• Olivier Moingeon

Week 20: J. Crew, Gucci, Macy's, Kardashian, Netflix, Farmacy, Tom Ford, Nordstrom, Ulta, Capri

Your weekly podcast summarizing the most important news in the luxury industry for the week of May 24, 2021.

  1. J. Crew Men’s new creative director comes from streetwear culture.

  2. Retail News: Gucci, Bottega Veneta, Macy’s, Kardashian Kloset

  3. Hainan: the new luxury hotspot in China

  4. Tech : Netflix x Halston. Google goes deep into commerce

  5. Innovation: Farmacy's gamification. Gucci auctions their first NFT

  6. Finance: Kering divests further from Puma. Officine Generale expands

  7. Tom Ford Plastic Innovation Prize: reduce thin-film plastics in the ocean

  8. Nordstrom quarterly results disappoint

  9. Capri Holdings shows strong signs of recovery

  10. Ulta Beauty record first quarter results

1. Let’s start the week with a great article in highsnobiety regarding the appointment of Brandon Babenzien as the new creative director of J. Crew men’s. Prior to that, Babenzien was co-founder of New York streetwear brand Noah, and design director at Supreme. This is the latest appointment in a string of large traditional corporations appointing designers coming from the streetwear and sneakers world, in hope to breathe new life into these aging brands. After Reebok, Adidas and New Balance, the last and most significant move came from Gap, and its partnership with Kanye West which is expected to become a billion dollar franchise. Luxury brands initiated that brand when historical Maisons such as Balenciaga, Gucci, Louis Vuitton, Dior and more recently Givenchy, all have hired street-culture founders. It is now going mainstream with Gap and J. Crew. This is a significant trend, which shows the necessity for most brands to constantly evolve to remain relevant. The article also points out the unexpected phenomenon around price positioning, where now luxury brands will compete with more down market mass conglomerates such as Gap and J. crew, because through the lens of their iconic creative designers, all rooted in the same cultural background, they might end up all targeting the same audience, regardless of price points.

2. Let’s review some retail news. First of all, Gucci opened their first permanent store in East Hamptons. The new venue is 2,000 square feet and will feature all the brand’s product categories. An exclusive capsule collection was developed especially for the occasion and will be available only in that store.

Then, Bottega Veneta announced they would open a store in Brooklyn, in the Williamsburg neighborhood.

Fendi opened a cafe in Miami Design District.

Then, Macy’s unveiled a massive expansion and renovation plan for their iconic new york city store located in Herald Square. The company will spend $235 million dollars to build a tower above the existing store, but also to improve the overall shopping experience in the neighborhood, from easier access to subways and transportation, to car-free zones. Macy's forecast that the plan will generate $269 million in yearly city tax revenues, support 16,290 jobs and deliver over $4 billion in economic output annually. The Herald Square location will be open throughout the project's development.

Finally, Kardashian Kloset will open its first-ever store in Las Vegas. If you don’t know about it, Kardashian Kloset is the resale concept developed by the Kardashian-Jenner family in 2019 as an online website. The store will open at Resort World Hotel on June 24, and will be home to apparel and accessories sourced directly from the Kardashian’s own wardrobes.

3. There was an interesting article in Jing Daily regarding Hainan, in China, which recently rose to prominence as the new luxury hotspot. Hainan is an island 1 hour south of Hong Kong, which has become the new tropical resort destination for luxury vacations. It is considered as the Hawaii of China. In 2020 the Chinese government added new products on the duty free list, and tripled the maximum amount shoppers could spend in duty free. This change, plus the covid-19 travel restrictions around the world, made the island a destination of choice for wealthy locals in need of splurging on experience and luxury goods. According to Bain and Altagamma Fondazione, Chinese consumers will make 26 to 28 percent of their purchases at home. Hainan also benefits from Hong Kong’s struggles of the past 2 years.

Brands are also investing on the island by opening stores, or expanding their presence, like Ralph Lauren or Coach. More duty free malls are opening and we can expect that it is only a matter of time before every major luxury brand has a significant presence on the island.

4. Here are a few news from tech companies:

First of all, Netflix taps into e-commerce for the launch of Halston, their new biopic series tracing the life of the famous designer. Netflix released a 10-piece capsule collection of gowns inspired from the show, priced between $1000 dollars to $1600 dollars. The collection will also be on sale at Neiman Marcus and Saks starting in August. Netflix will not earn any revenue from the sale of these gowns as they see this partnership as a marketing tool helping cross promote both brands.

Then, Google released a wide array of shopping features in order to make Google Shopping easier for brands. It added integrations with Shopify, WooCommerce, Square and Godaddy. Brands using these platforms will automatically show up on google shopping. Google also announced that brands will be able to personalize their listings by adding lifestyle images or videos. It will also add a virtual reality try-on feature. Regarding the shopify partnership, it now allows the 1.7 million shopify merchants to have their products appear across all google shopping searches, whether on search, map, lens or youtube. With all these developments, the goal for Google is to become the first place that people go when looking for a product.

