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- [01:05]
Lauren Sherman
Hello and welcome to Fashion People. I'm Lauren Sherman, writer of Puck's Fashion and Beauty Memo line sheet and today with me on the show is Bernstein analyst Lucas Soka. It's earnings season so we're talking about LVMH's portfolio, pruning, Kering's Gucci problem, Hermes work in strategy, and plenty more. Happy Tuesday everyone. Hope you're having a good break between the shows which start up again at the end of the week in London. I am currently in Los Angeles where celebrity styling season is in full swing. Yes, there are award shows too, but it's really about the close people. Tons of people went to London for the Baftas. Then this weekend were the WGAs, the SNL 50th Special, and then in like a week and a half for the Milan and Paris shows and the Oscars fall right between them. What terrible timing for everyone involved. This week Online Sheet I broke some news about a collaboration between Nike and Skims. It's going to be huge. Expect to hear a lot more about it throughout the week. I also explained what's going on with Saks Global, whose CEO Mark Metric sent a note to brands last week saying a bunch of stuff and a lot of people are upset. So I talked to Mark about it, I talked to a bunch of brands about it. So I wrote about that. If you're a customer also and you've been waiting on a refund from Saks, I explain what's happening. You will get your refund. It's going to take a while and I I hope to explain why. Rachel Strugatz also made a special Monday appearance to give the latest update on what's happening with Drew Elliott's exit from Mac Cosmetics. So there's so much going on. Luca Silka, welcome back to Fashion People.
- [02:56]
Lucas Soka
Thank you very much indeed. Lauren, thank you for having me.
- [03:00]
Lauren Sherman
One of my favorite guests. So you've been very busy the last few weeks.
- [03:03]
Lucas Soka
Yes, indeed. There's been quite a lot of companies reporting and there was a lot of excitement for the sector as there's a cyclical rebound in the making. So lots of investors wanting to discuss it.
- [03:17]
Lauren Sherman
So when do you think the rebound will actually be? Do you think end of 2025 things will start picking up?
- [03:26]
Lucas Soka
I think that from what we've seen so far, the worst was probably 3Q24 and we've seen an incremental improvement in the fourth quarter with a very broad based contribution from different nationalities. The Americans, the Europeans, they were all up relative to what we had seen recently. And even the Chinese while staying on the Buckford were better than in the third quarter. It's not clear when it comes to the Chinese whether it was the third quarter that was impacted by Daigu's pausing and as the Japanese yen appreciated. But there seems to be a sense that the first quarter of this year is continuing on the same trends. So we seem to be out of the woods.
- [04:20]
Lauren Sherman
So on China in particular, I noticed that Montclair, which had pretty good results or great results, I think you use the word smash. Whenever you use that word I pay attention. But that they did particularly well in China, can you explain why and do you think their success there is separate from all this or reflective of what is about to happen there?
- [04:46]
Lucas Soka
I think that they've clearly done a very good job in becoming relevant to Chinese consumers. The Shanghai genius event definitely helped most recently, but they had been building the brand for quite a long time. The Chinese also have a love affair with the outdoors and Moncler resonates with that quite, quite well. And so, you know when I would say there's a general rule when consumers watch their pennies and cut their shopping lists, you need to be at the top of their preferences so that you stay on the shopping list. And I think that Moncler is one of those brands that have managed to do so.
- [05:32]
Lauren Sherman
Do you think it also has to do with the fact that it was just a lot snowier and colder and rainier in a big part of the world, I mean especially in Europe and on the east coast of the US this year it was much snowier than it has been in quite a few years.
- [05:52]
Lucas Soka
But I think that the truth is that winter comes every year. Sooner or later we have that. And I think that while in parts of the globe it was a favorable weather, in Europe it was relatively warmer. So at the end of the day, I think that brand appeal and how brands mean to what brands mean to consumers is probably more important than the weather or the comps for that matter. I think everyone was worrying about the comps and saying, oh my God, the comps are going to be very tough. We decided to have Moncler as best idea for the fourth quarter because we saw that the brand momentum was very strong, never mind the comps.
