A few joys and a few sorrows.
The fashion industry is huge and complex, compared with the annual performance of the stable rise, full of confidence to embark on a new journey of international luxury giants, for Capri, SMCP, VF and other groups that are positioned as light luxury, trend, sports; Bath & Body Works and Victoria's Secret target mid-market beauty and skincare and lingerie brands; As well as luxury e-commerce companies Mytheresa and Farfetch, traditional department stores Saks and Nordstrom, it is clear that it has not been easy for some time.
Although the weak performance has made many high-level changes difficult, the industry is in a dilemma; The haze of uncertainties trapped in many dimensions such as global inflation and the international trade environment has not really dissipated. But rather than reacting and waiting for the moment to come, finding a solution to the crisis – with clear short-term stress plans and long-term plans, many brands or groups are showing a rhythmic approach.
Capri stock plunged more than 23% to $50.71 in February, which once attracted industry attention. Previously, the company's third-quarter results fell short of expectations, and Chairman and CEO John Idol issued another performance "warning" before entering the holiday season, especially in the wholesale business. Capri third-quarter net profit declined 30.1% to $225 million, and diluted earnings per share (EPS) were $1.72, compared to $322 million and $2.11, respectively, in the year-ago quarter. Adjusted earnings came in at $1.84, well below analysts' expectations of $2.22. Revenue fell 6% from $1.6 billion to $1.5 billion for the three months ended Dec. 31.
To this end, John D. "Overall, this was tougher than we expected, particularly disappointed by the increase in marketing expenses and lower operating margins due to the performance of our global wholesale business, and we are already responding aggressively," Idol said. ”
According to the recent performance report released by Victoria's Secret, the company's fourth-quarter sales reached $2 billion, in line with analysts' expectations, CEO Martin Waters said that after a year of listing, Victoria's Secret itself is in good shape and on the right path.
But net profit for the quarter slipped 29.7 percent to $173 million from $246.1 million in the year-ago quarter, though the company's adjusted earnings per share were $2.47, up from analysts' previous forecast of $2.34. In addition, full-year net income decreased 46% to $348.1 million and sales decreased 6.4% to $6.3 billion.
On March 2, according to the newly released full-year results of SMCP Group, the parent company of Sandro, Maje and Claudie Pierlot, SMCP's full-year sales accumulated 1.2 billion euros, organic growth of 13%, but overall sales in Asia fell by 20% year-on-year, despite the impact of rising prices and reduced discounts; Wolverine, an American footwear group that includes Merrell, Saucony, Sweaty Betty, Hush Puppies and other brands, posted a net loss of $361 million in the fiscal fourth quarter.
In addition, international retail groups with the European and American markets as the core are facing the continuous uncertainty of the current economic environment, as well as the drastic changes in market structure and consumption mentality, and the inventory and supply chain problems accumulated over a long period of time, which have brought many challenges to their road to recovery. This point means a business focus for the global retail industry that needs to be faced urgently.
Luxury e-commerce company Mytheresa saw its GMV grow 7.8% to €215.9 million in the second quarter, but it was a significant slowdown from the 20.8% GMV growth rate in the first quarter, and the company's share price fell 6.2% after the earnings report was announced
Macy's posted full-year 2022 net sales of $24.4 billion, down 0.1% from 2021 and 0.5% from 2019. In addition, the company's digital sales decreased by 6% compared to 2021 and increased by 31% compared to 2019. Sales in the gift and occasional-based categories, including beauty, men's tailor-made clothing, dresses and shoes, were strong, but sales in leisure and soft furnishings declined significantly year-on-year.
Similarly, affected by sharp price cuts and macroeconomic reversals, Nordstrom, another high-end department store chain in the United States, both fell in revenue and net profit in the fourth quarter and announced its withdrawal from the Canadian market. Approximately 2,500 Canadian employees are expected to lose their jobs, resulting in approximately $400 million in lost sales. On the other hand, unlike Nordstrom's aggressive approach, Saks adjusted its expectations and adopted a cautious approach to 2023, despite an 8% increase in GMV for the full year 2022 compared to the previous year, after experiencing high volume and growth in sales, customers and services over the past two years.
