(upbeat music) - Hello, and welcome back to the Glossy Weekend Review Podcast. I'm your host, senior fashion reporter, Danny Prudisi, and I'm here with our international reporter, Zofia Zwiglinska. Hello Zofia, how are you? - Very good, thank you. It just came out of about of COVID, so I'm feeling great on the other side. - Oh, I'm so sorry to hear that. Well, I'm glad you're feeling better. I'm just coming out of about of it being my birthday, and I was off for almost a week. So I'm a little bit like, trying to remember how to do my job, but we have a fun episode this week. We're gonna be talking about some layoffs happening at Burberry, which I believe you're writing about this week or next, I think. We'll also talk about-- - Let's meet, yeah. - We'll also talk about Sax Fifth Avenue, buying Neiman Marcus, which happened right before I went, like, was off work for a week, so that's annoying. And then finally, we're gonna talk about She-in and their sort of surprising collaboration with Monce, who we actually had Lara Kim from Monce on the glossy podcast not too long ago. So we will talk about that as well. But let's start with Burberry. So Burberry is reportedly laying off hundreds of employees soon and specifically in the UK. They had previously laid off, I think, around 500 people in 2020, and then it could be up to as many as 400 people laid off at this round. So that's still kind of up in the air, exactly how many people and what their sort of redundancy packages will look like. Burberry is in negotiation with union reps and other stuff, so it's still kind of happening as of the time of this recording Thursday morning. But it's a little bit surprising to me. I feel like there's been a ton of layoffs in the last year in tech, obviously in media, which is not great for you and me, Zofia. But not as much in luxury fashion that I've seen. So you're working on something about this right now. Do you wanna just tell me a little bit about what you've sort of observed and your thoughts on this? - Yeah, of course. I mean, obviously Burberry has been in trouble for, I would say, a good number of years now. It hasn't had the reception, I think, that it was hoping to, after the pandemic, I think it was relying very heavily on Chinese customers, which also affected it. But I think right now with these layoffs, it's just a sign that the expenses were mounting up too high. And considering the state of the business, it just needs to adjust staffing. I'm not sure exactly which sectors are going to be hit. And I would assume that it would be probably lower down positions, as well as any kind of newer departments that maybe came up post-pandemic that they're now kind of not operating, as well as they should be. But I think that it's interesting to see this happening in luxury, because typically, I would say, luxury is quite well insulated, like it doesn't end up being affected by layoffs in a big way. It's something that happens with brands in mass fashion, anything from a Nike that reported layoffs last year to Benetton, for example, which isn't exactly luxury, but it's also kind of a more premium product, but still more in that mass space. So I think that there's a lot of brands that typically do layoffs in those mass sectors, but luxury is typically not affected. And the fact that Burberry is quite literally, I would say the only major luxury house in the UK is probably a factor here. Like the UK has been suffering a lot with different financial issues. Post-pandemic, the kind of financial situation here and the market situation is very bad. And the Brexit didn't help for a lot of brands in the fashion space. And I'm sure that Burberry's also been impacted by that. There's been issues with taxes and tourists not coming back. Like that's something that is affecting kind of all brands, but luxury in particular, because they have such a big tourist spend. So again, like all of this kind of is making sense, but still surprising to see a luxury kind of big player taking a hit like this. - Yeah, I definitely think profits are an interesting part of it. Like you said, a company like Nike or who's selling at a lower price point and also means their margins are thinner, whereas luxury brands, one of the kind of defining traits of luxury is that the profit margins are very high. They, Burberry, you know, jacket, I'm sure costs a lot to make, but they also sell it for a lot of money. And I don't think it's proportional to like a more affordable code or a bag or something, because a lot of what you're paying for is not necessarily the material or the labor, but the brand name. But that being said, luxury does, you know, I think a lot of luxury companies spend a lot of money as well, maybe less on product and product development, but a lot on marketing and a lot on branding. They're whining and dining, you know, wealthy clients and they're spending a lot of money to kind of, you know, they're being involved in the Olympics and they're dressing celebrities. They're doing a lot. So they are spending a lot of money there. And I specifically saw that Burberry's profits have taken a pretty heavy hit in the last year. They went from over 800 million in profit last year to under 500 this year. So that's like almost half of their profits gone in a year. So even though I think the product might have good profit margins, they're still need to sort of be mindful of how much they're spending and how much they're making. And it seems like that ratio is like not very favorable at the moment. I think that like in terms of the designer as well, situation over there with Daniel Lee, like coming in, like they raised the prices for a lot of the products that were for the new collection. So I'm quite surprised that that's actually not paying out, which either means that, you know, the designer situation there isn't as good as they hope or that all of these spending on like the runway events, which honestly the venues have been getting kind of bigger and grander. So like that's also a factor. And then they've also had like a whole retail redevelopment. I know that at least two of the stores in the UK have had like a redesign and it has