Fashion Notebook

Financial Desk: H&M Powers Through Another Impressive Quarter

H&M continues its charge through the fashion world
with another strong earnings season.

Per the company's quarterly, and annual, earnings report released this morning, fourth quarter sales grew 17% to $3.57 billion in domestic currency (at current exchange rates), and profits jumped 14% to roughly $975 million.

Though the company did seem to feel a similar slump in the month of December, where sales decreased by 10% over the previous year, sales through Jan. 29 (one has to marvel at the efficiency that can include sales figures from as recently as two days ago in such a report!), sales have increased 16%. Results for the U.S. market, specifically, were not provided.

Full-year results for fiscal 2006/2007 were similarly positive, with sales climbing 15% to $12.3 billion, and profits resting solidly at the $3.0 billion mark, an increase of 21%.

The company plans to control roughly 190 stores for the next fiscal year, focusing its efforts in 2008 on building up markets in Egypt, Saudi Arabia, Bahrain, and Oman. Stores are expected to open in the Russian market in 2009.

The retailer is currently gearing up for the release of its "Fashion Against AIDS" collection, which bows tomorrow. The group of t-shirts, tank tops and hooded sweaters were designed in conjunction with Designers Against AIDS (DAA) and music industry celebrities including Rihanna, Timbaland, Rufus Wainwright (pictured in the spot above), Scissor Sisters, and Ziggy Marley, and Good Charlotte, among others. Twenty-five percent of sales from the line, priced at roughly $16-$40 (at current exchange) will go to various HIV/AIDS prevention projects at non-profits worldwide.

In 2006, H&M spent $17 million on measured media advertising in the U.S. market, and through November 2007, has spent $18 million, per Nielsen Monitor-Plus.

Jimmy Choo Bucks Tradition, Taps AR New York as Ad Agency

Jimmy Choo is taking its advertising out of house this year.

The London-based luxury footwear brand, popularized in large part by the role it played (alongside Manolo Blahniks) in Sex and the City and owned by boldfacer Tamara Mellon (you may also remember her ex-husband, Matthew Mellon, whose name she kept) announced today that it has tapped AR, New York, as its agency of record.

"A key pillar of our strategy is to elevate our advertising, increase our media presence and synchronize all consumer touch points," said Choo CEO Joshua Schulman, in a statement. "We believe that AR will add great value to our communications efforts and help us to achieve these strategic goals."

The brand has managed to create quite a stir with its in-house campaigns (such as the one pictured, right, featuring Molly Simms and the seeming non-sequitur appearance of Quincy Jones) over the past several years, so it will be interesting to see the type of creative that ends up rolling out of this external operation.

"[AR] understands exactly my vision for Jimmy Choo," added Mellon, in a statement. "Working with an agency of this caliber is consistent with my goal to elevate our brand to one of the world's leading luxury houses."

AR currently handles advertising duties  for Brooks Brothers, Elie Tahari, Jones New York, and Valentino. They were also the agency responsible for repositioning the image of the Banana Republic brand, elevating it to the more upscale fashion label it has become in recent years.

Couture Contest: Who Will Be Wearing These On The Red Carpet?

Let's stuff those bad dreams about The Recession for a moment and take a gander at the surreality of couture week! While more film is shuttling in over at Style.com, it's been a fun romp over the past few days through the high-concept runways of Christian Dior (which I've dubbed the "Baltimore's Miss Crabs" Collection), Chanel, Christian Lacroix, and Armani Privé.

But I guess we're never too far from bad dreams, are we? After all, while the ladies attending these shows are part of that rarified market that will buy whatever they want whenever they want it (cue the "Lola" theme), the reality is that the shows are little more than a big marketing stunt to drum up interest in the storied houses, and their designers.

For the most part, the only time we'll see a couture gown will be at a Costume Institute retrospective at the Metropolitan Museum of Art, or, of course on the red carpet for big ticket events like the Oscars. But wait, the Oscars might not even happen this year, meaning that there potentially could be the elimination of millions of consumer impressions for these brands across the loads of magazines and TV stations that cover this stuff. The horror!

But let's assume that the actresses will be ticking their way across that crimson spread, and that Ryan Seacrest will be there to catch it all (with a bunch of quips sure to prompt catty "outings" across the blogosphere for the day after). Who do you think can pull off these tricky designer looks? Drop your submissions in the comments box or shoot me a plug at enewman@brandweek.com. Happy guessing!

