Fashion Notebook

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.

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.