Market Update 10.19.20

Past the Q and into the new...

Since May we have seen a shift from a total lockdown period to (dare I say) the “new norm”. 

  • Unemployment rates have decreased from around 16% at the height of the pandemic to around 8%. Estimates indicate that from July to September US GDP grew by 30%. 
  • Consumer spending comprises the largest component of Gross Domestic Production, and in August, we saw it rise as average income fell.
 U.S. spending is aiding economic recovery which only reinforces the importance of the business of fashion..

An Online World

U.S. retail sales have been growing since May but the online sector has been growing at a faster pace.

  • Those that remained heavily reliant on in-store shopping saw profits shrivel in the second quarter: Luxury brands like Ralph Lauren saw a decline of 34% 
  • In August alone, almost 2,200 retail stores closed while only 14 opened
  • On the other hand, E-commerce sales in the second quarter rose by 44.5% compared to the same 2019 period and now make up 16% of all U.S. retail sales
  • Even online transactions with credit and debit cards have increased an average of 88% each month since the beginning of April

Is AR the New Reality?

What is AR? Augmented reality is a tool that can revolutionize the way consumers interact with brands and products by customizing your experience to best mimic an in store experience: the interpretations and styles vary but the tool remains an exciting potential future for e-commerce.

  • In 2017, DressingRoom by GAP was unveiled and launched to help customers virtually try on clothes. GAP was one of the first to implement the idea, but almost too ahead of their time. However, with the recent push for all retailers to utilize online technology, they might be able to leverage their early experience to reintroduce AR to their brand.
  • In a recent interview, Media Manager Michelle Lee spoke about the company’s introduction into the world of AR with Sephora and how COVID has accelerated the future prominence of the tool, possibly serving as a model for brands moving forward.
  • In early October the Circular Fashion Summit had its first virtual reality conference with VR headsets so that guests 3D avatars could meet and speak with international designers, innovators and cross-industry changemakers.

Levis and Lunch?

While the growth of online retail is prominent, it is not considered mutually exclusive from the success of retail and flagship locations. However the landscape has changed. How so? By a shift in creativity to make shopping more accessible and a part of an “experience”. Customers are no longer as driven to leave the house solely to buy a new pair of heels. Retail stores are having to get more creative to generate foot traffic and revenue with desire for more than just a click and “add to cart”. 

Creativity is being pushed through brand partnerships, pop up shops and out-of-the ordinary partnerships (from community farmer’s markets to neighborhood venues).

  • The shoe retailer DSW is opening shop-in-shop style stores inside six Hy-Vee grocery stores in Minneapolis
  • Cosabella’s flagship NYC location saw a boost in sales with the introduction of later hours to accommodate nearby outdoor diners who wanted to shop after a meal and drinks.
  • Levi’s is opening up “NextGen” concept retail stores where a digitally focused design priorities fit and personalization to deepen the connection with consumers and broaden the experience.
  • Belgian luxury designer DriesVanNoten is investing more into physical retail with plans for stores with Art exhibitions, performances, music, film screenings and workshops in addition to the fashion and accessories collections.

Collaborating to Create a Sustainable World

Over the past year, companies including Chanel, Burberry, and Ralph Lauren have collaborated to create a series of 7 goals to mitigate fashion’s impact on climate, biodiversity, and oceans, including initiatives to reduce emissions, plastic packaging, and the impact of raw materials within the fashion industry.

This marks an industry milestone, as  an unusually diverse group of industry players are collaborating on  a high-profile public stage.

  • Stella Mccartney’s Spring Summer 20201 utilizes 65% sustainable materials
  • H&M  has created the Loop and introduced the concept to Stockholm locations. The Loop is a recycling machine that breaks down old clothes into material to be created into new garments right before your eyes.
  • The RealReal’s promise of planting a tree for every Gucci item purchased
  • 58 million coffee cups have been recycled into new Burberry packaging since February 2019

What’s Old is New

Is the rise of second hand a result of growing initiatives in sustainability? 

Second hand is no longer just second hand- even luxury fashion houses now agree. The online secondhand market continues to grow and is expected to be worth $51 billion by 2023

  • On October 5, Gucci and luxury resale platform The RealReal announced a partnership that will see the luxury brand’s goods become available second-hand on the platform.
  • Two of the most well known online secondary market/resale platforms have announced plans to go public. Though no dates have been set, the announcement only adds to the speculation of a growing and prominent future segment.
    • The number of shares and the price range for the POSHMARK IPO haven’t been determined
    • In August, ThredUp Inc. announced their decision to pursue an IPO in early next year (which could raise $200 to $300 million)

Our Crystal Ball

  • Leading stock market indices are up more than 26% since March indicating a general optimistic future expectation of market performance
  • Louis Vuitton promised the beginning of a journey to “discover and find expression in a landscape that is tenuous and vast, but also neutral”- a shift to neutrality and what fashion means between all genders with their latest collection 
  • With the election almost 2 weeks away, the future lies within the hands of the largest generation on earth, Gen Z. With Saks on 5th registering voters at their flagship locations, Aerie donating all profits from voting apparel to registration initiatives, and Under Armour paying employees to vote, retail has deemed it essential and so have we.

Stocks we’ve been following

KERING (Ticker: PPRUY)

Currently Trading at $69.80

KERING is a global luxury group managing renowned fashion houses in in Fashion, Leather Goods, Jewelry and Watches: Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen, Brioni, Boucheron.

  • Trades on European stock exchange (Euronext).
  • Decreased their stake in Puma from 15.7% to 9.8% to focus on their luxury houses; contrastingly, throughout COVID Puma has performed well due to the focus on exercise. 
  • As of July 28th, reported revenue was down 43.5% but are encouraged by fast recovery lead by the Asia-Pacific region.
  • Recently announced the opening of Tokyo based Headquarters which signals prioritization of the asian market segment.

LVMH (Ticker: LVMUY)

Currently Trading at $96

The world’s largest luxury conglomerate owning brands from Louis Vuitton to Dom Pérignon, Marc Jacobs, Fendi, Christian Dior and Benefit Cosmetics.

  • In 2019, LVMH saw record growth with revenue reaching $59 billion but 2020 brought more difficulty as revenue dropped almost 30% in the first 2 quarters.
  • LVMH’s comeback this summer has been driven by Chinese consumers who fueled growth pre-pandemic and have contributed to LV and Dior’s 12% 3rd quarter boost in sales (compared to 2019).
  • Stock price has rebounded about 54% from a mid March low.
  • Last year LVMH agreed to purchase Tiffany & Co. for $16.2 billion which would have made it their most expensive acquisition ever. The acquisition has been drawn out over legal disputes and lawsuits but progress is being made with EU antitrust approval for its acquisition of the US jeweler. 

AMAZON (Ticker: AMZN)

Currently Trading at $3,442.93

What would usually celebrate the summer solstice that now marks the beginning of holiday shopping? Amazon Prime Day.

  • This past Tuesday was the beginning of the site-wide 48 hour promotion utilized to boost sales.
  • Estimates predict the promotion brought in over $9.91 billion in worldwide sales (making it the biggest Prime Day ever).
  • In 2019, sales grew 71% to reach $7.16 billion globally over the 48-hour period.
  • Outside of sales, Amazon is a target of an antitrust case by the U.S. House of Representatives against some of the biggest names in town (from Google to Apple).

A final thought to leave you with...

Chanel remains dead set on maintaining the traditional values and practices that have allowed it to be a leader in fashion for decades.

Will this weariness to adapt to a new technological world hinder their identity or further why Chanel remains “different”?

 

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