W46 - Supreme, Ulta, Chloe, Amazon Luxury... and more!
1. Supreme acquisition by VF Corp
2. Ulta - Target partnership
3. Revive on Amazon Luxury
4. China - Singles Day
5. Printemps closing stores
6. Burberry earnings
7. Todd's earnings
8. Pharrel Williams' skincare brand
9. The Verticale - digital mall
10. Chloe pivots to Purpose-driven
One. The biggest news of the week is the acquisition of Supreme by VF Corps, for $2.1 billion, more than doubling the brand’s valuation after its last 2017 funding round with lead investor The Carlyle Group. The streetwear brand will join other iconic brands in the VF portfolio, namely Vans, The North Face or Timberland. Why is this a big deal? Well, first of all, Supreme is a $500m business annually whereas they only have 12 stores in the world. 60% of their sales are generated online. VF is acquiring a brand with immense cultural appeal and brand equity. They will also be able to tap into that die-hard loyal client base. What’s in it for Supreme: scale on multiple levels to capitalize on the brand equity, operational excellence and a huge pay day. Both parties believe they will turn Supreme into a billion dollar brand in the coming few years.
For the 2 listeners who have never heard about Supreme, here is what you need to know: The brand started 26 years ago with one store in downtown New York City, serving the skateboarding community. Through innovative marketing and merchandising tactics, it developed a cult-like following. You probably heard about the famous weekly drops, the stratospheric resale market or the collaborations with Louis Vuitton, Jeff Koons, Nike, Rimowa, Vans, Damien Hirst or even Fender. Over the years Supreme gained global recognition and became one of the most iconic streetwear brands.
Two. In Beauty, a really innovative partnership was announced this week, between Target and Ulta. The 2 retailers are joining forces to roll-out 100 Ulta Beauty stores within Target locations. The dedicated 1,000 square feet shop-in-shops will be a truly immersive Ulta outpost with a curated and rotating selection of close to 40 beauty brands across multiple categories. Ulta products will also be featured on the target website. The staff will be Target employees trained by Ulta beauty experts.
While the markets responded positively to the news, with each retailer’s share price increasing, the deal seems slightly in favor of Target, giving it access to prestige beauty brands it never was able to list, therefore elevating its beauty offer. One of the benefits of the partnerships was to leverage both retailers’ loyalty programs, which boast a combine 100 million users, but it is unclear how this will play out. What’s in it for Ulta you might say? They will benefit from Target’s growth in terms of foot traffic and client base, as well as leverage Target’s operational excellence. This is a trend to follow, where specialty retailers are joining forces with essential retailers. It shows that the traditional lines of commerce are blurred and we see more and more companies willing to test new ways of connecting with clients where it is convenient for them. My bet is that this trend will continue to increase and that we will see more and more fluidity across distribution channels and price tiers.
Three. Still in Beauty, the luxury skincare brand Revive announced it will launch on Amazon Luxury. If you remember, Amazon launched its Luxury storefront back in September, with Oscar de la Renta being the first featured brand. Since then others have joined, such as Cle de Peau Beaute, Altuzarra and now, Revive! Reminder: Amazon Luxury is only accessible through the app and if you are a Prime member. Why is it a big deal? Revive is one of the most prestigious luxury skincare brands and it might pave the way for more prestige brands to join Amazon Luxury. It is not the first time Amazon tries to lure luxury brands onto its platform, but this time, it provides brands with a true digital storefront as well as features they were demanding, such as a better control over assortment, pricing, features and services. On the brand side, Amazon provides access to 100 million prime members in the US. According to Revive’s CEO, this partnership allows them to expand their digital footprint, and they are confident that Amazon will deliver the quality of service expected by their customers. My 2 cents on this one is that it’s not a question of If Luxury brands will go onto Amazon, but When.
Four. News from China: the highly anticipated Singles Day broke records once again, generating 116 Billion dollars in GMV across multiple online platforms. Alibaba was the biggest winner with 75 billion GMV, and was up 29% vs last year. JD.com generated 41 Billion GMV which was a 33% increase vs PY. It feels like every year is a new record, and in this post-covid world, expectations were high, with 86% of Chinese consumers reporting before the event that they would be spending more money this year than last. Here are a few numbers to understand the magnitude of this event: Nike exceded 100 million yuan in GMV within the first minute after the launch of the event! 100 million yuan is close to $15m. Within the first 111 minutes, 100 brands also passed that 100 million yuan mark (which is equivalent to $15m). Livestreaming shows were a strong revenue driver this year, as anticipated, and hey, by the way, the top selling brands were American !
Five. Sad news coming from France, with the announcement this week that the Printemps Department Stores chain will close 7 stores, including 4 Printemps and 3 Citadium. The massive restructuration threatens 428 jobs and the group is implementing an employment rescue plan. The process of closing these stores is expected to last until January 2022. The Covid-19 crisis is partly to blame for such a decision, with store closures, loss of traffic and complete disappearance of tourists. However, Printemps troubles are not new and a spokewoman for the group explained that their revenue had shrunk by 17% over the past 5 years and had been in the red since 2016. Through this restructuration, Printemps is looking to reduce its cost structure and shift investments towards strategic growth levers in the following areas:
. Digital and omnichannel capabilities
. Reinvent their Retail experience
. Redevelop their client base
On a more positive note, French department store Gallerie Lafayette announced this week it would open a 3rd store in China in 2021.
Six. Burberry posted its fiscal Q2 earnings results this week, and it shared some positive news. Store sales only declined by 6% that quarter vs a 45% decline in the prior quarter, and the group reported sales growth in its partial October results. The year to date results remain negative but the decline is slowing down and there are positive signs of recovery.
Seven. Todds’ earnings were also published this week and the group reported positive signs of a recovery with double digit growth in China in Q3 and also a strong performance of its eCommerce channel. However, the year-to-date results remain negative with an overall 33% decline compared to the same period in 2019, but the decline in Q3 was only minus 12% vs previous year. These encouraging signs were well received by the market and Todd’s shares rose almost 10%.
Eight. On the beauty front, Pharrell Williams launched his own skincare brand called Humanrace. It starts with 3 skus ranging from $32 to $48 and will be available on the brand’s website. The line is clean, vegan, fragrance-free, for all-gender and sustainable.
Nine. On the DTC front, say hello to The Verticale, a virtual mall listing about 50 DTC brands across multiple product categories: beauty, personal care, fashion and home. Virtual department stores and malls are a trend to follow and which has accelerated through Covid. We can expect a lot of innovation around making product and brand discovery more convenient for shoppers.
Ten. Chloe announced that it would transform its business model towards being purpose-driven, community-base and accountable, in addition to its core mission of being highly creative. According to Chloe’s CEO, Ricardo Bellini, “the Maison is moving from a phase of collections to a phase of connections. Doing collections is not enough anymore”. As such, here are the key measures that Chloe will implement:
. Creation of a Social P&L, which reminds us of the Environmental P&L implemented by Kering
. They will seek B Corp certification for its social and environmental performance
. Creation of an impact fund dedicated to girls education
. Create an advisory board of experts to hold the firm accountable
QUestions of impact, sustainability and responsibility, both social and environmental, have been at the center of the discussion, and were only amplified throught Covid. We can expect to see more moves like this one, as brands values and corporate actions increasingly influence the purchase decision.
To finish on a glamorous note, the largest purple-pink diamond to have ever been auctioned was sold this week in Geneva, for the modest price tag of $26 million dollars. It weights 14.8 carat and is called “the spirit of the rose”. The parents are happy, I guess.