Fashion Notebook

Financial Desk: Strong Gains in Q1 Portend Bright 2008 For LVMH

In the words of one Flavor-Flav, LVMH Chairman and CEO
Bernard Arnault "knows what time it is."

Remember when the luxury house's head honcho (pictured, right), whom we've always thought was like a lost member of the Rat Pack, said this, a while back?

"I believe that [the recession's] consequences on LVMH will be limited, weak, or even non-existent. In fact, the clientele that we are dealing with is far less affected than the rest of the economy by these short-term economic swings.  They have high purchasing power, located in a number of countries where the economic climate will be bouyant, even if there's a minor recession in the U.S."

Well, he wasn't just puffing his sails. First quarter revenue reports show that, with the sole exception of the wine and spirits group, all divisions of LVMH are up.

Fashion and leather goods grew 7%, led by the strength of Louis Vuitton, which received its own TV commercial this quarter, in addition to recently inking a deal to have Rolling Stones' guitarist (and, we think, animatronic wax doll) Keith Richards star in its current print campaign. On the product front, the company said that the collaboration between Marc Jacobs and Richard Prince (the artist of "Let's not and say we did, XOXO, Jennifer Aniston" fame) was particularly successful. Meanwhile, perfumes and cosmetics grew 8%, attributed to the continued momentum of the Christian Dior brand offerings, as well as the new Midnight Poison fragrance and Addict High Shine lipstick.

But the real winner of the quarter was the watches and jewelry group , which posted 12% revenue gains over the year-earlier period. Strength came from brands including TAG Heuer, Zenith and the Christal collection from Dior. The company added that Chaumet and De Beers also continued their retail expansion plans and increased revenues. New watches previewed at Art Basel in Switzerland have reportedly attracted "large increases in orders" from retailers.

And the bottom kicker of the sales release seems to only confirm what Arnault had promised earlier:

"LVMH will continue its growth in 2008 despite the challenging monetary environment and an uncertain economic climate at the beginning of this year. Increasing market share and the profitability of its leading brands as well as improving the results of its developing companies remain LVMH top priorities."

If they can keep these numbers up, or better yet, best them, then we think it's fair to say that the strategy we outlined a while back, that of weathering the recession by only appealing to the top end clientele, has indeed proved not only stable, but a money maker for LVMH.

Week in Review Pt. 1: Louis Vuitton Rocks Out, Kohl's Gets Punked, and More Rumbles for the Luxury Market

OK, so we've kinda been bad lovers the past two weeks. Yeah, we admit it;
we haven't been updating as often as we, or you, would like. But our offline
job got a bit crazed last week and that prevented us from posting. So, in effect, it's not you, it's us.

Also, we were, like, on pins and needles waiting for the finale of Project Runway. And, hopefully you'll agree, we're so, so, so, fiercely happy that Christian Siriano won we can barely contain ourselves. Kid has some serious talent, and we're sure that we'll be hearing from him sometime soon. Is he adoptable  by the way? We might just forego that Boston Terrier we'd been planning on bringing home and swap it for that adorable pocket-gay (though he'll have to sleep in a closet, as we're still living in a New York state of reality folks!).

But let's leave all this relationship drama to the Spitzers! It's time to take a look at what's happened, what it means, and where we see things going... So without further ado...

Louis Vuitton's New Bag
Unless you've been hiding out under a mountain of paperwork (like us), you've probably already heard that Rolling Stones guitarist Keith Richards is the new, wrinkly face of Louis Vuitton (SEE PHOTO, BELOW, LEFT). (Insert "Vuitton's new, iconic wrinkled bag" joke here, hell, everyone else has. For SHAME Saturday Night Live! You, like fashion, were more inventive in the 1980s.) If you haven't seen the spot already, check the photo at right.

We have to say to say that this is an interesting choice, and it's already done its job many times over in terms of exposure (more than we'd imagine placing, say, Katherine Heigl, or some other, safer choice, in front of the camera). But hasn't Vuitton really missed the rebel-rock-me boat by like, say, 40 years? We would prefer to see the ads featuring this Keith.

Also, how does John Varvatos feel about all of this. Certainly, the Stones trump Cheap Trick, not to mention the fact that the campaign pretty much cribs from Varvatos' own advertising mantra: Bring back old rockers and consumers will come. Of  course, Varvatos seems to have more credibility here and we're still not sure what a great cover boy Richards is for the brand. After all, while he's definitely rich beyond words—and amazingly still alive—we're just not sold on him as a real luxury guy. Then again, maybe that's what rehab and old age will do to you. I'm sure that he has a wonderful assortment of organic teas backstage, but is he really throwing those outfits in a Vuitton steamer?

