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- [00:00]
Lauren Sherman
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That's R U L A dot com fashion. You deserve mental healthcare that works with you, not against your budget. Watching that massive housing payment leave your bank account every single month can be a painful experience. It's easily my biggest monthly expense. So like, why shouldn't there be something equivalent to airline miles? If you're not earning something back on your rent or mortgage right now, you need to check out Bilt. Becoming a Bilt member means earning points on every housing payment no matter where you live. You can then take those built points and redeem them toward your next flight, hotel, Stay, or even Amazon.com purchases. I'll use mine towards a future mortgage payment, but my favorite feature has to be Bilt's Neighborhood Concierge, which you can find right inside the app. It's connected to your home and over 50,000 merchant partners, so you can literally ask it to book a fitness class, make a dinner reservation, or schedule a Lyft. And it seamlessly applies your membership benefits along the way. To get started, just download the built app, link any of your existing creditor debit cards to make local shopping even more rewarding and let the concierge show you exclusive member benefits right in your neighborhood. Download the built app and join the membership for where you live@joinbuilt.com fashion. That's J O I N B I L T. Use our link so they know we sent you. Hello and welcome to Fashion People. I'm Lauren Sherman, writer of Crutt's Fashion and Beauty Memo line sheet and today with me on the show is Bernstein analyst Luka Silka. We're talking first half 2026 results from LVMH, Kering, Hermes and plenty more. Before we get going, I wanted to remind you that if you like this podcast, you'll definitely love Puck, where I send an email called Line Sheet. If you're a fashion person, you get that reference. It's an original look at what's really going on inside the fashion and beauty industries. Line Sheet is scoopy, analytical and above all, fun. Along with me, a subscription to Puck gains you access to an unmatched roster of experts reporting on powerful people and companies in entertainment, media, sports, politics, finance, the art world and much more. If you're interested listeners of Fashion People get a discount. Just go to Puck News Fashion People to join Puck or start a free trial. Happy Friday everyone. Hope you had a great week. I have updates for you. As many of you know, I was on a self imposed shopping freeze where I was permitted by the rules of the freeze to buy vintage and workout clothes. I obviously did not make these rules up because it was only helpful to me to an extent because the majority of the clothes I buy are secondhand. However, I will say that I did not really buy anything for two months except for some very good 1990s era Calvin Klein on Vinted. Big shout out to the fashion people listener who sourced that stuff for me. It was amazing. All under €100. I'm very excited to see it and also to my friend Gabby who traveled to the edge of the 12th arrondissement to pick up one of the packages. I hear it was a harrowing experience and I am very grateful. I'm excited to see this stuff and get it dry cleaned when I get back to Paris. Anyway, this past week I did sort of break the seal. The shopping freeze is technically over. I was like I'm really not going to buy anything new until the fall anyway. But I did buy a Cleo Camp reversible boat neck top upon the recommendation of Carolyn Faux Fashion People guest and obviously Liana Sattenstein did a piece on them a while back. But Carolyn, I don't know, she was like you should get one. I'm excited. I got butter yellow not black which is very daring for me. I also bought some vintage jeans. I got a pair of Nicola Giscar era Balenciaga trousers corduroys. They're amazing. And also a rose nickels top that I will wear to a Puck event this fall. I wish you could write off clothing anyway. These are all obvious and easy purchases and all the vintage was like average, like 200 a piece which made it justifiable as well I also bought two Nike skim sets mostly because they were on sale. But I do need new workout clothes. Like I just do my review. I like the bras a lot. The bottoms are also fine and honestly better than anything else I've tried. I have not tried aloe bottoms yet. I will soon. Maybe I will go to aloe before I leave. I do not want to stand in line so if there's a line I'm not going to stand in it or wait to try stuff on. Or maybe I'll just order them to the house and return. But I also like the way the like Nike skim stuff is branded. I'm not looking to be some fashion plate when I go to Legree but I do wish there were more options still. I just think there needs to be there need I guess live the process. This is what I'm going to try it. I've known Robin forever. I'm going to try a bunch of that stuff too. It's super chic and it's basically the same price as all the more mass brands. But I just wish there just needs to be a few more things. This is a. It's like you can buy 5,000 different styles and brands of denim. Why can't you do that with activewear? Anyway, more updates at some point. Hopefully you're still listening. This week online sheet I actually wrote quite a bit about shopping including fashion's increasingly complicated, real complex, I would say relationship with the Row, which we used to talk about constantly on here. I think we even did a dedicated episode to it. I forget who my co host on that was. Maybe Becky or Marissa, I can't remember. Or maybe Jacob. I don't know. We don't really talk about it so much anymore. What happened? Well, Phoebe Filo happened but also Hank gets a confluence of