• Olivier Moingeon

W06 - Fenty, Kering, L'Oreal, Coty, De Beers, OTB, Lancome, Fashion Weeks

. LVMH and Rihanna suspend fashion collaboration

. Boohoo acquires digital assets of 3 Arcadia Group brands

. Fashion week calendars revealed for New York, Milan and London.

. Shopify payment system now available on Facebook and Insta.

. Livestream Shopping news: Tik Tok, Lancome

. Kering under investigation in France for tax evasion

. L’Oreal results exceed expectations

. Coty underperforms, despite positive results

. De Beers Diamond sales surge in January

. Only The Brave Group results. Maison Margelia’s stellar performance.

1. LVMH and super star singer Rihanna have decided to put on hold the development of Rihanna’s fashion brand, which was launched 2 years ago, and didn’t seem to perform up to expectations. According to sources, a small staff will remain in the Paris headquarter to wind down remaining operations. The Fenty fashion house was met with some relative success when it launched, with some items being sold out, but the Pandemic brought on 2 challenges: first of all, the difficulty to meet demand for expensive luxury clothing when the target client generally skues younger and is stuck at home, but also there was the challenges of creating eight rtw collections per year while the creative director is busy with other engagement and stuck in the US, unable to regularly visit the creative team in the Parisian headquarter. However, Rihanna is doubling down on other product categories, and her lingerie line Savage x Fenty, closed this week a $115m dollars series B led by L Catterton, which also happens to be connected to LVMH. Savage posted revenue growth of more than 200 percent last year, and “increased its active VIP member base by more than 150 percent”. LVMH and Rihanna are also reaffirming their ambition for the brand’s cosmetics and skincare lines, which have generated $30 million in sales in less than 4 months on their eCommerce . The brand debuted in Sephora locations this month, and it is also available at Harvey Nichols and Boots in the U.K.

It is an interesting lesson learned that Fashion Houses built on the cultural appeal of celebrities seem like the perfect combination of forces, but that it requires much more heavy lifting than launching a celebrity beauty line for example. Such celebrity brand needs an architecture, point of view and creative vision need to resonate with customers, especially at these price points.

2. The saga of online retailers acquiring bits and pieces of bankrupt brick and mortar retailers goes on! If you remember, last week we talked about Asos acquiring the digital assets of 4 brands from the bankrupt Arcadia Group, including Topshop. 2 weeks ago, Boohoo acquired the IP and customer base of the historical british department store Debenhams. Boohoo is on a buying spree as they are now acquiring 4 brands from Arcadia. I’m telling you, it’s a saga. For 25.2 million pounds, Boohoo will acquire the online operations of Burton, Dorothy Perkins and Wallis. For that price, Boohoo gets the IP, the digital assets, the customer database and inventory. Boohoo has zero interest in the physical stores. Let’s talk about this trend for a bit. To give some context, Boohoo is an online retailer which was launched in the UK in 2006 and has been on an acquisition spree over the past few years. They had a record year in 2020, posting revenues of 1.23 billion euros, which was an increase by 44% vs 2019. The platform has 13.9 million active users. Why would these online pure players buy these failing brands? It’s simple: at a relatively low price, they acquire a huge customer database and the ability to expand into new product categories. They can revamp and modernize these brands online, without incurring the cost of running physical distributions. The bet is that they will be able to turn these brands around online, which will increase the overall performance and valuation of their platform.

3. Let’s review the upcoming fashion show calendar. New York Fashion week will take place this year over 4 days only, and 84 brands will present. It is a strong decline from 2 years ago when there were more than 170 shows over an 8-day period. We also note the absence of the 4 largest american brands: Ralph Lauren, Tommy Hilfiger, Calvin Klein and Michael Kors, which are not on the schedule for New York, but the CFDA announced through a letter from Tom Ford, its chairman, that it will communicate the schedule of the NY fashion week shows, but also the schedule of american designers showing abroad and off-calendar. This is meant in the spirit of adapting to the changing nature of the fashion show cycle, locations and medium.Finally, the CFDA changed the name to American Collections Calendar. Most shows will be digital and all of them will be featured on Runway360, which is the CFDA’s website.

Looking at European women’s upcoming ready to wear shows, London will be entirely digital, Milan will have 15 physical shows in the presence of a handful of journalists and buyers. The remaining brands will show on the digital platform launched for the occasion. One notable absence is Versace, which will reveal their collection through a video, on March 5th, which means after the official calendar.

4. On the technology side, Shopify announced that their payment solution, called Shop Pay, will now integrate with Facebook and Instagram. Why does it matter? It means that merchants on shopify will be able to add a new payment option onto their Insta and FAcebook business pages. It is not a game changer for Facebook and Insta as it is not expected to generate additional revenue, given that it is simply adding a new payment method to its users, but it is an important milestone for Shopify as it marks the first time that its payment system outside of its own eco-system. It also adds ease of use for users who might already have their profiles saved on a merchant shopify website, and will now be able to speed up checkout using shop pay on Insta and Facebook. This move shows Shopify’s interest and investment in social commerce. According to a recent survey by Shopify called “Future of Commerce”, 28% of young consumers shop via social media.