5. Let’s review a few interesting tech initiatives. First of all, beauty brand Farmacy will launch a virtual game called Farmacy Beauty Lab on its website. Through the game, users learn about ingredients, formulations and Farmacy’s corporate responsibility. Customers can then personalize a bottle of the brand’s serum with a short message and an image. Gamification and personalization are 2 strong trends to follow and it’s interesting to see that this feature was originally developed for a press event, but Farmacy ultimately decided to make it available to the public, as a way to drive traffic and increase dwell time on their website.

Gucci participates in Christie’s very first NFT auction, which runs from May 25th until June. This is part of their test and learn digital first philosophy, of trying new ideas and concepts. Gucci will release their first NFT, along the theme of Gucci Aria, which is a movie developed to present the brand’s latest collection. It’s interesting to note that Christie’s is controlled by the Pinault family, which also owns Kering and thus Gucci. The proceeds of the auction will be donated to UNICEF.

Finally, An interesting follow up to last week’s news about Gucci’s partnership with gaming platform Roblox. I mentioned that digital Gucci products could be purchased within Roblox, using the platform’s own digital currency called Robux. While each digital product was sold for a price ranging from $1 to $10 dollars, some items were available in limited quantities and for only a very short period of time, which quickly created a strong speculative resale market on Roblox. Some of the items were resold For thousands of dollars, and apparently one bag sold for $4,000, which is more than the price of that same bag in the real world! This is madness.

6. On the finance side, Kering will continue to reduce its stakes in Puma, by selling about 6% of their ownership for an estimated $1 billion dollar. This is part of the group’s strategy to focus on luxury brands.

Then, Authentic brand plans on going public as early as this summer. The owner of Barney’s, Century 21, Brooks Brothers, Juicy Couture, Lucky Brands and Judith Leiber amongst many others, plans on raising at least $10 billion dollars in the process.

Finally, French fashion brand Officine Générale sold a large minority stake to the New York investment firm The Untitled Group. The funding round will help the brand expand and open at least a dozen stores in Europe.

7. On the sustainability front, Tom Ford is looking for an alternative to thin-film plastic. Submissions are now open for the Tom Ford Plastic Innovation Prize, a competition challenging entrepreneurs and inventors to help fight plastic pollution by coming up with biologically degradable alternatives to thin-film plastic.The initiative brings together a coalition of investors, major brands and other strategic partners with the aim of helping competition finalists achieve scale and market adoption for their innovations by 2025. This is an excellent initiative and submissions are open until October 2021.

8. Nordstrom released their first quarter results and even though they reached $3.0 billion dollars in sales and beat expectations, analysts were disappointed and the stock fell by 7% following the earning call. Why? For 2 main reasons: first of all, Nordstrom incurred a loss which was wider than expected, due to

high labor and shipping cost, as well as supply chain constraints in the apparel industry. The second negative news was that Nordstrom’s road to recovery seems to be slower than its competitors. Despite first quarter sales beating expectations, they were still down by 13% compared to 2019, showing that Nordstrom has still not returned to pre-pandemic levels. One of the reasons for that was the decision to close 16 full line stores a few months ago, which obviously hurt their top line. It also kept its financial outlook for 2021, whereas its biggest rivals, Macy’s and Kohl’s, increased their annual forecast following a strong first quarter.

A bright spot came from Digital, with sales rising 23% from 2020 levels, and 28% compared with the same period in 2019. E-commerce business represented 46% of total sales in the latest quarter and are expected to reach more than 50% of the business in 2021. Nordstrom is investing heavily in ECommerce merchandising and capabilities. It will also benefit from foot traffic increasing as the world is slowly returning to normal, and they would be well positioned to serve their customers' needs for more formal and dressier apparel and accessories.

9. Capri holding, the owner of Michael Kors, Jimmy Choo and Versace, published their fiscal Q4 results and posted a revenue of $1.2 billion dollar, which is flat vs last year, but beat expectations because of the store lockdowns the group faced in EMEA and Canada. The group’s e-commerce did particularly well, with sales up 80 percent in the quarter. Retail sales were also up 13 percent globally, with growth across all three of its luxury brands. The group still reported a loss of $183 million dollars for the quarter, but it is a strong improvement from the 550 million dollar loss of 2020. At the brand’s level, Michael Kors sales fell by 4%, whereas Jimmy Choo’s sales increased by 16% and Versace by 10%.

For the full year, the group’s sales reached $4.0 billion dollars and losses narrowed to $62 million. While sales have not come back to pre pandemic levels yet, the CEO is optimistic that recovery is well underway and they slightly raised their guidance for 2022.

10. Ulta Beauty posted a record first quarter of 2921, with sales increasing 65% to reach almos $2.0 billion dollars. The beauty retailer also returned to profit making, and posted a net income of $230 million dollars. Not only did Ulta beat expectations, they also surpassed Q1 2019 levels by more than 11%, showing that they recovered from the Pandemic. The company raised their guidance for the remainder of the year and predicted that comp sales might increase by as much as 25%.

During that first quarter, Ulta opened 28 new locations and closed 2. They operated 1,290 stores at the end of the quarter.

4 views0 comments