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.

Lessons in Branding: Why Going Logo-less Might Be A Good Idea For Luxury Brands During The Recession

There's an interesting  article today in the New York Times' "Thursday
Styles" section.

No, no, read on! It's not another critique of an out-of-touch story on youth trends or pandering pitch about how great the rich are and why we, the not-so-rich should thank our lucky stars they exist. Our friends over at Marx Marvelous have that end covered pretty well.

Rather, today, we're calling out a piece about the absence of logos on Bottega Veneta's luxury sportswear.

The piece, which can be read in full here, looks at how the Italian luxury label has revamped itself without going the route of high-profile monogramming or logoing.

Within the article, journo Ruth La Ferla, extolls the virtues of creative director Tomas Maier's consistent attention to high quality goods that hit the real deal in luxury, rather than merely the perception of luxury, and how his actions have driven the brand to a $500 million annual business, thereby making it the second highest earner for parent Gucci Group.

And then our favorite luxurist, Milton Pedraza, CEO of The Luxury Institute, chimes in to tell La Ferla that during a recession, the rich "don’t want to be screaming luxury right now...They don’t want something flashy that everybody else has. They are looking for unique handcrafted things that can’t immediately be reinterpreted at every level of the marketplace.”

The thing about logos, as we've long felt, is that they can cut both ways. In fact, we've been thinking about our own logo, for Fashion Notebook, which you can check out, at right, but the tech guys haven't yet gotten around to installing it. And maybe, now, we're thinking that's a good thing.

But back to the relevance.

Taking Vuitton, for example, when one of perhaps mass-affluent or aspirational means has laid down the dollars for a fashion piece that is truly of excellent quality, not to mention name recognition, it's, we think, safe to assume that we'd like others to know it. After all, that monogram tells others that we care about quality, perhaps that  we're hip to hot or established names in the industry, and, let's be honest, that we could afford to purchase it. In a sense, we want everyone else to know what that handbag, dress, or accessory was worth, and, by proxy, that we're worth something as well.

The problem, of course, is logos also tell us what everyone else is worth, too. And if we see a bunch of Louis Vuitton monograms on my friends' purses, or luggage, shoes, or, god help us, something bigger and obviously more expensive than the piece we bought, suddenly, Vuitton just doesn't seem so special anymore.

This is to ignore the further complications that arise from knock-offs. If everyone on Canal Street is rocking the monogram, and for a mere percentage point of what we paid, why we'd have a fit and would feel somewhat obligated to inform everyone we saw that, well, no, ours is in fact, real and then go into a litany about the stitching and leather quality that, at best, wouldn't gain us any friends, and, at worst, would lose us those we already count in our ranks.

And let's not forget that this isn't, obviously, just a Vuitton problem. Many other luxury brands feature highly-identifiable logos, monograms, or signature patterns on their products that identify the brand with all the subtlety of a bull horn. Think about those brands you recognize within seconds on some of the products worn by your friends: Coach, Gucci, Burberry, Chanel, Marc Jacobs, Dolce & Gabanna, DSquared, etc. 

As far as the recession, the no-logo route is probably a good idea. After all, those who can afford luxury goods without batting an eye are usually so acclimated to that lifestyle that, well, they don't need to scream it, as Milton says, like the rest of us. And those customers are precisely the ones luxury brands need to be going after in times of serious economic downturns. Sound familiar? Yeah, we've said that before.

And we've also dished with Maier on his strategy. When we were writing that tome about the opportunities and potential pitfalls of lower-tier secondary collections for high-end designers, it was Maier who said (towards the end of the article) he would never consider such an extension because he felt that it would potentially overexposure of the handbag business that is the core of Bottega's sales.

"The philosophy of Bottega Veneta is to produce innovative designs with the highest quality materials and contemporary functionality," Maier told us at the time. "All of this comes with a cost that can't be recreated at a bridge level price."

What remains to be seen, however, is whether or not Mr. Maier's activities give the brand something of a glass ceiling when we're in economic boom times, and everyone is scrambling for top-end designer merchandise. Then again, at $500 million in annual sales, I don't think he's got anything to worry about.

