W50 - Moncler, Puig, China, Lululemon, LVMH.. and more!
1. Moncler acquires Stone Island
2. Puig ambitious growth plans
3. The state of Advertising
4. China: luxury brands need to monitor these trends
5. Lululemon and Stitch Fix report strong results
6. Ted Baker's revenue declines and losses widen
7. Levi's on Snapchat, Dior on Twitch
8. LVMH sustainability initiative "Life 360"
9. JC Penney emerges out of bankruptcy
10. Elie Saab on Amazon Luxury
One. The biggest news of the week was the acquisition of Stone Island by Moncler, in a deal which values Stone Island at 1.1 billion euros, almost 17 times Ebitda.
The benefit for Moncler is to attract a new wave of luxury customers, who are generally younger and gravitate more towards casual fashion. It is the first acquisition from Moncler. The benefit for Stone Island is to leverage Moncler’s global expertise and expand in international markets.
The two Italian brands will continue to operate as separate entities but will share best-practices on how to grow the American and Asian markets, as well as amplify their eCommerce channels.
Here is what you need to know about Stone Island. First of all, it is considered as a more technical brand, with innovation at its core, such as fabrics changing colors depending on the weather, reflective fabrics and reversible jackets to name a few. It was founded in 1982 by Italian designer Massimo Osti, who is considered as one of the great fashion innovators and had a deep influence in the world of fashion. Stone Island was quickly adopted by European soccer fans' subculture, who were looking for a flashy, highly masculine and recognizable sportswear alternative to wearing their team’s jerseys. The brand gained global appeal in the recent years when it started being worn by Drake and other artists.
On a separate note, Moncler re-opened this week their Paris flagship after a renovation and expansion. It is now the biggest store in the world.
Two. The Spanish fragrance and beauty group PUIG announced that they will reach 1.5 billion euro of sales in 2020, which is a decline by 25% from the 2bn euros they achieved in 2019. However, the group also announced an ambitious plan to reach 3 billion euros in sales by 2023. It basically means they plan on doubling their business in the next 3 years. How will they do it? First of all, they expect significant growth in Digital and China, which will represent respectively 30% and 25% of the Group’s sales by 2025. Also, Puig has reorganized its business structure and created three new divisions: Beauty and Fashion, Charlotte Tilbury and Derma. In the new Beauty and Fashion division, 2 brands are expected to reach the billion euro in sales by 2025: Paco Rabanne and Carolina Herrera.
Charlotte Tilbury will be a standalone division, and the brand’s founder, Charlotte Tilbury, will remain with the company as Chairman, President and Chief Creative Officer. The brand is expected to generate 500m euros in sales by 2025.
Finally, the Derma division will include Uriage, Isdin and Apivita brands. The three brands make Puig the third largest player in the derma-cosmetic category within pharmacies in Europe. Two of these brands are in the top ten highest ranked derma-cosmetic brands in Europe.
In the world of Advertising, the media powerhouse GroupM published their annual report on the state of global advertising. The key findings are that media buy showed a certain resilience through the Pandemic and would decline by less than 6% in 2020. Looking at 2021, global advertising budgets are expected to increase by 12%. In terms of channels, the Pandemic forced brands to quickly adapt and rebalance their marketing dollars towards digital advertising. That trend will continue and advertising budgets on platforms like Facebook, Google or Amazon will represent more than 60% of the entire advertising business. As a point of reference, this share has doubled since 2015, when these media platforms represented only 30% of advertising. Another important finding was the confirmation that print advertising was less and less of a priority for brands, and that it will keep declining year on year.
Four: Some key findings in China.
According to a report from real estate advisor Savills, luxury brands have opened more brick-and-mortar stores in markets like China and Japan this year than in traditional markets like Europe. The trend will continue in the coming years, which is unprecedented considering that until 2020, Europe was the most in demand location for new store openings.