things. The Row at the same time. Phoebe Filo coming up, Mattie obviously coming up this sort of change in the way we are all dressing. The Row really benefited from the sort of Sweatpants Forever in 2000s, in 2020s pandemic era and people were kind of like yes, I would love a pair of cashmere sweatpants from the Row. I have a bunch of money and it and it sort of shot up in popularity going from being a sort of really insidery brand to something that a lot of people who live in Brentwood by. Not that they weren't before but it really became the sort of basics for that that group And I think it still is like you go on the website and stuff is still sold out But I don't think it's in the conversation as much with fashion insiders. And one of the reasons for that is we don't really see their images of their clothes, much like the stills on the site are still styled to a point of that you need to use them for your references forever. But they're not passed around the way they used to be. And I think some of that is on purpose. Obviously, they have really strict rules around their fashion shows, but I think it's also because they don't want people to copy them. But being copied is how you sort of take over the culture. So my question for the row is do they want to be a brand with a loyal following that doesn't waver? Kind of Rick Owen style, but. But bigger, obviously, but like that kind of thing, where it's kind. You go to the row for these certain things, and if you're a real person, you're a real person. Your style never changes. Or do they want to rule the world? Because they did for a while. I think either path is fine. They'll be fine. They're very conservative, the way they operate. They have amazing investors who will back them. There's no rush. But I do think that they're probably grappling with this internally just from some of the strategic business decisions they've made. But read more on Lynchi and let's
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get going with the
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Lauren Sherman
Luca Silka, welcome back to Fashion People. Very, very quick return.
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Luca Silka
Thank you very much for having me.
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Lauren Sherman
You know, this is the Friday episode. So what did you have for breakfast today?
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Luca Silka
Just had a bowl of milk with Weetabix.
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Lauren Sherman
That's awesome. Luca, I was wondering, because the last time you were on. On a Friday, you had a biscuit, and I was wondering if you have a biscuit.
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Luca Silka
You know, it's indulging in sugar, but this morning I thought fiber was healthier, so I try to limit my sugar intake as much as I possibly can.
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Lauren Sherman
Well, you look great. And, you know, it's funny, Luca, everybody's obsessed with protein and they forget about how important fiber is.
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Luca Silka
It is, I think. And also reducing sugar and salt if you can. But that's another.
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Lauren Sherman
Yeah, that's another podcast. The sugar is easy. Salt not so much for me. I'm a love it. Anyway, it's been a busy week for you, so I understand why you're trying to be healthy. There were so many. So really quickly, before we get into the luxury earnings super week, you write these notes to investors after the earnings come out. And I am always Amazed. As someone who writes, I'm very prolific. I can write a lot in a quick, short amount of time. Can you explain your process of how you and your team write these notes? Because I'm always amazed. They obviously come out right after the earnings. You do a short thing and then you do a follow up. But like, how long does it take you to write them? What's the process? Is your team like submitting thoughts to you and you can put them all together? What's the editing process for an analyst?
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Luca Silka
Yes, indeed, we work as a team. I have the good luck of having two senior associates working with me, a junior associate also on the team, and then another analyst, Maria Mehta, who helps me with covers the mid caps and helps me with the rest of the coverage. So we split responsibilities. I sort of write a mantra or so to speak, a key message coming out of the print, which gives the tone and the investment implications that we should draw. And then my team fits into all of the moving parts, the numbers at the table. We sort of produce the tables ahead of time so that we fit in the actuals and the deltas are calculated automatically and so on. They send me a draft, I go through it, and then if it's okay, off it goes. Or if it needs to be changed, we change it and then it goes out. It's quite. I mean, the fast reaction piece just after the print is relatively straightforward. What takes more time is the highlights from the call, because we need to listen to the call now. These days you have the advantage that you can potentially also be helped producing a good summary because of artificial intelligence and everything else. But you still have to go through the number implications. So you need to change the model in a way that makes sense. And that too, we do as a team. So we managed to go through a week like this, which was exhausting because we have, you know, a good team working on all of the updates. Some of these updates this week were also overlapped. Like I said, Oluxotica and Kering partially overlapped, which made following these updates also more difficult.