- [06:43]
Lauren Sherman
Speaking of brand momentum, Kering released its results last Monday night after announcing less than a week earlier that Sabato di Sarno was going to leave the brand. I did a bunch of reporting on that, you did a bunch of analysis on that. And I was thinking back to when you and I chatted at the top of Sabato's reign and you know, how retailers were reacting to it and where it would go. Curious to hear your thoughts. I thought one of the things that someone brought up to me was Francesca Belentini, the deputy CEO of Kering, mentioning on the call that like, yes, Sabato is not with us, but we're still on the same path that we were on when he joined and we have made progress on that path, which I think in my mind is to become more of a Louis Vuitton or an Hermes and less of a fashion fashion brand. So really be one of these brands that has something for everybody in some ways. And I'm just curious, a what you thought of Kering's results overall and B, what you think the path forward is with Gucci and how long it's going to take them to actually turn it around.
- [08:06]
Lucas Soka
Well, at the risk of stating the obvious, I thought that the Karing update was once again disappointing. Seeing Gucci down in the mid-20s is a clear indication, as if there was any need for confirmation after seeing Carrying Fire Sabato di Sano that Gucci is not working. My understanding is that what Sabato has achieved is maybe cleanse the Gucci aesthetics and move it towards being more elegant. But what he has failed to provide is excitement and buzz and twist on top of this newly found elegance. So from what I understand, I think that they want the creative director who is able to build on this platform, who's able to build on this elegance that Sabato has brought also on the this quality. I think that quality has also improved, but it was also going to be creating a buzz around the brand and making a bit of a sensation and also adding a fashion twist. I think that Gucci has two souls in a way. On the one hand, it is sort of rooted in craftsmanship, rooted in leather goods. It comes from the same tradition as Vuitton. But then it has an equally important fashion forward soul that we saw very clearly with Tom Ford, especially when it came to his over the top communication and that we saw again even too vividly with Alessandro Michele in the aesthetics of the products he brought to the market. In order to work, Gucci has to be able to mix the two. And probably if you could criticize Alessandro Michele, it was too much on the fashion side. But Saboto da Sana was too bland and too boring. So one has to find a bit of a happy medium, I think. Yeah, that is the task for the new creative director to accomplish.
- [10:26]
Lauren Sherman
So who do you think it's going to be?
- [10:29]
Lucas Soka
This is the guessing game of the moment. We're seeing so many. I believe that given the need to sort of revive the interest and the attention for Gucci, it has to be some kind of heavy weight that could potentially bring a huge amount of attention. At the same time as Gucci is hoping to revive its fortunes in the second half of the year, the person that comes on board should be immediately available. So if we look at who is a heavyweight and who is a heavyweight that is currently available, I don't know that we have a very long list of potential candidates. I guess Hades Lehman, John Galliano. I don't know if you would consider the outgoing creature director of Miu Miu a number one or a heavyweight. Maybe these would be the three. I think that there was a lot of discussions about Mario Grazia Chiuri potentially being a candidate, but I don't think so because the garden leave that you would have to serve is very long. 12 months, I believe. And by that time Gucci would have to be already hard at work on the new. On the new direction. So I would not think that she's a credible candidate just because of the engagement she still has with DeOrr and the LVMH group.
- [12:08]
Lauren Sherman
Yeah, I think what I've been told from people at Caring and what I know about her situation at LVMH is not to count her out. I think that she was interviewed for the job for sure. Like that's whether or not. But I think you're Right, the gardening leave thing. The one thing I know is Adi Salman did not have a non compete. So he is ready to go. He's ready to go. And he also bought an apartment in Milan. So why did he buy an apartment in Milan? We will never know. I also was told by people at Kering not long ago that they thought he was taking a break and just didn't want to do anything for a while or do fashion for a while. So who knows the Dario Vitali, it seems like a really. I know he's a number one in the making, but I also know that he has definitely been in talks with Versace and who knows. I haven't viewed these contracts, these ones, but I think they were close to being sure they were maybe close to signing someone. Whether or not they had just signed someone or when the disarno break happened, I don't think. I think if they knew who, if the person was signed, they would have announced it the next day. And that hasn't happened. So yeah, I think that the LVMH Maria Grazia situation is very complicated and so it's gonna. It would be hard. But when you think of Chanel, like the only answer at some point felt like it was Eddie Slimond and they went a totally different direction. But that's a different company that is already making the money in the way Gucci wants to make it. So I think like from a who can make a big splash fast and get the product on, on the mark that people want to buy it and do that all really, really quickly. He's the answer. So I would love for it to be someone like Dariel Vitaly to make it new and exciting, but it feels like they can't take a risk like that at this point. Right.