been pretty extensive. So I'm wondering if that's also something that is taking quite a lot of that cash out. Yeah, and especially whenever you invest in something, you always have to kind of time it, right? And sometimes you're like, you know, now's a good time to spend big and renovate these stores. And then right after your profit slump and actually it was the worst time that you could have chosen to spend that money. So that's not always easy to predict. And then you also mentioned that they relied on China for a while and I think you're right about that. I read a great article in Jing Daily that kind of went over some of the missteps they've made in China recently. I feel like I don't know the sort of like Chinese internet culture well enough to sort of understand it, but there was something about a very overpriced water bottle they were selling in China that people did not like and led to this hashtag that was like, I will not give Burberry a penny or something like that. And then there was a Lunar New Year campaign they did there that I think also kind of got a weird reception and people were like people on Weibo and other Chinese social networks were kind of clowning on it quite a bit. So I don't know enough to truly understand why, but it sounds like they've kind of made some, some gaffs and like culturally speaking in China recently. And that's not helpful since like you said, that's a big market for them and one they've put a lot of emphasis on. So if they're losing there, that also contributes to that overall kind of drop in revenue that we're talking about. - Gosh, I had no idea about that. Like the Lunar campaign for New Year, I was like, wow. And I think that it's also like in previous years, it was like almost 50% of their whole sales came from China. Which I think is just like a gross over reliance on one market, but I don't know. - Yeah, I think it's a constant thing where it's like, do you want to lean into where you already, you know, are having a lot of strength or do you want to diversify and not be over reliant? And it definitely feels like they're a little over reliant at the moment. Let's move on to our second topic though. I want to talk about the Saks and Neiman news, which they announced this right as I was finishing up my day and about to be off of work for like five days. So I'm a little annoyed that I didn't get a chance to sort of, we were, yeah, we were all off in the US. I think you were still floating around because you don't get off for Fourth of July, sorry. But it happened right as I was taking off. So I didn't get a chance to write about it. And this is my first chance to sort of talk about it, but it's crazy news. I mean, they're like Saks and Neiman are maybe the last two kind of remaining big, no, not the only two, but two of the few remaining big American department stores. And now they're kind of merging. Saks parent company HBC is the one that is buying Neiman. So it's not Saks directly buying Neiman. And they're forming Saks Global, which is gonna be like this big department store group that includes Neiman Marcus, Saks with Avenue and Burgdorff Goodman, which Neiman Marcus owns. So that's like three of the like five or six big American department stores all in one company, which is a little bit crazy. It was like a $2.5 billion deal, so quite big. And I think now maybe their biggest rival would be Nordstrom, I guess. 'Cause Barney's isn't really around anymore. And a lot of the other ones on Rebendell closed quite a number of years ago. So it feels like that whole sector used to be such a huge part of American fashion and the American fashion retail landscape. And now it's just really constricted a lot. And they kind of have different sort of specialties. Like Nordstrom, I think does a lot with new brands. They pride themselves on introducing new brands to their customers for the first time. And I think they've done a really good job of that. And Neiman, I think, are a little more focused on the more traditional, bigger, older, luxury type brands. So anyway, I have more thoughts, but I'll pause there. What do you think of this acquisition? - Yeah, I mean, I think it's a really interesting one because obviously it's pointing to consolidation of department stores in the US. And there's already kind of been news that the more situation over there is not doing so great. And in general, these kind of multi-brand shopping spaces are not doing particularly well. There's been a couple of newer ones as well that have closed. So I think that it's a big indicator that these big, almost houses or names, I guess, are not really keen to repeat what happened with Barney's over the pandemic and want to try and see if they can, you know, collaborate to get the most out of that market together, which I think is probably a good thing, although I don't know how they're going to be able to do that kind of customer segmentation as well. And what the, I guess, the transition will be from one brand, I guess, to another. I'm not sure if that's going to affect, you know, are they going to be bringing more new brands into sex? Or is there going to be more traditional brands at Neiman's? Like what is going to be the crossover impact from this deal? And is there going to be, you know, more interesting things coming out of you as fashion as a result? - Yeah, one thing that I definitely was thinking about with this is I've talked to a lot of brands recently about the relationship with wholesale retailers and sort of how much leverage brands have in that conversation and what's negotiable. And I think if you're a smaller brand, if you're new, and you want to sell in Nordstrom or something, you really don't have a ton of leverage and they've got kind of all the, they can make sort of whatever demands of you that they want because they're fine without you. But if you're like LVMH or something, you can ask for whatever you want. And like even sex, which is huge, does not, I think, hold the candle to like LVMH. Like LVMH could ask them probably for anything and they would do it. No, maybe that's not true. But definitely they have way more leverage than a smaller brand. And so I wonder if also part of this is that sex and Neman merged will have more leverage, more negotiating power with those huge luxury conglomerates and huge luxury brands than they would have separate. And because a lot of those luxury brands, I think have been slowly sort of moving toward their own channels like more direct consumer and a little bit less selling through places like sex. I wonder if a consolidated sex global part of the impetus to form it is to be able to have a little more strength in those negotiations with, say, Louis Vuitton or Dior, whoever. - Yeah, that's interesting. I was gonna ask you actually if you thought that what the kind of future of department stores is going to be like in the US. 