Though I would guess Privé is a lock for Katie Holmes in her next near-comatose red carpet/"news" interview gig. If you haven't seen, check it out here. "Mad Money," indeed!

             ARMANI PRIVÉ                    CHRISTIAN LACROIX                 CHRISTIAN DIOR

Financial Desk: Coach Fights Back with Q2 Growth and Upped Guidance

Despite ominous downgrades from a Goldman Sachs analyst
last week, Coach seems to be  coming out swinging
following an impressive second quarter in which the leather goods company posted increases across top and bottom line ledgers.

Earnings climbed 11% to $252.3 million, or 70 cents a share, for quarter ended Dec. 29, while sales jumped a strong 21% to $805.6 million. Gross profits, however, slid almost 174 basis points to roughly 75% of sales, and inventories jumped 20% to $300.7 million.

Those latter slides might be attributable to the current luxury market weakness as consumers tighten their purse strings—for more on that, check out my "Mass Affluents Retreat En Masse" story from earlier this week—which seems to be supported also by Chairman and CEO Lew Frankfort's (pictured, above, right) statements about weakness in comp store sales.

"Specifically, North American comparable store sales were impacted by weak mall traffic and an unexpected decline in average transaction size," he said, in a statement. "The macro environment appeared to cause a shift by many consumers to lower price point items. Conversion remained very strong, offsetting the bulk of weakness."

Looking ahead, the company actually upped its earnings and sales guidances, with revenues pegged at $3.15 billion (a 20% boost), and share value of $2.06 (a 22% gain). Still, given the challenges in the U.S. environment, Frankfort said that the company would remain cautious in providing forecasted estimates of comp store sales—which he added represent roughly 20% of overall retail sales for the back half of the fiscal year.

Another way to offset any slowdown in the U.S. market might be the brand's boosted efforts in China, where it will open a new global flagship store in Hong Kong this summer.

"This flagship will significantly enhance the Coach brand and is consistent with our strategy of raising awareness and aggressively growing market share with the Chinese luxury  consumer," Frankfort said, in a statement. "Clearly, Greater China has the potential, during hte next few years, to become the third major market for Coach, following North America and Japan."

International markets currently represent about 25% of Coach brand sales.

No word yet on any ad changes at the company, though Frankfort emphasized that the challenging retail climate has the company "embarking on a comprehensive review of all ways in which the brand touches the consumer," and said the new positioning will become more clear as the company shifts into the 2009 fiscal year.

The brand boosted its ad spend by roughly 31% during Jan.-Nov. 2007, growing to $13.2 million, versus $10.1 million from Jan.-Nov. 2006, per Nielsen Monitor-Plus.

The Luxury Market, The Recession and What Marketers Can Do About It

If you haven't checked it out already—and it seems many of you have since it's o ne of the most popular stories on our site this week—give a quick gloss to my story about mass affluent consumers retreating from the luxury market as we head into what analysts and the papers seems to be projecting as a certain American recession. Read the full story here. 

Raúl Martinez, CEO and  executive creative director over at AR New York (they've done worked for brands including Salvatore Ferragamo, Dolce & Gabbana, Yves Saint Laurent, Versace and the most recent ads for Valentino, post the namesake's well-publicized adieu, pictured at right) seemed to sum it up nicely.

“I think the downturn in the luxury-goods market is now trickling down to Europe and it’s been a shock to many over there," he told me. "For a while there’s been a sort of comfort-level that luxury brands have enjoyed. Consumer are cautious and luxury brands are in alert mode.”

It's an interesting time for sure, and many of the analysts and consultants I spoke to for this story told me that they see several key points emerging from the luxury market's stumble over the past few weeks:

1. That affected luxury brands were taken by surprise given that they underestimated how much of their growth over the past five years had been fueled by these mass affluent consumers;

2. That the first area where tightened budgets might force some changes will be in the marketing and advertising departments. (This is, of course, a general market theory as well, and can be extrapolated to areas far beyond the luxury market in specific.;

3. And that some of those tightened ad dollars could increasingly go towards online campaigns, which offer greater ROI than the traditional media (no big secret to anyone) and also have the additional benefit of global reach that could prompt sales in foreign markets, which are still a thriving area for luxury goods.

However, the problem is that luxury marketers will most likely not be making quick, dramatic changes to their traditional media buys.

