(upbeat music) - Hello and welcome back to the Glossy Weekend Review podcast. I'm your host, senior fashion reporter, Danny Parisi. And I'm here with our international reporter, Zofia Zwiglinska. How are you Zofia? Thank you for joining. - Yeah, great. Thank you so much for bringing me on again. - Yeah, it's always good to have you. I wanna try something a little different this week. There were a bunch of earnings reports from a bunch of different fashion companies, a lot of them in the luxury space in the last week. And I wanted to just go through and talk about some of them, Prada, Armani, Adidas, and Hugo Boss. In particular, dig into what kind of each brand or each company saw in their results. And then we'll see if any common threads emerge and maybe try to come to some sort of conclusion about what's going on. But I think we should start probably with Prada, which I think is the biggest kind of success story of the week. They had probably the best results of any recent brand earnings that I saw, primarily thanks to Miu Miu, which has just been very much blowing up. But their revenue for Prada as a whole was up 17% in the first half of the year. It's around $2.8 billion just for the first half. And that is very different compared to a lot of other luxury brands. We've talked about this on the podcast and we've written about it. LVMH and Caring both saw lower revenue over the last quarter down, I think 1% for LVMH and 11% for Caring. There's been this broader luxury market slowdown that we've been talking about for quite a while. And Prada seems like they're just really beating that. And that's especially, as I said, due to Miu Miu, which saw their retail sales up 93% in the first half of the year. And in the first quarter, it was up 89%. So it's actually speeding up, I think, if I'm doing my math right. They're just an extremely hot brand right now. What's your take on kind of like why Prada is doing so well when the rest of luxury feels like it's not doing well at all? - Yeah, I feel like Prada's got this, I don't know, like this longevity piece that a lot of other brands don't have in the luxury space. I think that it's got such a strong identity that regardless of the seasons, it always ends up appealing to its core customer. I think that it's always kept this like cool cache that maybe some other brands dip in and out of depending on what the trend cycle is going through. Obviously, I'm a big fan. So I don't know, maybe I'm being too complimentary, but it seems like it's a brand that just seems to do well consistently. And a lot of that is just down to the way that it's marketed, but also like the type of products it sells. I always feel like Prada's kind of the practical fashion kind of brand. And it always has a lot of very interesting propositions in like the leather goods space as well, which makes it again like just something that people tend to go towards. - Yeah, I was gonna say their handbags have been a big success. And then the other thing is there was a really great New York Times article about the men who are into Mew Mew. They mentioned like Asap Rocky, Odell Beckham Jr. So that was a great article and speaks to kind of Mew Mew's broad, it's interesting. I feel like they're one of those brands that they have a broad appeal despite their like very specific kind of aesthetic. And I think there's a fallacy that people sort of fall into, not just in fashion, but across all sorts of sectors where it's like we want to appeal to as many people as possible. So we'll be as broad as possible. But I think that sometimes backfires like Mew Mew has this very specific luxury Italian women's kind of vibe, but that doesn't mean it's only, you know, meant for rich Italian women. You know, it's like it can be, I think the specificity of its aesthetic is attractive to a lot of people. The other thing interesting from their earnings was that Japan was a big growth area for them. I think their sales in Japan were up like 55% in the first half of the year, which is really interesting, especially compared to some of the other brands we're going to talk about, not doing so hot in Asia. And also that the Japanese yen is currently not in a great position. And so there's been a number of articles about people traveling from China and other parts of the world, traveling to Japan specifically to do luxury shopping there because of the currency situation. So I think Mew Mew definitely benefited from that, I'm guessing, you know that they're, well, maybe not. Maybe that was a later development. I'm not exactly sure if that affected it, but it is an interesting note about kind of the current luxury landscape in Japan. - Yeah, it really is. And actually, because I went through the earnings a little bit yesterday, and they had quite a high percentage of local customers as well, buying. So I think, I can't remember exactly what the split was, but I think it was about 30, 50% split. So 30 going on tourists and 50% locals, I'm not sure what the other bits were, but... - Is this in Japan or for all their sources? - In Japan, yeah, in Japan. So like, they still have a really strong hold on that domestic market as well. And it seems like, even with Mew Mew, like they're doing very well in that market, I had a little look at the Mew Mew side just to kind of see what products they're offering. I haven't actually looked at their products in a long time. And it is very, very broad. Like they have everything from key chains and like little cute little accessories things to like full on outfits and like big collections that go for like thousands and thousands of pounds. So I think they're probably doing quite well on that entry level like market price. And it's something that came up in the earnings as well, one of the analysts asked, you know, with the competitors in the luxury space, like a lot of them are going towards like ultra high luxury and they're not really looking at those kind of entry-level kind of prices. Whereas I think Prada and Mew Mew still have those and might be contributing to what they're doing so well. - Yeah, that's actually a great point. I feel like a lot of luxury companies have been moving up the price bracket. They've