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Lauren Sherman
Okay, so how do you choose when you're going to ask a question? Because there was one LVMH quarter probably two quarters ago that you were not on. You didn't ask a question question and I DM'd a one of the board members. It's like, why didn't Luca ask a question and was. I thought maybe they didn't let you or something. And in the end you were busy, you couldn't. You weren't on the that part of the call.
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Luca Silka
But, but no, no, I think that sometimes there's very prosaic explanations. You know, that the way that the mechanics of asking questions work is that. And they opened the lines quite a bit before the call. Some people were very keen being first just connect like an hour before and they wait on the line, never mind the telephone bill, to be among the first in line. Sometimes I cannot do it because I have better things to do. I have to use my phone to talk to clients. And so maybe I end up at the bottom of the queue and I don't get a chance to ask a question. I try to be as disciplined as I can and to get on the call as early as I can so that I can ask questions. Because normally there's good questions to be asked. And with a lot of my colleagues working with a very short term horizon, I see that some of the fundamental questions are not asked otherwise. But it's very rare. I would say that you get sort of denied the right to ask a question by the companies. I would say that this would be to some extent inappropriate. And I have no direct experience of this that I can, that I can report.
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Lauren Sherman
Well, yeah, you are. You're the priority. Definitely. I mean, the interesting thing is one other question and then we can get into it. So obviously you've become a sort of celebrity within the luxury fashion executive community. Lots of CMOs into Lukas Sulka, people asking me to make Lukas Sulka T shirts. But so yesterday I noticed there's this editor, her name's Costanza Lombardi. And she's interesting. She's like, she has a lot of, she does a lot of business analysis. She's like Gen Z business analysis. And she's good. I like her take and I like the way she approaches it. She has fun with it. She obviously likes fashion, but is really into talking about the business and marketing and all that stuff. So she's been doing, she's been on all the earnings calls and she's just having a great time, which I totally understand. I love, I love it when I have the luxury and time to be on the earnings call the whole time. But she was like quoting your questions. And I do this sometimes, sometimes if I'm doing an earnings summary, I'll say Luca asked this question in the call. What is that like for you? That, like, I know it's important for you to do press and to engage with the media because that is a way that you get investors to work with Bernstein. But what's it like for you for this Gen Z influencer talking about Lukasolka
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Luca Silka
I think I can only say it's a privilege to be noted and to be respected as a voice looking at the luxury space, you know, we're as good as our analysis and as our reputations and I devote time to interact with media not just because media can sort of act as a loudspeaker, but also because I get a lot of interesting feedback and interesting input from you and from the other journalists I talk to. I think that being an analyst in this sector, being an effective analyst in this sector requires more than just sitting at your desk and going through the Excel spreadsheets. You need to be going to the stores, you need to be talking to the retailers, you need to be talking to the key influencers, you need to be talking to the journalists to get a good finger on the pulse of what is going on. And so I just, you know, I can only say I'm very grateful to the people that like what I'm doing or even don't like what I'm doing, but disagree and provide interesting feedback that is always very useful. We work in a job where you cannot always be right, that's for sure. Because we are trying to anticipate the future. Nobody can do that with 100% hit rate. So we're all trying to do our best. And the more sources, the more homework, the more data, the better.
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Lauren Sherman
Yeah, I think it's interesting. At the Caring Investor Day I met many of your peers who I'd never met in person before. And it is.
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You are.
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Lauren Sherman
And there are a couple. I have a person who, Simeon Siegel who covers, who works at Guggenheim now who covers more of bigger, I don't want to say mass retail but like some like Nike, stuff like that in the US and you two are my sort of go to analysts where I think you have this sensibility of what is happening in the culture and how that influences consumer behavior and you think that way and not every analyst does. And so let's talk about what you feel like this week overall said about the state of luxury industry and its long term prospects.
