Google Shopping’s Augmented Reality feature. This beta test is part of a larger collaboration between Richemont YNAP group and Google and its objective is to accelerate digital transformation through technology.

How does it work: shoppers will be able to discover Jaeger’s latest watch in Augmented Reality on their mobile device, by clicking on the option “view in 3D” directly from the Google search bar.

7. A mysterious move this week from Bottega Veneta, which deleted their Instagram, Twitter and Facebook accounts without explanation as to why or how long it would last. However, they kept their Chinese Wechat and Weibo. As a point of reference, the brand had 2.5 million followers on Instagram. This unprecedented move follows the recent presentation of the Spring Summer 21 collection in London, which was a private show to industry leaders and influencers, breaking from the usual digital and social media communication overload around fashion shows. Bottega’s creative designer, Daniel Lee, has been quite critical of social media for fashion brands, and this move could be a strategic way to drive sales in the West by favoring experiential luxury while still being active in China and not losing ground in the eCommerce war there. I am also curious to see if it is the beginning of a new trend and other brands might follow. We can note that brands like Hermes, The Row or Goyard are relatively quiet on social media and incite customers to discover products in their majestic stores and get a full on luxury experience. Also, In the era of growing concerns around data usage and privacy, this decision feels like a return to luxury’s traditional roots of being coveted, exclusive and for people with access.

8. Coty concluded this week the purchase of a 20% stake in Kim Kardashian West Beauty, for $200m. Coty plans to expand the existing line to more product categories, and develop skincare, haircare, personal care, and nail products at some point in 2022. Kim Kardashian launched her beauty line in 2017 with contour kits and then fragrance. According to Coty’s CEO, Kardashian will now have access to Coty’s expertise in scientific formulation to further develop her vision, while Coty will gain access to Kardashian’s 198 million followers on Insta. As a reminder, Coty also owns 51% of Kyle Jenner’s beauty brand, which it acquired in 2019 for $600mm.

9. continuing the celebrity beauty trends, Jennifer Lopez launched her beauty line called J.Lo Beauty. The brand starts with a collection of 8 products, including a gel cream cleanser, a serum, a mask, a 'wonder' cream, a brand spectrum SPF moisturizer, an eye cream, a 'complexion booster,' and a dietary supplement. Prices range from $18 to $118. The star ingredient is the Olive, with 4 parts of the fruit being extracted to create a proprietary blend called “'JLo Beauty Olive Complex”. The 4 parts used are: squalane, fermented oil, extra virgin oil and leaf extracts. The complex is meant to deliver antioxidant protection, all-day moisturization and star-glow. You can buy the line right now on their website as well as Sephora and Amazon as of January 14th. This news would not be complete without mentioning that the singer Halsey also released a beauty brand called About Face, which she describes as a multidimensional make-up brand for everyone, everywhere”

10. Finally, we get a little bit more visibility on store closures in the US. Real Estate firm Costar Group estimated that 12,200 stores shut down in the US in 2020, which is an increase by 22% vs 2019. About ⅓ of these closures came from companies linked to malls, including department stores and apparel brands. Macy’s announced this week their plans to close more than 30 stores in 2021 in an effort to exit under performing malls and optimize their real estate portfolio which value has clearly declined. By the end of the month, all the stores closing this year will be running liquidation sales. This announcement is part of an overall plan to close 125 locations by 2023 in order to focus purely on the best-performing malls and grow their off-mall stores. Last year, Macy’s closed 30 locations.

Bed Bath & Beyond also announced this week that they would close 43 stores by the end of February 2021, as part of a plan to close 200 stores by 2022. The strategic objective is to reduce their real estate footprint, focus on remodeling their more profitable stores and increase their digital sales.

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