- [14:15]
Lucas Soka
That would be my hunch. And they cannot even wait for two or three years given you know, how pressing some of the improvements would appear. So they need to get sort of a shock therapy and I guess that there's not many people that could potentially deliver that shock therapy. So I also think that Hedy Sliman ticks a lot of boxes. Then others point out that they were falling off with each other because when Hedy left there was a sort of a court ruling and caring ended up having to pay money that they preferred not to have paid. Whatever. I think that the rescuing witches are far more important than ever. 7 million euros or whatever it was that they were to pay.
- [15:12]
Lauren Sherman
So easily forgotten, indeed, all the money. So moving on. Well, really quickly though, was there anything in the other. I saw that Bottega was up not a ton, but a bit. Was there anything else on the carrying results that the St. Laurent or anything that you took note of?
- [15:34]
Lucas Soka
I think that the most important point I noticed is that Kering is now moving to make less money with Bottega and Saint Laurent. You saw that Bottega was increasing sales but was actually reducing the EBIT margin. I think this is appropriate because this is a fixed cost industry. These brands are relatively small. They compete in a very tough environment. LVMH has been escalating the, let's say, the ante that you need to play in the game. And so what these brands need is a lot more support in communication and in retail. They need better flagships, for example, and so they will have to provide for those with lower margins.
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- [16:59]
Lauren Sherman
On the Moff podcast we share stories.
- [17:01]
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- [17:05]
Lucas Soka
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- [17:17]
Lauren Sherman
Of in the aisles of Target following.
- [17:21]
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- [17:22]
Lauren Sherman
Odyssey app or wherever you get your podcasts. So onto lvmh, which is in a class of its own. One thing I've noticed, and their report feels like it was a week and a half ago at this point or two weeks ago, it feels like it was ages ago. One thing I've noticed is that they seem to be really looking at their portfolio and saying and they've always done this like gotten rid of stuff. I mean they used to own Bliss Spa or whatever and Christian Lacroix, but so they will sort of get rid of things occasionally. But I've noticed in recent years, I mean they have a 70 person M& a team so it's not surprising that they're always looking at what they can get rid of and what what they need to need to keep. And I thought your thesis on what was happening with wine and spirits seemed really on the mark and interesting. But also there were reports in the French media about them potentially sell. Finally, after Years of trying to sell DFS the duty free company, which Arnaud, during the earnings call, did not deny that they were trying to sell it. I'm just curious, in this cycle of portfolio pruning, what you think they should do? What? They obviously broke up with Stella McCartney, but that was sort of expected. And I think, like, that. I think that has less to do with them trying to prune their portfolio. More to do with like, that was a bad fit. But I'm curious what you think overall.
- [19:13]
Lucas Soka
Yeah, they've been doing a little bit of pruning. You consider Stella, you consider off white as well. Recognizing that, you know, streetwear is no longer the flavor of the month. There must be a recognition that wines and spirits is no longer serving the purpose that it was serving in the past. It's not really helping to diversify what the business is, which is entirely dependent on fashion and leather goods profits. No matter whether wines and spirits works or not, it works according to a different logic. So my understanding is that, you know, the writing is on the wall. If it's not now a spin off is probably what is to come on that front. DFS is losing a lot of money and they've been cutting loss making stores like the one in Venice, for example, and a few in Asia. An outright divestiture could potentially also be considered. And it's true that LVMH has a very long tail of underperforming brands in fashion and leather goods, but they've been always very reluctant to get rid of them. You mentioned Christian Lacroix, which was indeed one of the brands that at one point they divested. Pink.