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Luca Silka
I think that one way to understand what has been going on this week and the past week is to recognize that the consumer audience has been polarizing. If you're focused on the very rich and you only focused on the very rich, take Loro Piana, Cucine, Lizena, you're doing well. The top end consumers are on the front foot. There's a wealth effect. Financial asset markets are up, but they feel good. They spend money I think that the debate opens up when it comes to the middle class aspirational consumers. We're all very excited about the very rich consumers. But as important as they are, 90% of luxury consumers spend between 1,000 and €1,500 per year. And nevertheless they represent 55% of the total market. It's with these consumers that the battle is on. Quite clearly. These consumers today are telling us we see more value in a piece of jewelry at 3, 4, $5,000 than we see value in the same price in a bag. And so that explains, in my view, the big gap between the growth of the jewelry maisons at Richemont and for example, the fashion leather goods division of Image. Of course there was the attempt last year to try and build value into what consumers see by adding to creativity, changing creative directors. Dior has been reviving on the back of Jonathan Anderson. Chanel has been reviving on the back of Mathieu Blaisey. But as much as Dior has been resurging and as well as Vuitton has been managed, which I think is very well. Yeah, even with that, they're only growing at plus 1%. So I think it is becoming painfully obvious that there's more to do at the level of price mix that you need to be paying more attention to the fact that a lot of consumers would love to buy luxury except because of cost of living inflation, because of more muted prospects in Korea, in China, for example, they don't feel like spending the kind of money that brands are today asking for. And so I think that there's some adjustment that needs to be coming. The good demonstration that that works this week has come from Kering. You could argue that Gucci has yet to invent a new and compelling aesthetic and yet it was improving. How come? Well, Luca explained it very clearly in the conference call. By cutting prices and by repositioning Gucci downwards, in some cases, they have found exponential price elasticity behavior from consumers. The anecdotal evidence we have talking to shopping mall operators in China is that there's quite a few first time Gucci buyers. To them, innovation is not very relevant because they liked Gucci in the past and they couldn't buy it. Now they can and they're going to Gucci. So of course brands need to be careful when they move downwards because cheapening the brand equity can be a very quick effect. Building the brand equity back up takes years. So going down is very fast. Going back up is sometimes very difficult, if not outright impossible. But I think that what we've seen in America with the likes of Coach and Paul Ralph Lauren. What we've seen with Burberry is all converging to say well guys, let's wake up and face reality. We possibly went overboard in the post Covid price increases. We need to adjust a bit more where we stand and I think that that is going to be the shape of things to come because I don't see the cavalry on the horizon. I don't see a strong recovery in middle class consumer demand in China coming to the rescue. So unless you want to continue to grow at 1% or 2%, you need to do something, I guess and I expect the industry will take action.
- [24:59]
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- [25:32]
Sophia Franklin
It's Sophia with an F. Franklin with the Y. And if you're looking for some bubble gum dum dum podcast, then you are in the wrong place, baby. Whether I'm reminiscing on the trials and tribulations of working in the corporate world world to recapping today's latest reality TV show, you're gonna wanna pull up a chair and stick around. It's a good time and always 100% unfiltered. Follow and listen to Sophia with an F wherever you get your podcasts.
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Lauren Sherman
So on the caring point, it's interesting and I'm, I'm thrilled for them because we want, we want people to succeed and but do you think that these practical solutions that have been put in place that the market has responded extremely favorably to are enough to. Do you think they're a band Aid or do you think that they will? Because all of this sounds good to me but it feels like a short term, next couple of months, next year solution or not even year? Like do you think that it's good enough to get people. So basically what you're saying is I don't want to put words in your mouth, but are you like. It always amazes me That I think the way that Burberry has been repositioned, I understand that like plaid scarves and trench coats, those are classics that people would want. I really respect the way Coach is managed, but I do not understand why people buy that stuff. Like, it doesn't make sense to me. It looks exactly like everything else. And if you're a consumer who could afford Coach, you can afford a bunch of other stuff. And why would you buy Coach? And yet it's been extremely successful. And the combination of Todd the CEO and Stuart, the creative director, they've done an amazing job with it. But the value in that brand is still hard for me as a consumer, but also as an, you know, observer of this industry to understand. Are you kind of saying that, like that's what Gucci is, is now? It's, it's going to be a thing where people want a designer bag and they make nice handbags and it's a little cheaper than buying a Louis Vuitton or buying or Chanel. And so they're going to go there. Like, my concern with the strategy is that it feels like a band aid and not a solution to the fact that, like, we still don't really understand what Gucci stands for. And maybe we are starting to now. I don't know.