Love to hear your thoughts on this. Drop us a line, here.

Kohls Pumps Up Its Juniors Jam with Avril Lavigne
Yeah, the girl ain't punk kids. Then again, Richards sold his ass to Louis Vuitton, so what does define the legitimate rocker persona? Anyways, Avril Lavigne maybe didn't steal your boyfriend, but she did ink a deal with Kohl's to produce "Abbey Dawn," a collection of apparel (priced $24 to $48) and accessories (read: jewelry, for now) that will hit the mass merchant's doors nationwide in July.

The move obviously means that Lavigne will get some dollars in her coffers—seriously, is she even that hot anymore?—but it also seems to really define her audience in a way that could be limiting for the popstar. Launching just in time for back-to-school shopping, the line is allegedly for the "broad group of shoppers" that Lavigne attracts, according to SVP Don Brennan, but we're calling bullshit. If it's B-T-S, the tricks are for kids, and that's fine, after all, those are the types that will pay retail for her album "The Best Damn Thing," which came out last year and for which the star began touring to support last week.

According to spokeswoman Vicki Shamian, the line shouldn't cannibalize any of the retailer's other exclusive brands, like Candies given Avril (and by proxy, her collection's) "feminine yet rock n' roll attitude." [Side note: Meanwhile, no notes on how the Simply Vera collection is doing. If you've got deets, or reactions, or if you've tried on the products, send a note here]. Advertising, on which details aren't yet available, will be handled by the Kohl's in-house team, in conjunction with lead agency McCann Erickson, New York. Stayed tuned.

 

Financial Desk: Luxury Retail's Mixed Bag
Ok, so we've probably hammered this to death, but there might be trouble with the luxury market.

Saks Fifth Avenue announced last week that it had approached roughly $1 billion in sales for the quarter ended Feb. 2, up almost 5% from the year-earlier period, but with comp store sales increasing by 9%. Meanwhile, net income rose dramatically, some 83% drama, to $39.5 million, or 26 cents a diluted share. However, gross margin slipped about 50 basis points to 37.4% of sales.

But there's trouble ahead. According to a statement by chairman and CEO Steven Sadove, January and February comp store sales grew by only 4.1% and 3.4%, respectively, and "previously high-growth rate businesses such as handbags, footwear and men's have slowed."

"As expected, the more challenging promotional and overall macroeconomic environment that we began to experience in the third quarter continued throughout the fourth quarter and put pressure on our merchandise margins," Sadove continued. "Our outsized comparable store sales growth indicates that we significantly improved our competitive positioning by market, driven by our merchandise, service marketing and capital investments."

And then  came the wahn-wahn moment.

"Nothwithstanding our improved performance and the longer-term outlook for the luxury channel, we expect to continue to face an increasingly challenging macroeconomic and promotional environment in 2008, and are taking a more conservative approach to planning the business this year," Sadove said, adding that the company expects to see comp store sales growth in the mid-single digits for 2008, with low-to-mid single digit growth in the first half of the year.

Meanwhile, at Neiman Marcus, positive earnings were also overcast by ominous notes. Revenues at the luxury department store grew almost 6% to $1.37 billion in the second quarter ended Jan. 26, while net earnings grew 8% to $44.3 million. However, February comp stores sales posted a 7.3% decrease.

In a conference call, Neiman Marcus chairman and CEO Burt Tansky seemed to feel, well, pretty much like every other luxury retailer these days. He's playing a cautious game as the news of a buckling economy and decreased consumer spending prophecies an even rougher year.

"As we all know, the entire U.S. retail sector has seen sales growth diminish somewhat, and this slowdown has affected some parts of the luxury market," he said in the call. "Our sense is that the aspirational customer has pulled back somewhat in response to concerns about the U.S. economy in stock and housing markets. However, this aspirational customer appreciates quality and can be expected to buy more as the economy improves. Nevertheless, we feel confident that the pure luxury customer, the affluent to the very affluent, will continue to demand only the finest."

Seems plausible, of course, except that we're not getting at raw numbers here. What's the proportion of aspirational consumers to pure luxury consumers? Wethinks it be disproportionate and that Neiman's might have a few, hopefully not too many, pricey dresses that are staying on the racks as Sex and the City fangirls start closing up their upper-middle class purses.