I also wanted to highlight some important trends coming from recent reports on the state of Luxury in China. First of all, 80% of luxury consumption comes from clients younger than 40 years old. 70% of purchases are done by women. This clientele is digitally native and brand discovery happens online. It is imperative for brands to understand and adapt to this shift in customer habits and profile. Luxury brands stuck in the old way of doing business might not survive the new roaring 20s.
Another interesting trend is the evolution of retail formats. Shopping centers are trying to appeal to the younger generations’ constant desire for newness by favoring brand rotation short term leases and pop-ups. We will also see brands developing new formats such as Harrod’s private members club in Shanghai called The Residence, where the retailer hosts personal shopping events for their VIPs, and is by invitation only. Brands are also offering new services such as repair centers, parts exchanges or custom tailoring.
Five : 2 brands posted positive results this week
Athleasure brand Lululemon reported a 22% sales increase in the 3rd quarter, to reach 1.1 billion dollars. This growth was largely driven by their DTC channels, which saw a +94% increase vs last year. Lululemon operates 515 stores in the world and YTD sales are 2.7 billion, up by 4% compared to the same period in 2019.
Online styling service Stitch Fix reported a quarterly revenue of $490m which is a 10% increase vs the same quarter last year, but more surprisingly, they reported a net profit of $9.5 million. These positive results were fueled by customer acquisition with a 10% rise in active clients, to reach 3.8 million customers at the end of the quarter.
Six: British lifestyle brand Ted Baker reported their first half 2021 results this week. They posted a 45% decline in revenue, and their losses more than tripled in one year to reach 86 million pounds. The company announced they will cut almost 1,000 jobs at stores and headquarters in the UK and in the US, in an effort to cut costs and simplify their org structure.
Seven. On the technology side, 2 interesting news this week:
. Levi’s launched a collection of virtual clothing for Snapchat bitmojis, which is made of jeans, jackets and shirts. Customers can purchase the real life Levi's pieces on the brand’s ecommerce website.
. Dior will unveil its Men’s fall 2021 collection on the video game streaming platform Twitch. Brands are turning more and more to social networks and live streaming platforms to meet the new luxury shopper where they virtually spend time. Video Gaming is said to
Eight. LVMH hosted their annual Climate Week, which is a 4-day internal event aiming at mobilizing their 163,000 employees around sustainability issues. They unveiled a new sustainability program called Life 360, which aims at setting exemplary standards for the industry. The group will establish concrete objectives with 3, 6 and 10 year time-frames and also commits to communicating more often on its own progress as well as its shortcomings. As part of this initiative, LVMH is looking to facilitate the sharing of best-practices between their 75 brands and encourage the maisons to share unused materials, as well as develop repair services to extend product lives. The group also plans on using only LED lights in their stores by 2023 and be fully reliant on renewable energy by 2030. Other initiatives include going away from heavy traditional packaging, as well as reducing the overall impact of their logistics by favoring shipping by boat and using electric vehicles when possible.
Nine. American Department Store JC Penney is coming out of bankruptcy after selling its retail and operating assets to its 2 main landlords: Simon Properties and Brookfield, for $300m in cash and $500m of debt. JC Penney will stay in business and push its turnaround strategy forward. Just like most department stores, it was struggling for years and we can speculate that the main motivation for Simon and Brookfield was to avoid seeing 600 JC Penney stores close down. The landlords would have been left with massive empty spaces to fill and limited options for a replacement. Also, losing an anchor department store can have a disastrous snowball effect, with adjacent smaller tenants being allowed to request a reduction in rent or not renewing their leases.
Ten. The Lebanese fashion designer Elie Saab is the latest one to join Amazon Luxury platform. Up until now the fashion label was only distributed on MyTheresa and Net-a-Porter. This move to Amazon Luxury signals a deeper investment into the US market as well as eCommerce. The company is also hoping to reach a younger audience and increase the brand awareness for product lines other than couture. After recently developing children and home categories, the brand announced that they will launch Eyewear and Watches product lines in 2021.