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Luca Silka
No, I think that first of all, we should recognize that price is one of the four P's, so it cannot be a solution for everything. But having the wrong price gives you a handicap, let me say. And what I think Kering has been showing, if you pay attention, is that they're willing to take a realistic and pragmatic approach to pricing. Now, can it be enough? No, no, because there's four pieces. So of course there needs to be more to go with it. It's maybe a step in the right direction, one first step in the right direction. But then you need to follow up with creativity. You need to follow up with a compelling product. This at least is buying time for Demna to come up with his own vision of Gucci, hopefully. But it's going to be a compelling vision. And if that was the case, then we would be having Gucci revival for the moment. You have indeed a bit of a short term boost to some extent and it cannot work alone. But it does show other industry players that the idea that, oh my God, we could be moving upwards forever and we could upgrade a mix forever because the rich are coming and so on for a mega brand is wishful thinking. And, you know, this is quite simple to understand. It's not that the rich buy in the same proportion to the money they have the same products that aspirational consumers buy. I may have 10 million people spending €1,500 and buying a handbag, for example, and So I sell 10 million handbags. But if I have one person with all the money of these 10 million people, they're not going to be buying 10 million handbags. They're going to be buying a helicopter, a private jet, a football team. Do you see what I mean?
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Lauren Sherman
And maybe one, one, $1 million dress.
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Luca Silka
Exactly, exactly. So the mix, the category mix as you move upwards in the wealth pecking order changes. So mega brands like Vuitton, like Gucci cannot do, I would even dare say like Hermes, because there's a lot that goes to the middle class, aspirational consumers from Hermes. So I think these brands cannot afford to forget that they have to succeed at both extremes if they want to grow at a decent pace.
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Lauren Sherman
Yeah, I don't want to talk too much about Dior. I actually want to talk to you about Vuitton because I think it's in some ways going to be the bigger story in the fall. But I think one interesting thing about Dior that they did early on and not saying it's fixed there in any way, I think it was interesting. It was very clear in the way LVMH communicated that they wanted to show it is working. They, the CFO talked about they've had double digit growth, I think in a lot of the regions. I doubt in Asia. I know that in some parts of Asia it's still a big struggle. But the point being they wanted to know it was working. But I thought one of the interesting things they did very early on, I think the thing that they have done really well and once the stuff is in stores, it will, you know, they've had all these supply chain issues as everybody has, but I think shoes and bags are really good, which obviously is important. And I'm not sure Dior had good shoes for a long time, but I don't know if you'd ever like categorize a Dior bag as good. And I think the, the like that bow bag and things like that are appealing to a much broader audience than in the past. But the, but in terms of the pricing, the costume jewelry with the daisies and things like that, that was really accessible. It was like €500 to get into that. And I thought, I'm surprised that hasn't become like a bigger. And I could see it picking up. I think the jewelry is somewhere where Jonathan Anderson has worked with their team there to make something. I think it's. It's really good. And that could be a huge. Not just. I'm sure in fine jewelry they're, they're pushing too, but in, in costume jewelry is. That was a good example of to me of like a pricing architecture where you could get in if you were a teenager.
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Sophia Franklin
Yeah.
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Lauren Sherman
To Dior.
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Luca Silka
Absolutely.
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Lauren Sherman
And, and not through fragrance, but on Vuitton. So I'm curious what you think. I think there's going to be lots of big changes there this fall. We know that obviously they have a deputy CEO. The plan at some point is for Pietro Bacari to not be the CEO anymore and for Damian to become the CEO. And then also I think that there's a chance there's going to be creative change is on the women's side at least. I'm curious from your perspective because they have done a such a good job managing it. Like people still buying Vuitton. The Runway shows for Louis Vuitton are not things people like for. They love Pharrell. Do they love the. Everybody was like this collection was a little better, but I think it also had to do with. There was just a different. The, the set was amazing and there was a different kind of tone to the, to the collection and. And everyone loves Pharrell and wants him to succeed or whatever. I think the women's wear people are ready for a change. That being said, like, we know that those Runway shows are mostly for marketing to sell other product in stores. And I'm just curious, like, do you think having a Matu Blasi style person, not that they could engineer that, but like someone that people actually were really excited about the Runway would be good for Vuitton or do you think it doesn't matter at all?
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Luca Silka
No, I think that anything that attract the spotlight on Vuitton is definitely good for business. I must say that I find Vuitton has been managed exceedingly well. Wherever I look there on the front line. I think that the case for the World cup was just another example how appropriately they're trying to recruit new consumers. As China is not providing an army of middle class consumers anymore as much as before football Formula one. I think these are promising fields where to find new potential consumers. The way that they are upping the ante in terms of flagships and retail execution at both Dior and Vuitton, what they've been able to achieve and create in terms of buzz around the Vuitton brand in China with the Louisiana and I think the utter control they have on pricing and distribution, you could argue that they're really flawless in this respect. So I think that attracting attention is definitely, could definitely be working. I wonder if, for example, the choice of Pharaoh Williams was a bit too much of a like for, like, replacement of Virgil Abloh at the time when streetwear was possibly no longer flavor of the month. So I wonder about that. But I think that even more importantly, as much as you can be successful with beauty, with small leather goods and so on, I wonder if you need to look at your core product and think through how you could potentially create more opportunities for people to. To enter that category. Yeah, of course, it has to be done carefully because Vuitton is very, very big. And if it was successful, paradoxically, with this mix adjustment, it would run a higher risk of ubiquity. And we know that ubiquity is a kiss of death for luxury, because what we are selling with luxury is the idea that if you buy my product, you become special.
