Six Questions on Fashion and the Economy

Here are more questions from all of you. Many thanks for the kind emails and posts.

1. Would it be sometimes more profitable for a parent company to let aging, dead, or fizzled out fashion houses go out in style rather than hire a new designer on board and try to replicate the glory days?

As I wrote in one of my posts during London fashion week, "It's much, much cheaper to relaunch a brand with big name recognition in the public consciousness than it is to launch a new one." Analyst Lisa Rachal at Redburn Partners provided some facts and figures too. . .

Bottega Veneta's sales were $50m or around euro37m at the time of its acquisition by Gucci in 2001. As of the end of 2007, it had grown to euro375m or about $543m.

Balenciaga had $20m or about euro18m in revenues in 2000 before Gucci (GUCG.PK) acquired it in early 2001. Today she estimates brand has sales of euro125-150 (or about $180m to $217m).

Alexander McQueen had sales of euro10m (or about $9.2m) in 2001 and was at euro50m or about $72m at the end of last year.

Of course, it's not always that easy. YSL was just under euro100m (or about $91.7m) at the time of acquisition in 2000, and has since racked up cumulative losses of euro430m or $623million, with break-even still 2-3 years away if it happens at all.

2. Perhaps you could discuss your thoughts on the future of fast fashion? Do you think it has any place right now in these uncertain retail times? On one hand, it's cheaper, and its inherent trendiness more escapist and upbeat; on the other, perhaps it's time to be serious and invest in high-quality classic timeless pieces?

There's the greater economic question -- and I do think fast fashion companies will do well in the next couple of years, for the obvious reasons. People are used to shopping and having new clothes in the closets every couple of weeks or so. If they can't afford Prada or even Banana Republic anymore, I think they'll trade down to Gap (GPS) and H&M (as evidenced by their first quarter results released today).

But I think those luxury consumers immune to economic swings will move even further away from logos and "statement pieces" like IT bags and from those so-called hidden luxury brands like Bottega Veneta that are less obvious. If it's advice you're looking for, I'd say it's a good time to be inventive. Try having something made by a local seamstress or tailor, or try your luck at vintage shops or online auctions.

3. I know you're a fan of NexCen (NEXC), but they've been suffering recently. Do you think it's a temporary setback or an indication that their unique business model may not be working? I've talked to buyers at Barney's (BNNY.OB) and Saks (SKS) and they're not carrying the new Bill Blass. I saw a BB dress in the Bergdorf spring look book, but I couldn't even find it in the store. With so many relaunches recently, how do you rate BB's? No matter how pretty the men's and women's clothes may be, if you can't buy them anywhere, that's a problem.

It sounds like you've done more research than I have on Bill Blass. Peter Som's first show was well received, but you have to remember it was for Fall/Winter. We won't see those clothes until mid-July, earliest (though I think he also designed some pre-Fall). I'll send your question to Michael Groveman, the C.E.O. and see what he says.

As for NexCen ... yes, the stock is still suffering. (Full disclosure: I bought stock after I published my story in the FT). I think it is getting hit with the rest of the retail stocks, but the story is still a sound one and I still think D'Loren is a smart guy. So, fingers crossed. I knew it was going to be a shaky ride -- and I don't think it's going to get any smoother in the next quarter -- but it is a well-conceived concept and once the Street gets their head around it, I think it will do well. But remember, Blass is only one piece of that puzzle.

4. Do you think that there will attrition in the luxury sector? Can all of these brands survive or will there be a shakeout? I used to work for Coach (COH) and there has been a major slowing of sales. Consumers here in Los Angeles do not consider Coach a true luxury brand.

Coach sort of defies definition. I wouldn't call it luxury, but to many people it is. I see it as sort of a Max Mara, cheap to some, luxury to others. Coach is still doing well in Japan, and they have some of the most discriminating consumers in the world, so that's a good sign. Can all these brands survive? Well, certainly the Coachs of the world, and the Guccis and the Pradas will survive. The ones in most danger are the ones closest to the financial edge and the ones without forgiving corporate parents. Anyone behind a brand that is up for sale right now has reason to be worried. I wouldn't want to be in Christian Lacroix's shoes for instance.

5. Do you think big spending by (those consumers who can) will help the economy?

Gosh I am going to miss you LO! I am tempted to say "yes" just to watch you tear up Madison Avenue with your credit card in hand. But no, I don't think big spending by you and your friends can save the economy. But, don't feel too bad -- you're not the one who got the economy into such a mess in the first place. The Gucci's and Prada's of the world will be just fine. (And remember that much of the money you spend there goes into the pockets of foreign companies. Yes, there's staff in New York you'd be helping but I don't think the trickle-down knock-on will help the greater good that much.)

If you have money and a love of fashion, I'd say support those on the edge. It's the young independent designers who are going to suffer the most. Buy from the Isabelle Toledos and Chris Benzs of the world. You can help them stay afloat, but to be honest, I don't think it is going to help the rest of the economy. But thanks for trying!

6. Chinese art has become the darling of the auction rings lately - when will the time come for Chinese fashion? Will it be when the focus on the design will shift away from dragons and mandarin collars (Vivienne Tam) and develop into its own distinctive style and silhouette that comes with its own unique Chinese lifestyle?

This is one of the big questions. Right now the new Chinese consumers and the new Russian consumers seem to have little interest in domestic brands. This is not true of the Indian consumers who have been surrounded by their luxury throughout the ages. And, to be honest, I have no idea. I know that the question is being asked of Derek Lam, Vera Wang and even Jimmy Choo. But they all identify themselves as Western brands, with Eastern names. Will that help them in Asia? Maybe. Will it quicken the development of a fully Chinese brand? Doubtful.

Comments

[website:]

Brazil may do it!

2008 Dec 31 03:40 PM

[sweet:]

How may do that i don't get that lol. I like to know if you have some idea about Neckties

May 13 05:28 PM