been increasing their prices, focusing more and more on the most affluent customers. So interesting to see Prada, which still has a healthy kind of, you know, more accessible price point. You know, what's the word I'm looking for? They have a strong accessible price, kind of like section of their brand is doing really well. I think that's definitely something notable. On the flip side, we should talk about Hugo Boss, which saw basically like the complete opposite. They had a 42% drop in profit over the last quarter. I'm no financial expert, but I think losing half your profit in one quarter is not good. That's, but that's not sound good. They had ambitious goals to be a $5 billion company by 2025. And I think that seems less likely by the minute. Did you see anything notable from those earnings? - Not really. I mean, I have some general thoughts about the brands, like obviously like the Hugo Boss, the Boss, that bit split away. Was it the Boss bit? No, the Hugo bit split away from the main brand to form like a sub brand. And I think that that dichotomy in terms of the branding is confusing customers. Like I didn't think it was a particularly successful kind of move away. If you're going to do it, don't relaunch like whole store concepts and everything. Just make it, you know, like a diffusion line or something. And I think since they've done that, they've tried to make Hugo Boss the kind of really high fashion, like super tainted, like very kind of specific luxury brand. I'm not sure if Hugo Boss really has the like cultural capital right now to do that compared to the way it did, you know, a 40 years ago, perhaps. - Yeah, that's a great point. I forgot about the split. And that always I think is hard to kind of get it through people's heads. I still forget that the SACs, Fifth Avenue, like online and offline stuff is separate businesses. I forget that all the time. The other interesting thing is that they have been very ambitious with their spending and their kind of expansions. I saw that they opened over a hundred stores or at least a hundred points of sale. So that might, I think that includes wholesale in the last year and they've increased their ad spend by like 20% over the last year. And something about that that's interesting is I feel like I have heard from a lot of brands recently that just dumping more money into marketing and just spending more is not always the smartest move. I've talked to a couple of brands who have, you know, basically they're feeling that customer acquisition costs are higher than ever and they keep going up. A lot of social ads and like programmatic ad spend feels like kind of a black hole that you're just like pouring money into and no idea if it's going to work or not really seeing any ROI. And so, you know, I've talked to, I just talked to David Ting from Zenny who I'm going to write about this week about how he's reduced their ad spend and increased their profit and need to do a couple of different things. But he kind of echoed that idea that like just pouring more money into ad spend is not always kind of the best move. And I've heard that from a couple of different brands now. So I don't know where exactly Hugo Boss is putting all that ad money, but clearly I don't think it's really working out for them. But yeah, I don't know, I think it'd be easy. It's easy to just, you know, increase your spending and hope that that will kind of like solve all the problems. But it doesn't seem like it works like that. Yeah, definitely. I think there's actually a post that went viral on LinkedIn of all platforms from the Nike, I believe it was one of their executives, talking about how the transition to being like a data company basically did not do them any favors. Wondering if the conversation with ad spend is kind of similar right now where it's basically pouring money into something, hoping that data is the only thing that's going to make things work where a lot of this is tied to cultural capital, like social stuff, like all of those kind of intangible things that are much harder to quantify, perhaps. I'm wondering if that's the same thing happening here with Hugo Boss is that they don't have as much traction on that cultural intangible side of things. And they're trying to compensate by basically putting a lot of money into ads instead. Yeah. Yeah, and to contrast with Mumeo, who I feel like, I mean, I'm not sure, I feel like they don't spend that much on just playing old Instagram ads or whatever, but they've got a huge cultural capital, you know, and that's really helpful for them. Speaking of cultural capital, we should talk about Adidas because they had a really, they had a hard couple of quarters and some very bad PR that happened for them, namely the Yeezy situation, which was like completely disastrous. And I think that made the last couple quarters pretty difficult for them, they had all that Yeezy inventory that they needed to divest from, but they also had earnings this week and they were pretty good. They, their revenue was up 10% to, I think, $6.3 billion in the last quarter. And a big chunk of that actually was wholesale revenue, which was up 17% compared to DTC being up only 4%. So I have thoughts on the wholesale DTC split, but I'll pause there. What's your take on Adidas's kind of performance here? Yeah, I mean, I saw a post saying that a lot of it is down to luck. I think they sold a lot of football jerseys with the Euros. So they had a very good quarter with that. And then some of the fallout, as you said, with Yeezy's is slowed down. They've had a little bit of growth in China as well in some of the Asian markets, which I think is contributing positively to them, you know, a lot of companies are struggling in that market. So Adidas, I guess, is gaining market share, especially in China. Yeah, yeah, definitely. And I'll share my wholesale kind of take here. It's really interesting to me. I think the big sneaker brands have sort of waffled a bit on how valuable they're finding wholesale and direct to consumer. I mean, Nike very infamously, kind of like a couple of years ago, like announced they were pulling back on a bunch of their wholesale partnerships. They canceled