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Lauren Sherman
Yeah.
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Luca Silka
And if everybody has the same, then this promise is betrayed. But yet, I think that as far as I understand, there was a bit of a tug of war within LVMH on where Vuitton should be positioned, whether higher or a bit more accessible. I think the market is saying the latter is the way forward. You need to do it cleverly. You need to add creativity, content. But let's be clear, you probably also need to adjust the mix in a way that you allow more people to enjoy the brand. I don't know who's going to be leading this. You mentioned, you know, potential evolution at the helm of Image and Vuitton in particular. I think that both have been doing a great job. They are incredible resources for the company, and I think that they will continue to play a role. Very important role.
- [38:46]
Lauren Sherman
Yeah, I think, look, Pietro only doing the fashion group and Damian moving into the CEO role. That's something that they've been planning for, like, a year, and I think it will happen this fall. And in terms of the designer stuff, look, Nicola, Jessica, his contract's up. So, like, he's gonna leave. There's no way he's gonna stay for another five years or whatever. He's gonna leave and they're gonna have to have someone new. I think there are very few options of who could do that job at this point. Jonathan Anderson is busy, Demna is busy. But I think there. There are some ideas out there of people they could potentially poach from other groups on Pharrell. I think, look, there's part of me that thinks Pharrell's gonna be like, I don't need this crap. And he's gonna go be the creative director of Quint's where he's an investor. And he. The rumor among all the Pharrell, like inner circles or whatever is that he's good. Yeah, whatever. It's like his team has told me that's not true. I don't know. But the point being that, like, he doesn't need Louis Vuitton, so he's only going to do it if he's having a good time. I think they would like to make it work with him. And sometimes I get like people who go into the stores, then they like what his stuff looks like in the stores. I could see him staying for another couple of years. I think the bigger question is who goes to. To do the women's. Because it is like, obviously it's a multi billion dollar business, but like, no one thinks about it in that way. They think about it in Nicola Jeskier's runways, which are interesting, but not increasingly. It's funny, I think back to their. For his first couple shows there, and they were really directional because he. When he was a Balenciag, he was so direct, so influential. And you can really see his influence. Balenciaga influence in clothes right now. You just. It's in the air. I feel like people are buying it in secondhand a lot. And then his first couple collections, like he did this little a line skirt that became a big commercial thing. It was on the high street and everything. And then it just kind of devolved into something else which is interesting, but not. Not something that people get excited about commercially. So. I agree. I wonder. I mean, the. The way they've like created a lot of hype and then we should move on because I know you don't have a lot of time, but. And. And I. I've taken too much of your time this morning already. But they've created a lot of hype around these sort of moments. Like the. They're gonna have the Keith Haring thing. They obviously the Murakami stuff. I wonder if you can look and look at how Chanel did it now and say, well, let's not totally rely on collaborations for hype. Let's find someone who makes cool clothes that people want to talk about and build it around that, but manage the mix of products so that it's not in your face. Like the Chanel's. Risk is that everybody wants Chanel. One thing I've heard is like women going in there and just being like, I'll take anything. I don't even care if Matu Blasi designed it. I just want something which is so interesting because they just want to be associated with the brand right now. But I think the good thing is apparently there isn't a lot of the stuff like they've controlled distribution of, of his actual product. I don't know how true that is and I think, I guess we'll see when the numbers come out next year. But I think there's like an argument that that's better than relying on these sort of hype driven collaborations to boost foot traffic or whatever. But I guess there are pros and cons to both approaches.
- [43:02]
Luca Silka
No, but I would, I would agree. I think that collaborations to some extent can become a bit of a sport in, of a performance enhancing drug. Like in sport. Yeah, you know, I, I think you need to be relying on your own strengths to be producing performance every now and then. Of course a collaboration is appropriate, but becoming addicted to collaborations is definitely not the way forward.
- [43:31]
Lauren Sherman
Yeah, it's complicated. I feel like that's an issue Dior had with Kim Jones because he did a lot of really good collaborations. They did well and it like, it got to be too much. I mean, he's like collaboration can.