'Cause obviously like if you have this consolidation here and a lot of those kind of multi-brand things are not doing as well, even with this, there's going to be most likely there's gonna be layoffs and kind of restructuring and changes that are happening there. Where do you think that like department stores will be and say like five years when, you know, so much of what is happening is already going through like direct brand channels? - Yeah, okay, so I have actually thought about this. I was, I just read, and this is related, I just read an interview with the executive editor of the New York Times and he was talking about how like so many other newspapers in the US have folded or collapsed or just have like no money. And then conversely, the New York Times has gotten bigger and huger and more kind of just like central. And there were some crazy stat that was like 8% of journalists in the US work for the New York Times or something like that. It's just, it's so big, but so many. I might be getting the number wrong, but it's something like that. Like a not insignificant percentage of American journalists work for the times. They have thousands of reporters, but so many other papers just like, you know, have two reporters and or less and or they have nobody because they're all falling apart. And I kind of think that department stores might sort of go a similar route. And actually the Neiman acquisition, I think, definitely confirms my view that that's where it's going where there's not going to be the landscape to support, you know, a bunch of department stores and all these different cities, but maybe one giant one that has all the money and all the resources of all the smaller ones might be the only way it kind of survives. Because I think operating a department store like that requires a lot of resources, a lot of money and a lot of like a sort of widespread supply chain and logistics and like all this stuff. And the smaller, like a smaller department store I just think is not really able to support that anymore, but one huge one could and maybe like, it's the only one that could. So I wonder if we'll get to a similar situation where in five years, it's like the only thing that exists is sacks, but it's huge. It's like, you know, and 10% of all department store employees work at sacks. And you know, even that actually probably would be way more than that. But that's kind of what I imagine is just more consolidation. I think that's where it will go. The other thing we should talk about in terms of the future is that Amazon is involved in this deal. They supplied some of the cash for HBC to buy. Neiman Marcus and they, it's interesting because it's kind of like two things that Amazon wants and hasn't really been able to do yet is physical, retail and luxury. They have made efforts toward both of those and I feel like have not really cracked it the way they have dominated so many other sort of fields. So they're presence kind of in the middle of this deal is interesting to me because yeah, those are two things they definitely want to be involved in. - Yeah, definitely. I'm actually seeing a little bit of a pickup on the luxury front with Amazon. I've had a whole like slew of different pitches saying more brands are joining on the luxury side of things. I think Aeropostale was the last one that I heard of. And I think the other interesting thing from the deal is that it's not just Amazon, it's also Salesforce who are going to be integrated on that like artificial intelligence side. So I'm wondering if there's going to be a bit more of a move towards a nimbler like situation with department stores, ice hacks. And I think it might be something that would help them a lot 'cause a lot of the times the issue with these is that they're such big giants that they end up moving really, really slowly. Like I always point to selfages and the fact that like they're like whole little exhibition space that they rotate on like a monthly or two monthly basis. Like that's doing so well for them. And I think that they've got a lot more kind of fun stuff going on there that maybe some of the US department stores could learn from. - Yeah, it's been a while since I've looked into it but I've always felt like the UK's department store scene is a lot more robust than the US. Like selfages and herons are always doing really well. And are there smaller ones than those two? Like are there department stores all over or is it kind of just dominated by those two? - Those two are definitely the biggest brands there. There's others, you've got Harvey Nichols. There was some others, one which closed down in Bond Street a couple of months ago now. Also because of the fact that there's kind of growing retail hubs in other cities in the UK, like some of those are growing. I know that I think Harrods has like a mini Harrods in multiple places in the UK. But on the luxury front, it would be those ones than other than that, it's just kind of shopping malls which I think are doing still like pretty well. Like I don't think there's been any kind of major signs that they're dropping off. I think it's just generally the UK high street is not doing too well. - I have so many more thoughts about Saxon, Neiman, but I think we should move on. Maybe we'll, maybe I'll write something about it or maybe we'll just talk about this deal again in the future as it kind of develops. But let's do quickly talk about our last topic. We've talked about