Marc Metrick, CEO of the company, told WWD: "We are starting to see that the growth of the past few years is decelerating, and we must prepare for this and make deliberate decisions and plans. I expect 2023 to be more normal, but it's still challenging for everyone. ”
Although the strong signals released by the Chinese market have given international luxury brands a lot of confidence, the macroeconomic environment and the recovery of the overall market are still a must-answer question for brands or groups facing the wider mass market. As Fran Horowitz, CEO of Abercrombie & Fitch, told WWD, "There is no normal and no new normal in this industry.
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How to deal with challenges in short-term response and long-term planning is actually not only related to the survival and development of a brand or a company, but also the overall improvement of the entire market fundamentals.
For any company, throttling is a stressful response to weak performance or even an existential crisis, and groups with multiple brand matrices and large employee sizes are also showing such a response.
Bath & Body Works also said it will work to reduce expenses across the global enterprise, with projected annual cost savings of $200 million, with more than half of those savings occurring in 2023. In August, the company eliminated 130 positions, most of them at the top. CEO GinaBoswell said in the earnings report: "Pursuing a range of initiatives to improve financial performance can help companies better position and organize in the long term."
In addition, in the face of unsatisfactory annual revenue, cutting product lines that are not core or lagging behind in financial performance has also become an emergency solution.
U.S. footwear group Wolverine has sold the Keds brand to Designer Brands Inc., the parent company of footwear retailer DSW, and has revealed its intention to grant DBI exclusive licenses to Hush Puppies in the U.S. and Canada, where DSW has been the exclusive retail partner. Brendan Hoffman, president and CEO of Wolverine, said the sale and licensing agreement for Keds will bring in more than $90 million in cash, including the monetization of working capital.
At the same time, Wolverine will also dedicate a key team to accelerate the growth of core brands and quickly restore overall profitability. Brendan Hoffman said: "Although 2022 has been a challenging year, we believe that through the important initiatives that have been implemented, we are becoming a more disciplined and flexible company. ”
For the retail industry, inefficient supply chains, uncontrolled inventory management, rigid pricing mechanisms and promotion policies, and expenditures that also come from personnel costs are reflected in the shortcomings and challenges of the market and the enterprise side in recent times, and they are also problems that need to be solved quickly in the short term.
As Jeff Gennette, Chairman and CEO of Macy's, said, improving inventory management will be the focus of the new year to meet customer needs.
"Benefiting from our rigorous inventory approach and compelling gift-giving strategy, which allows us to offer fresh fashion and style to all our customers at great value. At the same time, there is moderation in promotion, strategic price reductions, and deliberately not chasing unprofitable sales. ”
Luxury e-commerce Farfetch announced that it will realize cost savings in the form of layoffs in administrative costs after experiencing a 76.5% reduction in its full-year profit margin ($345 million) compared to the previous year in 2022 and only a "hard hit" of a loss of $177 million in the fourth quarter. At that time, the company will eliminate approximately 17% of its total headcount, and the compensation paid to employees in the form of company stock due to higher amortization expenses incurred in its partnership with Reebok and technology investment business will also have a greater impact on Farfetch's expenses last year.
From the perspective of a longer global economic development cycle, every fluctuation of the economic cycle is a long-term upgrading and transformation process for the market and enterprises, and it also means an opportunity to break through the cocoon and rebirth.
In the past, the debate between the advantages and disadvantages of the high-end luxury sector and the mass consumer market has been going on for a long time, but it has always been based on the presentation of market realities, rather than on effective and tested methodologies. If we say that through layoffs, business line divestitures and other helpless disconnections, only short-term crises are solved, and more essential and systematic planning strategies are an important link to fundamentally solve long-term problems.
As a result, the true improvement of the global fashion industry can come as promised.