- [43:48]
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- [45:19]
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Evening. Buyer's remorse.
- [45:21]
Luca Silka
Buy a new car.
- [45:22]
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I'll be moving in.
- [45:24]
Luca Silka
Let's get started.
- [45:25]
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Sorry, I think there's been a mistake. I bought it from Carvana.
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- [45:38]
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I guess I'll let myself out.
- [45:40]
Luca Silka
Congratulations.
- [45:41]
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I mean it.
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- [45:51]
Lauren Sherman
Anyway, okay, moving on. I want to talk about Prada a bit because they seem to be managing pretty well, especially at the Prada brand and also knowing that the Miu Miu growth was crazy and that they, it's, it's gonna stop and kind of managing the market for that. I also, I had an experience in a Prada store probably six months ago where I was like kind of made a comment about the prices to the salesperson. They said, well, you know, we did pull it down a little bit. And I don't know if that's actually true but. And maybe, maybe she was just trying to get me to buy stuff, which I did. But. But the point being I feel like they are in a, in a fortunate position where it's, they're not huge so they can manage these brands a little more delicately. And to me, the amazing thing about Prada always is that like people in the fashion industry still proudly wear things that say Prada. And you can't really find that with any of the other really big brands like maybe Dior with these polo sweaters and stuff will become bigger, especially with men. But generally I'd say that like people, insiders in the fashion industry or art world or whatever don't want to wear logos at this point. And yet they're still wearing like Prada across their chests. I'm curious about what you think about their approach to brand management. If you think it's working, if you think Miu Miu is going to be a problem for them in six months and, and then we could talk about Versace, but I think maybe it's too early too.
- [47:37]
Luca Silka
I think that practically speaking and from a stock market performance viewpoint, the re acceleration in the core Prada brand is very appropriate and it's moving away attention from Versace and from Miu Miu. I thought that the Prada predicament when they were dependent on the outsized growth of Mew New was a lot more fragile. We know that small brands at some point can resonate with consumers. We've seen a number of them in the past do that. Many of these have been meteoric in their rise and disappearance under the horizon. So I think the owner's burden of proof is with Prada to maintain the Mew Mew relevance with consumers. The normalization is coming very, very fast. We've seen it get close to low single digits, which I think was faster than the market was expecting. The good thing is that Prada was a lot better and Prada is a lot bigger. They have the ambition to be playing in the Premier League. They often say that their brand and in a way you were also implying that this is the case. The Prada brand is bigger than the Prada business. And so to some extent, if they execute well, they could get a lot of satisfaction. From our viewpoint, this would be very well rewarded in the stock market because the Prada stock is trading at a very, very low multiple. We see in the first move up on the back of these results. But it remains very cheap. And likewise, I think the attention was on Versace because there wasn't much to write home about on Prada. But with Prada doing well, I think Versace staying the course as it seems to be doing, is going to be more than enough. And all of the debate is going to be on Prada. On Prada, I think they probably have traditionally taken good care of the middle class, aspirational consumers. What they were short of, I think was in the high end. So yesterday when I asked Andre Aguera where his attention was, he reiterated the opportunity they have in the higher end by stretching the brand upwards, which they've been doing successfully so far. So good. It wasn't immediately clear from the conversation we had in the conference and from the results. What is it exactly that seems to be working, but it is working. I think that lots of good decisions were taken in the past few years. The partnership between raf, Siemens and Mutual Product works very well. As you say, the fashion proposition is compelling to those who care about fashion. I can only hope that this will progress. And in the meantime, you mu doesn't produce a meteoric trajectory like other brands before it, like Celine or a few others had done.
- [51:12]
Lauren Sherman
Yeah, I feel like it's a. I'm very. I love Prada clothes. I think to me the only place where they could improve are Handbags. Like, I think the clothes. The clothes are so correct. Like, they're so spot on. And I buy a lot of vintage Prada now, but I was never a Prada shopper up until Raph being there. And a new Prada shopper now I buy old vintage Prada and Miu Miu. For some reason, it's just like life. You change. But I think the shoes are really good. I think my kind of sticking point with them is the bags are too generic, and they need a bag that feels other than the thing that they've done really well is the shoe duster bag, like the. The satin little non bag bag. And that is very Prada, I guess, in the Prada philosophy. So maybe that is what. What it is. It's just like that. That little scrunchy satin bag is. Is their bag. But I think in terms of leather, leather bags, it hasn't always been the strongest in the last, you know, 15 years. But. But do you think it comes down to. I am always trying to, like, pinpoint why. And it may just be the strength of the Runway and. And the genius of Mitra Prada, and the energy Raf Simmons has brought to it. Do you think it's just that they have really good merchandisers? I don't know. There was like, 10 years ago, it just flipped. Like, it was just suddenly and that would. They. It was kind of around the time they brought back the re. The nylon stuff and pushed it, and then suddenly and they really focused on dtc and suddenly it was like, oh, they're just so good at merchandising, these stores. Do you think it's the merchandising? Like, do you think it's the combo of the marketing and the merchandising together? Like, why do you think the marketing, merchandising, and distribution, what do you think it is that has made them so strong in the last decade?