Sheehan, a bunch on this podcast. Specifically, we've talked about their efforts to kind of legitimize themselves. The infamous influencer trip, I think, was part of that. But also they're going public, I think, is also part of it and kind of trying to cozy up with different American and European fashion entities to sort of make themselves seem more legit. The one that was announced this week was a kind of surprising collaboration with Monce, which is a New York fashion label founded by Lara Kim and Fernando Garcia who are also the creative directors of Oscar de Laurenta. It's much more upscale than what Sheehan normally does and kind of an interesting choice too 'cause the Monce is a little bit of a designer's designer. I feel like if they had picked Oscar de Laurenta or somebody else that is maybe more obvious, that would have made sense to me. But Monce is kind of a cool, I don't know, interesting pick for them to work with, like a real kind of edgy New York design label. So I think that part of it is cool. The weird thing to me is that it is still like Sheehan prices. So the lowest price thing in the collection is like $1.70, which is insane. I know the prices are crazy. The most expensive thing I think in the collection is only like $60. Meanwhile, Monce's dresses from like straight from the brand are like $1,200. So it's a significantly different price kind of category. I don't know, what's your take on Sheehan's efforts here and then working with Monce? - I mean, main question is how are they getting those prices that low, especially like as a designer? - That's always a question. - How ethically like are you okay with this? And are you not checking the supply chain like at all? Like it seems like a very bizarre thing, but this is actually just one part of, I would say Sheehan's PR campaign right now to try and rebrand itself a little bit prior to the London IPO that is supposedly happening. It's actually got a couple of other developments. Like they've earmarked 50 million euros for potential investments in R&D or pilot Sheehan production facilities in Europe or the UK. So they're focusing on Europe in a really big way in terms of like almost like a helping hand for independent designers, which is something that, you know, it's kind of been alluded to that Sheehan's kind of taking away money from European design. And so this is really interesting that they're actually targeting that. And then also looking at kind of building facilities in Turkey for production rather than in China, which I think is what they're already doing in Mexico for US imports. And they're also going to be inviting UK and European artists and designers into an incubator program. So kind of similar what they're doing with months, but with European designers. So I'm wondering like how is that going to affect everyone's kind of ethical viewpoints on kind of fashion production and how many people end up chasing the money and kind of going with it? Because obviously if that's going to be a serious commitment, great, but Sheehan's efforts in the past have been very much kind of money first. We won't touch changing our production. And they're also launching a circularity fund, which I don't even understand how that's going to be possible within an initial investment of 200 million euros to support startups and businesses that are developing textile recycling technologies. So it's not anything about decreasing production. It's just material innovation, which is great, but that's not really the problem here. - Yeah, I'm totally with you that the $1.70 price is so sketchy to me, like not to sound like a snob or that everything needs to be super expensive, but I know how clothes are made. And I don't know what you could make for $1.70 that is not like bad in some way, either for the world or for the people making it. Like, there's just no way is there's nothing you can make and sell for that cheap, I think, in a sort of ethical way. So that part's really sketchy to me. But it could also be in the spirit. I mean, so we had Lara came on the podcast recently and she was great and struck me as someone who's very open to trying things and kind of like open to just experiment and see what works. I know that as part of this collaboration, they're releasing a collection. And then also Lara came in for an advocacy. Worked with some Xi and designers to sort of train them and like mentor them, I think, in some more kind of high fashion design. So it's not, the partnership is not like bad or anything, but it's just the price is so sketchy to me. So I'm with you. I don't know how you could possibly make that happen. - Yeah, I think it's really weird. And I've spoken to designers who are kind of part of like the Xi and challenge before, I think it was called Xi and X. Where it's kind of getting up and coming designers to design a collection for Xi and then they would get all of that kind of cost cover. They'd get help with designing. Like all of these things are going to be changing fashion in a really big way. And I'm interested to see that now they're kind of working with more established designers. Is that going to end up affecting these partnerships between kind of luxury or kind of fashion week brands? Like what is the perception of Xi and going to be here? Are they going to become like a permanent, you know, sponsor partner in every single kind of collaboration the way like H&M did it, but just on a much bigger scale? - Yeah, I don't know. I'm sure this is not the last time we are going to talk about Xi and on this podcast, but okay, I think that's all the time we have. Zofia, thank you so much for being here. It's always great talking to you. - Thank you so much, it was a pleasure. - For those of you listening, don't forget to give us a rating and a review on Apple Podcast or Spotify, wherever you listen to this, that helps us out so much. And don't forget to subscribe to the Glassy Podcast because you'll hear interviews with industry insiders every Wednesday and we can review episodes with me every Friday. Until then, thank you for listening. (upbeat music) ♪ Oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh ♪ (upbeat music)