- [20:33]
Lauren Sherman
Oh yeah, Thomas Pink. I forgot about that.
- [20:36]
Lucas Soka
That was another one. I, I think that the moment they reach the conclusion that there's really no future for, for these brands, they do divest them, but in most cases they prefer to keep them on the back burner if they don't lose a lot of money. I think the big difference is that if, like dfs, they lose a lot of money, then it's a. It's a different story. It's a different story also because I think that brands like Diora need to invest, they need to inject more content in what they bring to the market. So it's not that at the moment you have other reservoirs where you can milk profit and take care of losses very easily. It would be nice not to have too much of bleeding anywhere. And so you're probably right. I think that this sort of cleaning up will continue maybe more softly. And I don't necessarily expect the big bang spinning off for one's spirits just at the trough. But, you know, we listened to Bernard Reneu giving two years to Jean Jacques. What you can accomplish in two years is not clear. If the most important problem we have is demand not being there, like in China, for example. So I think that the next sensible thing to do is to sort of not divest, because this is not the time to sell an asset like that, but just separate it and give shares of this business to the other major holders and then they do what they like.
- [22:20]
Lauren Sherman
Oh my. So what's interesting, the point you made about Dior really quickly, and this is all, I don't want to say speculative, because it's a little more educated than that, but we know that Jonathan Anderson is going to work at Dior. Is he going to be the designer of both the men's and women's lines? It sounds like he is. But how that's all going to kind of work out and announce and everything. This is a person who is probably the biggest star of his generation, definitely a generational talent, and who has taken Loewe from being a nothing brand to a $2 billion business. Much of that has been driven by like really amazing marketing and Runway shows. What I have talking behind the scenes about him being at Dior, and I'm as a consumer, a massive fan of his work and also, as I would say, like a writer who writes about fashion. As a business reporter, my fear is that he's too niche or that he, that is such a big job. Like, how will he inject excitement into it in a way that it feels like Dior. Raf Simmons did it, but it wasn't necessarily commercially successful with him. Like the commercial success did not have to do with Raph. Kim Jones, obviously and Maria Grazia had tremendous commercial success, but maybe not as much Runway success. Kim's last Runway was really well reviewed, but generally people would be like, ugh, so bored. I'm so tired of it. But at the product level, it was really spectacular for a while, until it wasn't. I'm curious what you think as an analyst of someone. Like, do they need someone like Jonathan Anderson, who is, who has become like a celebrity in his own right? Because young people like his clothes. They like low bags. I was on the, on a plane the other day and a guy had a head to toe Loewe sweatsuit on. And I texted it to a friend who worked at Loewe and they were like, oh, that's a counterfeit. That's kind of remarkable that there are counterfeit Loewe sweatsuits. So I'm curious what you think if he is the chosen one of Dior, like, do you think that that's what they need to get back on track?
- [24:50]
Lucas Soka
I think that big brands like, like Dior probably need to have a multi pronged approach. They need to be clearly enjoying creativity and they need to have newness that would bring consumers back to the stores. But it's also true that they, especially Dior, take care of a very broad audience with many different consumers at different price points and at different levels of sophistication. And I think that the trick to make big brand like that work, which is multifaceted, is probably in the team you end in not only in the team of people you have, but also in a mix of tools you use. We saw recently, for example, with Don Come Back, I think largely on the back of this Takashi Murakami capsule that has been taking the world by storm. I wonder if a similar strategy could potentially be employed at Dior. Having an avant garde capable designer is one of the elements. Then you need to have the way to attract attention and to create a buzz. And then you also need to have the commercial products in the stores. So you need merchandising, you need maybe a collaboration, you need a new creative director, you need quite a few things. And at the moment there is, you know, not a lot that we can see. So for sure, I expect a lot of new news from Dior considering that so far they've just provided sort of news about who's leaving, but then who's coming and what are they going to do in order to get rapidly back center stage in terms of consumer retention. They lack consumer attention. Consumers are looking elsewhere today and that you don't necessarily get back just with a new creative director, especially if that creative director is niche because that is not going to appeal and it's not going to be understood by the wider public.