As Pam Danziger, the head of Unity Marketing, a luxury consultancy based in Stevens, Pa., told me: "The idea that magazine and TV advertising will go away is ridiculous, but what will become more important is having a better understanding of the consumer they're looking at. It's becoming much more vertical...with some of these niche magazines providing more connection to [the luxury sector's] real target market."

This trend seemed to be confirmed by Jason Binn, CEO of Niche Media, New York. Unless you're part of the uber-wealthy for whom these magazines are as ubiquitous as McDonald's golden arches are for the rest of us, you've probably seen his titles—among them Gotham, Hamptons, Ocean Drive and Los Angeles Confidential—in the high dollar rooms you booked through the company for a recent conference in Vegas. I know that I never stay at The Hotel on my own dime.

Per Danizger's assertion, Binn's group offers luxury marketers access to the consumers who will buy their products regardless of recessionary woes, the kind of folks, who, to paraphrase a WWD headline a few days ago, are more concerned with getting their high heels wet waiting in a drizzle outside of Chanel's couture show, than they are about this "thing" called a recession.

The titles are distributed to a consumer base in which roughly 50% have annual household incomes of over $250,000, as well as liquid assets and homes each valued at over $1 million. The books are also distributed through Net Jets, the private jet company owned by Warren Buffet’s Berkshire Hathaway, where Binn says he reaches customers with an average net worth of $25 million. 

"[Luxury brands] are relying on us more than ever to vertically integrate their products and their services to these wealth markets that we’re targeting with these very unique readers and consumers that we have,” Binn told me. “The [vast majority of] mainstream consumer magazines can’t really deliver those kind of  economic demographics to these brands.”

Though he did acknowledge that luxury marketers were shifting some dollars to more non-traditional media, for his part, Martinez said that it's a time when these brands need to maintain a consistency in their messaging.

"At a time like this its more important than ever to communicate with a singular voice and a singular vision...I think the worst thing a brand can do is to deviate from who they truly are, because over the long-term consumer confidence will be lost," Martinez told me. "One thing I think we have seen over the last number of years is a movement away from the more emotional creative and towards a more product-centric messaging. More dollars are being applied to Resort and Pre-Fall which are becoming true collections in their own right, where wearability becomes much bigger.”

Looks like for now, we'll have to play a game of wait and see concerning how the ad market will change for luxury players. Saks Fifth Avenue, for example, has already said that they're looking into doing ads in foreign magazines to grab some more tourism dollars, something the luxe retailer has never done before, and soon they'll start offering international shipping on their e-commerce Web site.

Meanwhile, I'll be comparison shopping the Vogue ad pages to see if any of this media shift stuff pans out. Oh, and Vanity Fair, you're on my list too.

Marketing to Men: How Two Beauty Brands are Reaching the Elusive "Mook" Psychographic

When I saw Knocked Up for the first time on DVD, I kind of fell in love with Seth Rogen. The same thing happened when I watched Jonah Hill’s character saunter through frenetic, sexually frustrated dialog in Superbad (see Rogen pictured, far left, with film's stars, Michael Cera and Hill) earlier this year. These guys reminded me of an old college buddy of mine: a pot-smoking, hard-drinking good times guy whose “Madden 2004” soundtrack used to put me to sleep each night, and with whom I'd spend the weekends swollen with beer, hollering myself hoarse watching NCAA games at a local Irish bar. We'd rag on each other, compare girls we were dating (these were my pre-out days, and now we split down the middle, he'll go for Juno's Ellen Paige while I'll geek out over Cera), and our apartment was the kind of squalor that we've both promised we'll never live in again.

Because, you know, those days are over. But they're not really, and guys well beyond the college years are whooping it up, well, like guys in college.

If you haven't already, check out my most recent feature story, "The Mook Industrial Complex," here.

The term comes from a 2001 Frontline documentary (female counterparts were dubbed "midriffs") and they're the zeitgeist of the 18-34 year old male demo that represents about $1.02 billion in annual household income according to MRI reports.

The problem is, they're highly elusive and, what's more, even though you might think their humor beyond sophomoric, they are wizards at blocking out your marketing messages. Maxim's Rob Gregory told me that these guys receive roughly 3,000 impressions a day (if they live in an urban area, natch) and they block out about 90% of them. So going after the dude-bro is not as easy as slapping a scantily-clad woman on a 30-second commercial for beef jerky, say. But some brands have found a way to get through the clutter, and there's some good advice and strategy talk from the marketing honchos at Mitchum (unit of Revlon) and Axe (unit of Unilever).

