No News is Good News...At Least for the Luxury Sector
Over the past few months, it feels like not much news has come from the fashion industry. Like most, I sit down with a cup of coffee and read BOF and other trade news daily, only to feel increasingly anxious at the state of the world and the fashion sector in particular. It felt for a moment with SS21 shows that we rose up, spurred by the excitement of fashion weeks, just to fall again into a troubled slumber.
To continue the metaphor of troubled slumber, perhaps the imagery of a cruise ship in my post Fashion World: What is Happening? was a little too much. I’ve since had several recurring nightmares about being on a sinking ship, so maybe I’ve been taking my own writing a little too literally. On actual inspection, though the fashion industry seems to have slowed overall, certain sectors are doing tremendously. In actuality, it’s not all bad out there. Let’s take a look at some of the positive highlights from Q2-Q3 to prove this point:
Due to China, Luxury Brands are doing A-OK:
Despite the fact that worldwide spending is expected to drop 45 percent in 2020 because of the pandemic, demand in China for luxury goods has risen by 30% as retail therapy/revenge spending takes hold. Luxury therefore appears somewhat impervious as a sector, and is actually doing extremely well (for now).
In Q2 alone of 2020, luxury firms including LVMH, Kering and Estee Lauder reported mid to double digit sales growth in China, according to a report by Boston Consulting Group. Capri holdings, too, has rebounded, and beat its Q2 revenue and profit estimates thanks to a strong demand in luxury apparel and accessories, again in China, and Versace in particular saw a 60% growth in e-commerce sales during the quarter. As we look at Q3, this China led rebound doesn’t show signs of slowing. For example, Hermes revenues rose 6.9% to €1.8 billion ($2.1 billion) in the third quarter, beating estimates by €100 million.
Online Luxury Shopping is here to Stay:
LVMH among others saw a huge huge increase in consumers’ willingness to buy luxury products online during the pandemic. This was more true for fashion than for watches and jewelry. Though it was still more preferable for high end clientele to shop in stores, many of the mental barriers to online retail have broken down as a result of having to buy luxury purchases online during lockdowns.
The LVMH Tiffany Deal is Back:
The LVMH-Tiffany merger is alive, with Tiffany conceding to a 2.6% reduction in price. Why is this significant? It gives LVMH a material edge in the jewelry sector by adding on a fully vertically integrated and trusted brand into its portfolio, and therefore massively strengthens the groups position re Richemont and Kering. Essentially, this acquisition reshapes the top of the industry.
Sustainable Fashion is the Beginning and End of it:
The industry continues to shift towards sustainable luxury. For example, Kering teamed up with the the RealReal to set up a temporary shop for used Gucci items, Moncler committed to making production sites carbon-neutral by 2021, and Estée Lauder’s Origins brand announced a collaboration with its packaging suppliers to bring an advanced recycling tube package to market in 2021. Lastly, Kering joined Adidas, Lululemon and Stella McCartney in pledging to use fungi-based leather in their manufacturing process from 2021 onwards. All of this points to a world where sustainability is a must in luxury purchases, and it appears that the industry is taking its promises to tackle sustainability really quite seriously.
All in all, it’s not so bad out there:
All in all, at least at the top of the industry, the pandemic has had some extremely positive outputs. Therefore just because the industry seems somewhat quiet does not mean that that waves aren’t being made (yes, the boat metaphor is back). The pandemic is not over yet, but as they say, at least for luxury fashion, no news is good news.
