The most important luxury groups are all harvesting steady or stellar revenues growth and worldwide appreciation.
They seem to be immune to the uncertain economics and they are hitting the gas like Tom Cruise on the infamous Porsche 928 in “Risky Business”.
They are cashing in-- but all that glitters is not gold and no luxury entity is free from risk.
KERING or Don’t Put All Your Eggs in One Basket
Kering's stellar results in the past two years were driven by the unexpected, aggressive growth of the flagship brand of the group: Gucci.
The duo Bizzarri-Michele set up a brand that delivered high visibility, as well as great revenues (we still don't know at what cost in terms of Group Investment and Brand Equity).
As we can imagine, short-term results have been celebrated by the press and at the stock exchange. The latter is the same that recently started to cool down the excitement.
Following Reuters, Berenberg equity analysts wrote “Yet, despite its impressive H1 (2018) performance, with operating profit and free cash flow increasing by around 53 percent and around 65 percent year-on-year, respectively, the small organic miss at Gucci (40 percent versus consensus of 42 percent) has attracted all the attention.”
Clearly some clouds are gathering on Kering's sky and they are very likely due to many questions:
- Will Alessandro Michele's style at Gucci continue to be appealing to the new, young, generations of Chinese customers? Will he be able to evolve the brand instead of keeping it in his visionary loop?
- Has Gucci reached a saturation point?
- Is it efficient to focus the revenue growth on China mostly?
- Does Balenciaga have the potential to accelerate its growth or has it already reached its peak under Demna Gvasalia creative direction?
- Which is the medium-term brand impact of pushing the revenues so fast and furious?
- Is Gucci expected to register an abrupt slowdown like Bottega Veneta has recently experienced?
- Has the growth of Gucci absorbed all the energies of the group?
Looks from Louis Vuitton's Spring 2019 menswear show. Image: Imaxtree
LVMH or Learn from Yesterday, Live for Today, Hope for Tomorrow
The more prudent and long-term oriented group founded by Bernard Arnault has placed a very interesting bet on its flagship brand, Louis Vuitton.
The French maison recently appointed Virgil Abloh for the Men’s Collections and Francesca Amfitheatrof for Jewelry and Watches. The business results of their work will be fully appreciated only in 2019 and for the moment the Brand is performing well and following the expectations.
Therefore the most interesting developments are expected at other Brands level.
Hedi Slimane will show his first collection at Céline in September. Will he be able to evolve his own taste taking the brand to new levels or will he “just” adapt the brand to his own skinny, black and white, off-off LA style?
Claire Weight-Keller. Will the British designer beloved by stars and royals be able to inject in Givenchy a powerful revenues growth after the strong awareness push? Will she develop blockbuster accessories?
Loro Piana: will the sleeping beauty in terms of style be able to catch up with the pace of growth of competitors such as Brunello Cucinelli?
On the other side Rimowa is a very interesting example of refreshing a Brand and make it very cool in a short time without exploiting its DNA.
RICHEMONT or the one-eyed, giant Cyclops with a Clear Vision Limit
The Swiss luxury giant is facing the biggest challenge of them all: The turnover of most of the Groups Brands CEO as well as a refresh of the group mindset.
Brands such as Panerai need to find new energy and a new spirit. They need to evolve from the established niche brand attitude to a more open and vivified enthusiasm.
Montblanc can further develop its leather and accessories category catching a more international and less conservative audience.
And Dunhill…pleasure and pain of the Group. Still a great unexploited potential.
Hopefully Yoox-NAP integration will introduce new stamina in the prestigious group that was so bold to introduce in the past the Salon International d’Haute Horlogerie, the only alternative to Baselworld and now probably the most interesting luxury gathering in the world.
The group that integrated art in the luxury industry thanks to the Fondation Cartier.
Time to go back to the glitzy, bold and cultivated roots.
At the end the luxury industry is facing a lot of undercover challenges despite its business growth.
There is no magic formula to successfully drive these groups but an ingredient should not be missed at any cost: Daily maintenance.
Cover image: Pexels