Oh, and for extra gross-out factor, check out some of the sites I had to go through for my research: Ebaum's World and College Humor. I can't guarantee that it's work safe, kids, so browse at your own risk.

Liz Claiborne Steals Isaac Mizrahi from Target!

Talk about a shake-up.

It appears that after a successful, five year marriage to Target, designer Isaac Mizrahi is setting sail for Liz Claiborne.

As the newly-tapped creative director for the Claiborne brand, Mizrahi, one of fashion's more ebullient and popular personalities, will oversee design and marketing for the brand's women's apparel, accessories and licensing businesses. His first collection under the Liz Claiborne label is slated to debut in spring 2009.

"[We] believe that [Mizrahi's] innovative design sense and widespread appeal will breathe new life into the Liz Claiborne brand," said Liz CEO William McComb, in a statement. "It is certainly no secret that the brand has been lacking a clear and cohesive vision and has languished as a result. With this appointment, we are taking a major step towards our goal of creating irresistible product that will provide today's discerning woman with a compelling reason to buy."

While no financials of the deal were disclosed, Mizrahi's own statement seems to betray, if not a fairly lucrative deal, then at least boosted branding opportunities for the designer who pioneered the high/low design ethos when he signed on to produce a women's collection for Target in 2003, paving the way for many others who followed in succession, including Karl Lagerfeld (in 2004, with a capsule collection for H&M), and most recently, Vera Wang (in 2007, with her Very Vera collection for Kohl's). For more on those partnerships, and their impact in the industry, please see my previous article, "Split Personality," here.

"I'm honored to have the opportunity to build on this fantastic legacy and excited to reestablish the label as a must have," Mizrahi said, in a statement. "And as excited as I am about developing Liz Claiborne, the collaboration also affords fantastic opportunities for growth in my own brand."

Aside from the forthcoming collection for Liz Claiborne, Mizrahi will also bow his new web-based series, "Watch Isaac," in February at WatchIsaac.com. His collections for Target will continue to be sold through the mass-retailer throughout 2008.

However, we have to say that the move seems a risky one, given several factors. First, Isaac had a pretty successful collection at Target, reportedly garnering annual sales of $300 million. Why shirk that to head over to Liz Claiborne, which posted 65% dip in third quarter net income on a 4% sales drop? And yet, it's not like things are all milk and honey over at Target, which posted a sales gain of only 0.1% (at $9.26 billion) for the month of December. Then again, it's important to remember that Mizrahi is no stranger to ups and downs himself, and that the deal he inked with Target back in 2003 can be credited, at least in large part, to revamping what was then an ailing name brand.

What the move means for Liz, and its impact on Target's business, remain to be seen.

"It can't hurt Liz Claiborne...but the issues there are more than one individual can conquer. Bringing the brand back to its heyday will require a lot more than just a new design concept or featuring a household name on the brand's marquee; it will have to be a major shift in management, merchandising, marketing and advertising and ," said Marshal Cohen, chief industry analyst at NPD Group, Port Washington, N.Y. "As for Target, they've shown that they understand the consumers' desire and the need to constantly revolve  their brands. Will they miss Isaac? Probably. But they'll find something to replace [him]."

Cohen also suggested that Mizrahi might have some growing pains to contend with in his new post.

"He was an island unto himself at Target; all of those other brands paled in comparison to his work, and he was treated as the prized jewel in that environment, " Cohen said. "In the mall environment [where Claiborne is], he'll be up against hundreds of other brands, where he's no longer the shining star by default."

 

The news of Mizrahi's switch comes following the appointment, earlier this week, of John Bartlett as Claiborne's new men's sportswear designer.

On a lighter note, if you're unfamiliar with Mizrahi or if you feel you need a refresher course on why this guy seems to be such a hot commodity for these mass merchants, check out "Unzipped," the 1995 documentary that took Isaac as its subject, with all his quirky humor and non sequitur dialog to go along the way.

One of our favorite lines: "All I want to do is fur pants, but I know, like if I do them, I will be stoned off of Seventh Avenue, like some wanton heretic or something. So there won't be any fur pants coming down my runway. It's about women not wanting to look like cows or something."