What the 2008 CFDA Nominations Tell Us About American Fashion

Another spring, another awards season for the Council of Fashion Designers of America. We always look forward to this announcement, and yet we always walk away from the press release disappointed. Why? Well, because year after year, it all just feels the same and it's gotten to the point where we feel we could pick out the nominees, blindfolded and drunk, and probably get them right about 90% of the time. But first, the nominees.

In case you haven't heard, the group, whose prez is none other than that lullaby-talking Diane Von Furstenberg, has announced the following nominations for 2008: [Note: The Swarovski awards recognize emerging design talent.]

Womenswear Designer of the Year                                   Swarovski Award for Womenswear
Francisco Costa (Calvin Klein)                                            Kate & Laura Mulleavy (Rodarte)
Lazaro Hernandez & Jack McCollough (Proenza Schouler)     Thakoon Panichgul (Thakoon)
Marc Jacobs                                                                      Alexander Wang

Menswear Designer of the Year                                        Swarovski Award for Menswear
Thom Browne                                                                   Patrik Ervell
Michael Bastian                                                                Tim Hamilton
Tom Ford                                                                         Scott Sternberg (Band of Outsiders)

Accessory Designer of the Year                                        Swarovski Award for Accessory Design   Tory Burch                                                                       Philip Crangi
Marc Jacobs                                                                      Justin Giunta (Subversive Jewelry)
Michael Kors                                                                     Joy Gryson

Well, congratulations to all the winners. Then again, we're sure they've heard it all before. Actually, they have. Let's take a quick, two-year trip down memory lane, just with the marquee awards.

CFDA Nominees 2007                                                     CFDA Nominees 2006     

Womenswear:                                                                  Womenswear:
Oscar de  la Renta                                                            Francisco Costa (Calvin Klein)
L. Hernandez and J. McCollough (Proenza Schouler)            L. Hernandez and J. McCollough (PS)
Marc Jacobs                                                                     Marc Jacobs

Menswear:                                                                       Menswear:
Steven Cox and Daniel Silver (Duckie Brown)                      Thom Browne
Ralph Lauren                                                                    Ralph Lauren
Italo Zucchelli (Calvin Klein)                                              Alexandre Plokhov (Cloak)

Accessory Designer of the Year:                                          Accessory Designer of the Year:
Marc Jacobs                                                                      Marc Jacobs    
Michael Kors                                                                     Michael Kors
Derek Lam                                                                        Tom Binns

Notice anything? Like maybe the fact that the nominees in the
womenswear category have remained virtually unchanged (with the
exception of Oscar de la Renta) for the past three years? Or that Michael Kors (pictured, right, doing his Project Runway duties) and Marc Jacobs have been the accessory designer of the year nominees for three years running, as well? The only thing that seems to have changed much at all is the men's category.

In his statement regarding this year's nominees, CFDA executive director Steven Kolb lauds the way in which "this year's nominees and honorees reflect the strength and vitality of the American fashion industry."

Really? It seems to us that it suggests the industry is rather stagnant, with only the same three names worthy of distinction in each of the categories. And let's not forget that chief among those names, Mr. Marc Jacobs, seemed poised, only a season ago, to take his whole operation to Paris. But we digress.

In essence, it would seem that the CFDA nominations this year, and as we've demonstrated above, the past several years, prove that American fashion is a pretty rarified echelon in which only a standard round of top names compete for industry prizes. For an industry where the bread and butter is creativity, the stagnancy (why does that word keep coming to us?) of the nominations list seems to imply a less thoughtful approach. That said, if asked which designers we thought were tops in American design, we'd be hard pressed to come up with a different list. Perhaps the fault then, dear readers, is not within the CFDA nominating committee but within our American fashion selves.