a bunch of relationships with different retailers, and they went all in on like direct to consumer. And then in the last year, so I think they've sort of backpedaled a little bit. They've reestablished some of those partnerships. And I think their DTC sort of shift didn't really do what they wanted it to do. So it's interesting to see Adidas see a lot of success with their wholesale business compared to DTC. I think the big box retailers like Footlocker or like Dick's Sporting Goods in the US, I'm not sure if there's an equivalent in the UK, I'm sure there's. But I think those kinds of stores are really valuable for sneaker brands. And especially for like the kind of everyday consumer who just like want some Nike's and just will go to the regular store, like they're not necessarily seeking out the Nike or the Adidas like direct store because that's where they, you know, that's where those brands put out like their super exclusive like collaborations and their limited releases, which is great for the kind of more specialty consumer is really plugged in. But for like the average regular consumer who is not trying to get like the latest Travis Scott, whatever Nike sneaker, they're just want to go to the store and get like regular sneakers, which is, you know, a big chunk of their business. So anyway, that's my take on that situation. I don't know if you had any thoughts on that. Yeah, no, I think that, you know, it's really hard to do like DTC well, especially in retail when you've already had such an established kind of wholesale presence, for God knows how many years, like I think a lot of that has to that has to kind of come down to like a real differentiation. And obviously like, yeah, putting out all of those collaborations in store is useful. But like when I go to my local like Adidas, I can't actually see all of the like regular sneakers, but they're so focused on all of the different sport categories that they have. So I'm like, okay, well, I just wanted to try out a pair of shoes. And instead I'm faced with like all of these things that I definitely don't need. I think that localizing those stores is maybe still not happening and you really need to know your local consumer to actually understand what they might want instead of, you know, just putting out those exclusive collaborations. And that's where wholesale is better because of all of the market research that they do in that specific area. They know what sales they know what's doing well. And also they usually offer better discounts, which right now is something that, you know, a lot of customers are looking for. Yeah. Yeah, definitely. And like you definitely have to relinquish a bit of control and obviously a bit of, you know, of margin when you, when you sell wholesale, but you also get all those benefits like you're saying. One other thing about Adidas that we should mention in addition to the Yeezy situation, maybe this one maybe doesn't have as huge of an economic impact, but I feel like this had to be like sort of a blow emotionally, which is that Nike became the official sponsor for the German national soccer team, which Adidas has sponsored for like decades and is their hometown team. I'm still not over that. That's such a, that's such a cool for Nike, I think, to like get that sponsorship away from Adidas, you know, it's like they're a German company. They've sponsored this team for, for so many years. I don't know. I don't know if that had a major impact financially, but I feel like it had to be an emotional impact. Oh, definitely, I think those kind of cultural stories are also really tied into those local markets as well. Like, Germany's still very proud of all of its different teams, but also it has called the National Soft League. So those like endemic almost partnerships between Adidas and them, it was just natural. So it's really weird to see Nike kind of emerge in that market when they're not perhaps doing as well. Yeah, it's very strange. Cool. Let's talk about our last brand. I don't have as much to say about this one, but there are some interesting things that came out of it, which is Armani. They had sort of a middle of the road kind of performance, 4% sales increase, which is not as good as Mew Mew or Adidas, but not as bad as Hugo Boss. They did see some declining sales in Asia, again, which I think is interesting, compared to how successful Prada is in Japan. But I do think one of the interesting things about it is that Georgia Armani said during their earnings report that one of the things they did is they lost out on some profit margins because they didn't increase their prices when inflation dictated that they should have, basically, which I saw and I was like, wow, that's very selfless of you. But I do think it puts brands in a little bit in a weird spot. When inflation makes their costs higher and so they have the option to either increase their prices to maintain their profit margin, which comes with all the challenges of raising your prices and your consumer, maybe not being happy about that, depends on what category you're in. If you're Chanel, you could raise it and probably no one would care. Also, luxury has better profit margins in general because the clothes are more expensive, so you can mess with the margin a little bit more. If you're selling something super cheap, your margin is probably already very thin. Or you could do what Armani did, not increase your prices and just take the hit to the margins. I'm sure a lot of brands are making similar calculations right now of like, do we raise our prices? Do we not? If we do, how much do we raise them and how much profit margin are we willing to lose to keep our prices where they are? That was an interesting thing that came out of the Armani report, but I don't know if you saw anything else, Zofia? No, I think that that was the most interesting thing. To be honest, it's very admirable, I guess, from the founder to make sure that those prices stay in line, Armani always seems like that kind of brand, which has a lot of kind of very loyal customers, particularly both on the men's side, but also probably an older woman who has known the brand for a really long time, even