5. Still on the tech front, let’s talk about livestream shopping. First of all, Tik Tok announced that it will roll out this year new commerce features, such as product catalogs and livestream shopping similar to QVC for mobile phones. If you rememebr, Tik Tok partnered with Shopify in October to give shopify merchants the ability to run ads on the app, and it also recently partnered with Walmart to launch livestream video events where tik tok users can shop curated assortments of walmart products.

Then, another interesting news came from Lancome, which held an entertaining shopping event in there Parisian flagship. The agenda included panel discussions with beauty influencers, live concerts but most of all, livestream shopping sessions powered by tech start up Livescale. During these sessions shoppers had access to with exclusive products and promotions, with beauty experts available to answer their questions.

Lancôme is the latest brand to embrace livestream shopping, which is one of the biggest trends in the industry. Cartier was quick to adopt it and held memorable events in China, which contributed to making it the most purchased brand on Tmall Luxury Pavilion, as revealed this week in a report from alibaba.

6. Kering is in troubled waters after an article published in French newspaper Le Monde, described how the luxury group used a subsidiary in Luxembourg to make off-shore payments to certain top managers, including Marco Bizzari, the CEO of Gucci. In 2018, up to 78 millions of salaries were paid this way. Obviously, the problem is that by doing so, Kering paid only 1% in social contributions, as opposed to the 10% it would have paid if the salaries originated from France. Kering told that Francois Henri Pinault, chairman and CEO of Kering, was not aware of these practices, before adding that these payments are legitimate and legal. This system was abandoned in 2019 when Kering moved its Luxembourg operations to the Netherlands, which offers slightly more opacity. As a reminder, Kering was fined a record 1.5 billion euro in Italy for tax evasion, and has been the subject of an investigation in France, where, according to Le Monde, the tax authorities demand 150 million euros in tax adjustments.

7. Ok we will now move on to reviewing earning reports published this week. L’oreal posted higher-than-expected revenue growth for the fourth quarter, thanks to a strong performance in China as well as in its online channels. Sales increased by 4.8% to reach 7.88 billion Euros for that holiday quarter. Demand for skincare was particularly strong and the 2nd half performance improved when stores and hair salons started reopening. Online revenues increased by 62% in 2020 as a whole, and represented more than 25% of total sales. Sales in China in 2020 were spectacular and it is now the 2nd market for L’oreal, after the US. Regarding 2021’s guidance, the group remains prudent but confident that demand for beauty products will soar in the longer term, especially make-up and fragrance, in a roaring 20s style, when the world goes back to normal. According to l’Oreal’s CEO, putting on lipstick will be a symbol of returning to life”

Net Profits decreased by 5% in 2020 to reach 3.75 billion euros, but the positive results encouraged the cosmetic giant to increase its dividends by almost 4%.

8. In a stark contrast to L’oreal, Coty published their holiday quarter results this week. Revenue was down by 18%, in line with estimates, at $1.42 billion dollars. The cost-cutting efforts initiated a few months ago paid off because they were able to deliver earnings per share slightly above estimates. Despite what seems to be positive news, the stock went down as Coty underperformed compared to its competitors. We just discussed the strong performance at L’Oreal, whereas Estee Lauder had already reported a 3% comp growth.

The company reaffirmed its strategic focus on skincare to compensate for the strong decrease of the make-up category due to a change in consumer demand since the pandemic. The 2nd strategic objective is to increase Coty’s digital footprint and share of sales, which is already under way as materialized by the 40% increase in eCommerce sales during that quarter. However, these gains were not enough to compensate for the sales lost due to Covid-19 lockdowns measures around the world, forcing store closures and a strong decline in travel retail.

9. De Beers, the world’s largest diamond miner, reported record sales in the month of January, the highest level in 3-years and 10% above the company’s 20-year average. De Beers sold $650m of rough stones to its partners in the industry, which will ultimately polish the stones and sell them to retailers. This performance is due to inventory replenishment orders following a surge in jewelry purchases during the holiday season, especially in the US, as well as preparation for a traditionally busy period for jewelry: Chinese New Year and Valentine’s.

2020 was a shaky year for the jewelry industry, with so many stores around the world shutting down, forcing retailers to reduce their inventories, which in turn affected the entire supply chain, from midstream diamond polishers, to De Beers, which supplies the rough diamonds. De Beers sales declined by ⅓ in 2020, to reach $2.7 billion dollar, their lowest level in almost 10 years, but recovery might be in sight after January generated record sales as well as December earnings slightly better than 1 year before. De Beers also raised their prices on stones larger than 1 carat, which was the steepest increase in 10 years.

Separately, Diamond jewellery demand will recover to pre-pandemic levels between 2022 and 2024, with China leading the way, a report commissioned by the Antwerp World Diamond Centre predicted. Growing high and middle classes in China and India will drive the global industry.

10. Finally, OTB Group published their 2020 consolidated financials and even though they reported a 14% decline in revenue, at 1.24 billion euros. Net profits fell 38 percent to 1.24 million euros. As a reminder, OTB stands for Only the Brave and it is the parent company of Diesel, Maison Margiela, Marni or Viktor & Rolf amongst others. At the group level, the online business improved by more than 26%.

At the brands level, Margiela delivered a solid performance, with revenue increasing by 20%. They reported growth in all channels and regions. At Diesel, eCommerce sales in its direct channels increased by 68% vs 2019, fueled by the launch of Moon, which is their omnichannel platform.

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