- [53:22]
Luca Silka
I think it's a combination of all of these elements. It's not that you can find a single defining ingredient. Like you could, for example, if you were looking at Alessandro Michele and the easy impact at Gucci. It was primarily an aesthetic revolution there. I think there was no revolution at Prada. There was an evolution, which they managed to sharpen the Prada execution. From an aesthetic viewpoint, I think the Raf and MUA have worked very well together. At the same time, Prada had indulged with excessive exposure to wholesale. Let's call it the way we should, gray market of price, which I think gradually they have dried up, improving their brand equity perception. And in their standing equally. I thought that after the apo, their idea of going the way that Hermes or Chanel were going, very few styles in handbags, high price. Let's get the nylon into the dustbin. That didn't make sense. That wasn't Prada. Bringing back nylon and making it even more relevant through the Renylon initiative has brought Prada to a better balance. I think that at one point the bringing back also digital distribution. I remember, I don't know if you remember, but there was a time when Prada was pushing back on selling online when they were really missing a lot of the evolution Prada strange because if we look at it over the course of history, they've been sometimes pre science. Like when I don't know if you remember Prada sport back in the day, that was I thought a genius idea except they didn't carry it forward. And at one point Streetwear exploded. And you could argue that Prada got there first but. But didn't really exploit it. And at the same time, Prada sometimes at times gave the impression of being very conservative and not wanting to embrace new ideas and just looking at the larger peers and mimicking what they'd done. So it has been very sort of haphazard in the most recent 10 years. I think that the execution has been a lot less haphazard. I think that it's a collective merit that needs to be given to this executive team, including Lorenzo, I think, who was instrumental in correcting some of the shortcomings and everybody else. I think that as a group they've been a lot more effective maybe as they could potentially bring in more people in the circle of confidence, if you see what I mean.
- [56:44]
Lauren Sherman
Yeah, I'm just looking through the Prada website right now and now I want a bunch of stuff, but I'm on a shopping freeze. Luca, I have to leave you. But we didn't get to talk to about Hermes really quickly on Hermes because I. I have a another call in one minute. Why doesn't the market like Hermes right now?
- [57:04]
Luca Silka
I think it has been a convenient funding short for hedge funds. Yeah, there's a concern that luxury is not going to go back to growth. So the question is why pay top multiples for a company that will also be moderating? And in the most recent quarters, Hermes said provide the impression of being on a moderating trajectory. The other thing is they've probably been in the shadow peers upgrading and enhancing their innovation, Chanel and Dior. But down the road they will have newness of their own. The launch of Couture, for example, the newmanswear creative director. I think that Hermes could very quickly bring the attention back to them. And I also think that in the top end, that could be a lot more effective. We published recently a report called Hermes Stretching Upwards. I think that there's more scope for them to introduce products at the very top end to manage vacs more effectively. And Couture and the high jewelry effort are probably the initial answer to this opportunity.
- [58:17]
Lauren Sherman
Luca, thank you for everything. You're the best. Have a great summer holiday.
- [58:21]
Luca Silka
You too.
- [58:21]
Lauren Sherman
And congrats on getting through this week.
- [58:23]
Luca Silka
Thank you very much, Lauren. Take care.
- [58:25]
Lauren Sherman
We'll talk to you.
- [58:26]
Luca Silka
Talk soon. Bye Bye Bye.
- [58:28]
Lauren Sherman
Fashion People is a presentation of Odyssey in partnership with Puck. The show is produced and edited by Molly Nugent. Special thanks to Puck co founder John Kelly, executive editor Ben Landy, producer Maya Tribbett and director of editorial operations, Gabby Grossman. An additional thanks to the team at Odyssey, Kelly Turner and Bob Tabad.