Suketu Gandhi, partner and head of digital supply chain, also emphasized the situation of light luxury brands: "Consumers may go overseas in order to re-purchase luxury goods after policy optimization, but they will definitely not go overseas for light luxury brands with medium prices, which in their view is not enough to constitute a 'cost-effective' reason for travel consumption." ”
Neil Saunders, managing director of Global Data, cited Capri Group as an example that while the company attributed the pandemic's poor performance in Asia, it also suffered a decline in revenue in North America because luxury fashion spending was no longer enough to constitute a "stimulus" for mass consumers.
Neil Saunders said: "At a time when Michael Kors in the group's portfolio is also the brand most vulnerable to price-sensitive, lower-income groups, it is not surprising that it has been hit the hardest by the economic slowdown. ”
In addition, a luxury consultant who has been working for many years said: "The current macroeconomic environment is not favorable for companies in the middle price range. ”
Fran Horowitz, chief executive of A&F Group, said that the efforts of the past year have made them acutely aware that at a time when external macro problems are becoming more complex, they must focus more on what they can effectively control. Therefore, in 2023, the Group will strengthen the innovation of its Maisons' businesses and product lines to meet long-term trends.
For light luxury brands or groups, persistent inflation has led to changes in the basic spending capacity and psychology of consumer groups, making them more clear than ever about the brand's irreplaceable competitive advantage and value proposition.
Recently, Coach has attracted the attention of millennials and young Gen Z consumers through iconic products, and the tightening strategy of wholesale channels has helped companies slow down the shock of operating losses. This also means that in the face of volatile economic cycles, continuously condensing cultural production capacity through the DNA of classic products is still a development path and export that cannot be ignored.
John D. Idol, chairman and CEO of Capri, said that he will suspend the price increase strategy of the Michael Kors brand, reduce the supply of distribution channels, and enhance the brand's resilience with a stronger brand portfolio and product building.
At the same time, A&F Group is also pursuing digital technologies and a more balanced portfolio as a long-term strategy to enhance the stability and growth capacity of the Group as a whole.
For the retail industry, if solving inventory and simplifying business is the first response to the crisis, then the improvement of overall positioning, the upgrading and expansion of channels, and the problem of deep upstream supply chain to solve the problem of rising raw material costs are also long-term ideas.
Adrian Mitchell, Chief Financial Officer of Macy's, emphasized, "Through enterprise-wide investments in supply chain, data and analytics, pricing science, digital and technology, we have laid a solid foundation for profitable growth. We believe a balance can be maintained in expense management and capital allocation in the future. At the same time, Jeff Gennette added as he looks ahead to Vision 2023: "We believe our positioning as a modern department store will be further strengthened by our five growth vectors, including our private label rebranding, offline expansion, online marketplace, accelerated development of luxury brands, and personalized service and communication. ”
VF Group, known for its strong supply chain, has also demonstrated its determination to return to a savvy and stable state. Interim CEO Benno Dorer also stated in his earnings report that "returning to the standard of excellence in the company's resupply chain is the Group".
For luxury e-commerce companies such as Mytheresa, the high-end positioning of the platform and the diversification of business lines are also a long-term idea to enhance their own stability. In the past, Mytheresa has been committed to consolidating its premium positioning through exclusive partnerships with many brands.
In February this year, in order to emphasize its market position, Mytheresa adjusted "fashion" to "luxury" in its own expression in content communication.
CEO Michael Kliger said the company's growth in the second quarter was driven by "high-end customers who frequently buy luxury goods, not "consumers who occasionally buy luxury goods"; Michael Kliger also pointed out that Mytheresa's business model is "resilient and agile", as is the diversification of the platform business (which launched a home goods line last year) and the focus on full-price sales and personalized service levels.
The retreat of the haze will not be achieved overnight; Confidence in the future should also be based on a longer-term, accurate analysis and implementation of strengths and weaknesses.
Today, there may still be a muddy road ahead, but it is the existence of problems that has enabled the entire fashion industry to continue to surf the sand, survive the fittest, and even become a solver of more macro problems. WWD
Written by Mango
Edited by Du Mingwei
Image source: Web