It's hard for American designers—hell, for ANY designers—to become established like these award winners anymore, given the difficulties of getting funding and the fact that we live in a world that no longer seems to care about the development of talent as much as they do about constantly having something new, something chic, and something with a name that others will recognize. To that end, CFDA (and Vogue) are to be commended for their work to bring notoriety to new design labels, as they have with Proenza Schouler, who now top the ranks of their regular awards, having graduated from the Swarovski Award for Womenswear. But it's hard to see any kind of sea change in American fashion coming—and perhaps no one wants it—given that these guys are always at the top of the list for women's design.

Here's hoping that maybe Christian Siriano, recent Project Runway winner (whom we can't help ourselves but to shill for), will liven up those ranks in the coming years.

And full disclaimer: This post is not a statement, by Fashion Notebook, that we think any of the nominated designers aren't talented, or are not worthy of awards. Rather, it is a statement that we've seen these same people getting awards and nominations for years, and we're wondering why there's no one else in the American fashion ring worthy of such distinction by the CFDA.

Updated: Financial Desk: LVMH Closes Out 2007 with Multi-Category Growth and Teaser For New Vuitton Campaign

Another positive luxury earnings report, now with some
straight talk about how 2008 will shape up, comes across
our desk this morning from Paris-based juggernaut LVMH.

The company, which markets a wide range of luxury products, posted sales gains across every category in its portfolio. In sum, company-wide revenues increased 8% to $24.1 billion, with profits climbing 12% to $5.2 billion for 2007.

While those gains are certainly commendable, Chairman and CEO Bernard Arnault didn't shy away from addressing some of the problems facing the U.S. market, though he was bullish on the company's prospects, given its higher-end clientele.

"It is true that the year is starting in a rather worrisome situation in terms of the economy and the financial markets in particular...[and] our analysis of the situation is that in 2008 we're likely to experience a degree of recession more or less important in the U.S. economy," Arnault said, in a conference call, though he added that January sales were in line with year-end performance for the company and noted that he believes the recession should only last one or two quarters into 2008, with market recovery by 2009.

"I believe that [the recession's] consequences on LVMH will be limited, weak, or even non-existent," Renault said. "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."

Returning back to the quarterly results, of particular interest to us were the following revenue boosts: sales of fashion and leather goods  grew 8% to $8.24 billion, at current exchange rates, in 2007; the perfumes and cosmetics business also grew 8%, with sales of roughly $4 billion; while the watches and jewelry group posted a 13% sales gain, at $1.2 billion.

The company, in a statement, attributed increased revenues in the fashion category to strong performance from its landmark Louis Vuitton brand, as well as "growing success" at Fendi, in addition to solid performances from Marc Jacobs, Givenchy and Loewe. The boost in perfumes and cosmetics came on the back of its popular Christian Dior fragrance line, particularly the J'Adore, Midnight Poison and Fahrenheit 32 scents. Strength in the watches and jewelry category was led by TAG Heuer, which the  company said showed strong progress across all of its markets (for more on TAG's marketing efforts, see previous article, here).

According to statements by Antonio Belloni, deputy managing director, in a conference call, the fragrance departments at Givenchy and Kenzo will be rolling out "aggressive programs," including a renewed advertising campaign for the female market, and a forthcoming men's launch for both brands. No further details were provided.

And Yves Carcelle, president of the fashion and leather goods division, alluded to an evolution of the brand's current campaign with Mikhail Gorbachev . In the call, Carcelle mentioned a "Life After Gorbachev" initiative that would be unveiled "in a few weeks' time."

"For the first time, indeed, in the history of the luxury industry, there will be an audio-visual film which will be used both on TV, in theaters and on the Internet," Carcelle said during the call, describing the spot as "90-seconds of pure emotion." Hmmm... We'll definitely be staying tuned on that one.

Anecdotally, it would appear that Gorbachev campaign (as well as the spots featuring French Actress Catherine Deneuve, both pictured, above) has been successful. I've heard a vast majority of positive reaction to those spots, and, given the pending recession, that campaign isn't a bad strategy for the U.S. market. After all, only the super-moneyed, who are likely the age contemporaries of Gorbachev and Deneuve, will be able to afford those never-marked-down handbags if the economy really gets bad.