through all of the updates that have been happening over the last couple of years, so maybe that maintenance of prices is for them, just to make sure that they don't leave other brands. I think that that's when you end up ostracising your existing customers and that can have a real impact for brands, which are kind of built on that longevity and keeping those relationships going. Yeah, I'm for sure. Well, let's do a little wrap up here then, so I wanted to see if there was any sort of common threads that emerge from talking about some of the brands we've seen over the last week report there earnings. One thing that's jumped out to me is that I think there's obviously still a lot of macro pressure on luxury as a whole and kind of like fashion. This was last week, but even LVMH and Caring seeing hits to their revenue, I think, especially LVMH is a really obvious sign that it's happening to everybody. I think for a while when luxury was slowing down at the end of 2023, LVMH was still kind of like plowing ahead and still growing and everything, and now even they are kind of feeling it. There's definitely like big pressures on luxury brands. I think the price increases and kind of just like pressure on consumers while it's because of everything else being really expensive is definitely starting to affect them all pretty significantly. What about you, any other like conclusions you drew from looking at what we just talked about? Yeah, I think especially on the luxury side, you know, I think it was a year ago when brands started moving away from getting those entry-level kind of shoppers or even kind of middle-pass shoppers. They focused on the old luxury sector and the sort of raising prices and kind of catering exclusive events just to their top clients. I'm wondering if that reliance on that middle market is actually a lot bigger than any of them thought, because obviously it's not just about the sales, but it's also about the impact, you know, people are sharing things that they're looking to purchase even if maybe they don't purchase it straight away. It might be something that kind of plays into that conversation of how that brand is doing. So I think that sales-wise, like, obviously it's important to look at that, but I'm wondering how much of an impact that kind of middle-class and entry-level consumers had, and perhaps it's actually been a lot bigger than what anyone thought. Yeah, I've thought that for a couple of months now that, like I said, I think a lot of luxury brands basically just turned their focus entirely on the highest bracket of their customers, like just their wealthiest, most affluent customers, which is sort of understandable if there's economic pressure, those are the people who are not affected that much, that makes sense from a kind of mercenary capitalist sense. I think there's more value in those entry-level customers than you might expect, not just in revenue, but also, like you said in things like cultural capital, I think luxury and exclusivity needs to have a balance of, you know, exclusivity is good for them, but something that's so exclusive that no one even sees it, like the average person doesn't even know the name, is like, that's not helpful, you know, like you do need that broad awareness, even if not everyone's buying it, because someone who cannot afford, you know, LVMH stuff like Louis Vuitton today might be able to next year or something, and if they didn't, you know, you kind of want people to feel like it's at least within reach, so that it, you know, maybe I'm rambling, but I think that's, you're right, that customer is important. Yeah, definitely. Actually, there's one bit from the meme earrings that I just remembered that was really kind of pertinent to that. They had this, like, cultural activation in a couple of months back where they gave out books, I think, as part of something, some campaign around feminist literature, and I think that that's something that they've been playing into a lot more, and obviously, it's a product that was given out for pre, and so again, like, it allowed customers to still participate in that brand conversation without having to purchase anything, and obviously, it was shared widely across most social media platforms, so again, it kept meme you in that kind of social sphere, it kept the conversation going, whereas I feel like a lot of the other luxury brands, they just don't do anything to kind of cater to those customers, even if it's free, like, you may have some exhibitions that are going one, but obviously, the Paris Olympics are kind of taking over that, so there's not really that many opportunities to almost have these, like, touch points with the brand without having to purchase something. Yeah, you're absolutely right, and speaking of the Olympics, I just finally got around to watching the opening ceremony, and it's crazy that there was a full-on, like, Louis Vuitton ad in the middle of the ceremony, like, did you, you know what I'm talking about? There was a whole section where the guy, like, runs into a Louis Vuitton workshop where they're like making the trunks. Oh, yeah. I understand they're, like, deeply entwined with, like, France and Paris, especially, but it was just so funny. It was, like, literally, it's just a Louis Vuitton ad. Yeah. Okay, I think that's all the time we have this week, but this was fun, and thank you so much, Zofia, for being here. Yeah, of course, great to run through all of the earnings. And don't forget to give us a rating and a review on Apple Podcasts or Spotify or wherever you listen to this, because that helps us out so much, and don't forget to subscribe to the glossy podcast because you'll hear interviews with industry insiders every Wednesday, and we can review episodes with me every Friday, except for the next two Fridays, because I will not be here because I'm getting married. So the next time you hear me, I will be a husband, and that will be, like, end of August, I think. Oh, congratulations. Thank you. In the meantime, Zofia and Joe will be hosting the week interview, so tune in in the next two weeks to hear them. Thanks again, Zofia, for being here, and thank you all for listening. [Music] You
