What a ‘K-Shaped Recovery’ Means for Luxury Fashion

THE CHEAT SHEET

The Rich Get Richer

A Gucci employee measures the temperature of a customer at a store entrance | Source: Getty Images

Kering and Moncler report quarterly results on Oct. 22
LVMH reported an unexpected increase in fashion and leather goods sales in the third quarter
For some luxury brands, a strong rebound in China is making up for stalled recoveries in the West

In the first presidential debate, the American republic received a quick economics lesson from Joe Biden, who described the US recovery as “K-shaped,” a pattern where the divide between rich and poor widens to reflect the shape of the letter. He meant it as a pejorative, but for luxury brands, it’s a reason to celebrate. While millions of people the world over are newly unemployed and struggling to cover basic expenses, the wealthy have seen little change to their income, and have plenty of money to burn after avoiding restaurants and travel for months.

All that said, it was likely a surge in luxury spending in China, rather than a smaller uptick in US sales, that paved the way for LVMH's surprise increase in fashion and leather goods revenue. There too, the recovery has looked different depending on one's pre-Covid economic status. As life returned to normal in China over the summer, well-off consumers flocked first to big, well-known brands like Louis Vuitton and Dior.

The Bottom Line: LVMH has the scale and global clout to consolidate their market position during the crisis. Some of the brands reporting next week, including Kering's Gucci is among a handful of others that can likely do the same. Less clear is whether smaller luxury brands will be as successful at shielding themselves from Covid-19's economic fallout.

Brexit Is Back

A Brexit protest | Photo: Justin Tallis/Getty Images

An Oct. 15 deadline passed with no trade agreement between the UK and EU
The EU has warned a no-deal "hard Brexit" is coming on Jan. 1
UK brands and suppliers could face labour and materials shortages, among other consequences

One of last year’s biggest headaches is back. Between the pandemic, the economic downturn and the US presidential election, the fashion industry can be forgiven for forgetting about Brexit. But with the UK set to crash out of the EU on Jan. 1, it’s time to start gaming out scenarios and checking supply chains for potential post-Brexit snarls again.

As a reminder, Brexit’s impact on fashion is hard to predict, but appears likely to include disruptions to the labour market and the movement of raw materials as well as finished apparel and accessories into and out of the UK. How severe these consequences prove to be depends both on the outcome of negotiations in Brussels and how individual brands have prepared themselves.

The Bottom Line: All that said, it's premature to take the latest round of threats and recriminations at face value. From the outset, progress toward an orderly exit from the EU has come only under intense deadline pressure. So while the Oct. 15 deadline has come and gone, the true contours of Brexit will only begin to take shape in the coming weeks.

Raf Simons' Other Big Debut

Raf Simons Autumn/ Winter 2020 | Source: INDIGITAL.TV

Raf Simons will debut his first women's collection under his own brand on Oct. 23
Simons has designed womenswear for Jil Sander, Dior, Calvin Klein and Prada, but never under his own label
He joins Michael Kors, Tory Burch and others in showing in October instead of during fashion week

Raf Simons has always had cross-gender appeal, which is why the most surprising aspect of his debut women’s collection is that it took nearly three decades to happen. After introducing the skinny silhouette to menswear, Simons’ womenswear collections for Jil Sander and especially Dior are part of fashion lore (his turbulent two years at Calvin Klein, less so). Simons has stuck to menswear for his own brand, though.

His first co-designed collection at Prada last month was critically well-regarded, and was accompanied by an unusually robust marketing blitz designed to raise Simons’ profile with the average luxury fashion consumer. The publicity boost should help the designer, who has a loyal tribe of followers but is less well-known to the general public.

The Bottom Line: Simons joins a growing number of major designers and brands who are showing at a time that fits their schedule, rather than the industry calendar. As one of the most famous designers working today he won't have trouble generating buzz around whatever he sends down the runway.

SUNDAY READING

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The Week Ahead wants to hear from you! Send tips, suggestions, complaints and compliments to brian.baskin@businessoffashion.com.

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