Monday, February 16, 2009

Amen, Anna!

Anna Wintour gets it.

In a recent interview with The Wall Street Journal, the editor of Vogue magazine breaks down what is wrong with the fashion industry:

WSJ: If fashion is a barometer of the prevailing mood, what can we expect to see for fall 2009?

Ms. Wintour: It is so important for designers not to run scared, and not to be too worried about what's safe and what's commercial.

Right now, what's going to work is something their customer doesn't have in her closet and that has a real intrinsic sense of value. …Because to be honest there's been too much product, too much copy-catting, and, probably too much consumerism. I think a sense of clarity, a sense leveling off and a sense of reality is needed.

BINGO! Designers have turned into expensive versions of H&M, focusing solely on short-term trends instead of long-term value. I'm not saying that trends should be ignored, as there are still some who can afford to acquire expensive "It" items. However, that isn't true for the majority who want value, so there needs to be a mix of trends and timeless classics.

People are willing to pay full price for high-end labels, provided the pieces are high quality, exclusive and are fashionably durable, meaning that 10, 20 years later the pieces aren't dated. Hermes and LVMH are indicative of that. While other companies in the fashion retail sector posted losses, LVMH reported a fourth-quarter sales increase of 4%, and Hermes reported 2008 sales rose 8.6%, exceeding analyst forecasts.

Sorry, but you can't design any ol' garment, slap a famous name on it and expect it to sell in today's economy. The sooner designers realize this, the better off they will be.

Friday, February 6, 2009

Wall Street Journal Shuts Down Retail & Luxury Bureau

As the economy continues to hit the fashion industry, the latest victims are well-regarded fashion journalists.

Yesterday, The Wall Street Journal announced that it will close its Retail & Luxury bureau, and reduce its full-time staff from nine people to five. Columnist Christina Binkley and the group's editor, Lisa Bannon will stay on. Sources have told that the renown fashion journalist, Teri Agins, who has been with the Journal for 23 years, is out while other staffers have been asked to apply for the remaining three positions per union rules. No definitive word on whether or not the Journal's fashion blog, Heard On The Runway, will remain. reports:
"For the last three years, the Journal has been building up its retail and luxury coverage group and trying to court that advertising," said one senior Journal writer who is close to the group. "But maybe now they feel that for the next year or 18 months, luxury advertising won't come through--and besides there's the new WSJ. magazine, which is courting the same advertising territory."
This could not have come at a more inopportune time. New York Fashion Week starts next week, with the London, Paris and Milan Fall '09 shows following on its heels. Who's going to cover the shows? With a staff of FIVE that's going to be impossible.

I'm not buying the excuse of the lack of luxury advertising. Yes, the luxury sector is going through a slump right now, but it's also the first sector in the retail industry to bounce back. Besides, luxury is on the verge of reinventing itself (which, ironically, was covered in an article by Ms. Agins in last week's Journal), and that metamorphosis needs to be covered thoroughly, and quite frankly, the WSJ. magazine is not the vehicle for that. If anything should have been eliminated, it's the WSJ. magazine which has not lived up to its supposed purpose, in my opinion. The Robb Report it is not.

Tuesday, February 3, 2009

Macy's Cuts 7000 Jobs, Slashes Dividend In Reorganization Effort

Amidst bleak guidance reports, Macy's Inc. announced on Monday that it will cut 7,000 jobs or 4% of its workforce, as one of several steps to reorganize and cut costs.
"Reducing our workforce is an unfortunate outcome of the current economic environment, and I am frustrated that so many of our people will be unable to move forward with us as we proceed into a very exciting future for Macy's and Bloomingdale's," Terry Lundgren, Macy's Chief Executive said.
The company also announced that it will slash it's quarterly dividend 62% from 13.25 cents per share to 5 cents per share. This cut in dividend is expected to save the company $138M in cash for fiscal 2009.

Other actions to reduce expenses include eliminating merit salary increases across the company, a reduction of its match to employee 401(k) plan contributions in 2009, and cutting its capital expenditure budget to $450M from an original budget of $1 billion, saving $100M to $150M.

In a separate announcement, Macy's said it will repurchase outstanding $950M in debt that will mature later in 2009.

Broad reorganization efforts include a nationwide expansion of their "My Macy's" initiative, an experimental "customer-centric" program. Launched in 20 selected geographic markets in spring of 2008, "My Macy's" is used to identify and serve consumer needs location by location. The program will expand to 49 more districts in the second quarter.
"We have been very encouraged by early results from our My Macy's district structure in capturing new sales opportunities in pilot markets over the past year," Lundgren said. "In fact, of the company's top 15 best-performing geographic markets in December, 13 were My Macy's pilot districts. We are moving quickly and decisively to expand this model to all of our markets so we can pursue sales-driving opportunities as we position ourselves to capture share in every local market.
Further reorganization will entail the elimination of Macy's geographic division structure in favor of a more "unified organization", centralizing the company's buying, merchandise planning, stores senior management and marketing functions in New York, while corporate business functions will be located in Cincinnati.

Macy's expects these moves to save them $250M in 2009 and $400M per year beginning in 2010.

Meanwhile, the outlook for Macy's continues to be bleak. The company predicts that same-store sales in 2009 will be down 6-8%. Earnings per share forecasts is in the range of $0.40 - 0.55 per share. On Monday, Moody's Investors Service said that it may cut its rating on Macy's into junk terrority, which would increase borrowing costs for the company.

Monday, February 2, 2009

Will LVMH Acquire Coach?

Coach Inc. and LVMH
Sittin' in a tree

According to a report from WWD, that's the speculation going around the retail industry:
LVMH will have their 2008 Annual Results Presentation on Feb. 5th, so stay tuned......
More than 13,800 Coach Inc. calls changed hands on Friday, fueled by rumors that French luxury goods conglomerate LVMH Moët Hennessy Louis Vuitton might acquire the luxury accessories marketer, according to OptionsMonster. Typical volume for Coach calls is 2,500 contracts. A Coach spokeswoman said, “The company doesn’t comment on market rumors.” LVMH executives declined comment as well. Although Coach has been the target of mergers talks in the past, market sources noted the firm, founded in 1941, has a long history of preferring to remain independent. Shares of Coach ended Friday’s session at $14.06 in heavier than average trading of 10.8 million shares, compared with average daily volume of 7.3 million shares.

UPDATE 2/4/09: reports that LVMH have denied any interest in acquiring Coach, Inc.:

LVMH Moët Hennessy Louis Vuitton has squelched speculation the French luxury giant could acquire Coach, as a spokesman officially denied any interest in the American accessories marketer.

As reported, more than 13,800 Coach Inc. calls changed hands last Friday, fueled by takeover rumors. Typical volume for Coach calls is 2,500 contracts.

The denial comes a few days before LVMH is set to report its 2008 results at a press conference in Paris on Thursday.