- [27:11]
Lauren Sherman
Yeah, it's a good. The Murakami example is such a great point. I've heard it has blown expectations out of the water and it's just been an incredible success for me. What is Dax, are you tracking all.
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- [28:28]
Lauren Sherman
So moving on to another can't lose brand, Hermes. Their numbers were expectedly pretty good, right? Or double digits in the U.S. but I wanted to ask you about A if you think their numbers were as good as they could be and B Axel Dumas actually ended up addressing the work in and all the dupes and all the counterfeits and all of that. And you know, in typical Hermes fashion he was like we're not going to put up with this. But also I do feel for these people who can't afford Hermes, which I loved. But I'm curious what you think about that. Do you think they need to address it in any way or it matters? Or are the dupes over becoming so big that they actually are affecting the top line revenue?
- [29:21]
Lucas Soka
I doubt it. I think that imitation is the best form of flattery in a way. So it comes with the territory. If you are the most desirable brand, many will try to imitate you. Then it's down to Hermes to defend its intellectual property and then take matters to court where it's appropriate and fight like mowing the grass. I think you never mow the grass once and for all, there's always going to be people wanting to try and copy you and provide dupes and counterfeits to the market. It is a sign that the brand remains vital and very prized by consumers. So I was listening primarily to the fact that Axel was annoyed by it to understand that the for what they can and for what is infringing copyright, they will be trying to pursue anyone that steals intellectual property from them. When it comes to the results, they were really very good. I think that once again this goes down to the fact that when consumers watch their pennies like in China today, the last brand that they give up on is the most desirable one on their list. And Hermes has been able to stay in that very high position for many consumers. And so this is the result of brand desirability. It's very good. It was, was in a way noblesse oblige. It was expected because the share price had already anticipated this move a lot contrary To Moncler, where you had a lot of doubters in the stock market, I don't think that if you could look at the share price, you had a lot of doubters on the buy side. So my sense was that to some extent, the good news were largely in the share price already, when in the case of Montclair, it was more of a genuine surprise because there were very, very few people supporting Montclair into the print. And luckily we were one of those. But that mess was to shine. This was, in a way anticipated by the stock market.
- [32:08]
Lauren Sherman
What about Richemont? How did people feel about their results?
- [32:12]
Lucas Soka
I think that Richemont has definitely done very well indeed. That they were only a few percentage points behind Hermes with their jewelry. Maison's jury is enjoying a better value for money image in the eyes of consumers. And Cartier and frankly, Fenapels are at the very top of that category, with Tiffany and Bulgaria commanding much less consumer traction. So I think Richemont is indeed in a very, very good position with a better and stronger management team. With cleaning up, that has been done. We're talking about LVMH cleaning up its portfolio. Luckily, Richemont has separated itself from Juxtaporte.
- [33:11]
Lauren Sherman
Luckily. Finally, Luca.
- [33:14]
Lucas Soka
Finally, finally. Yes, I should have said finally. Indeed. It's been a journey, which was indeed a very long and winding road, but at last we got there. And so I think that, of course, in the ideal world, you would want to have a little bit more clarity in the soft luxury business, but that is not too big that it hurts. So I think that Richemont is in very good shape overall.
- [33:46]
Lauren Sherman
Yeah. And it's interesting, like two years ago, the soft luxury, you just why did they own it? And now Chloe and also Alaia are both very hot brands with consumers. They're tiny compared to most of these other brands, but they are the ones that, you know, real fashion consumers are obsessing over right now. And so in a weird way, it's like, oh, well, maybe it's good that they kept them.
- [34:12]
Lucas Soka
They can get these successes every now and then. I think that the only thing they need to pay attention to, like when they had at one point the Chloe and the Phoebe Filo doing very well not to get their best resources poached by competitors. If they can avoid that, then this development could have legs and continue.
- [34:36]
Lauren Sherman
Yeah, I think it's going to be tough. I think it's going to be tough, especially on certain fronts. Finally, Luca, looking ahead and we see that everything is improving. One thing I always think about in these cases is so many of these companies are really trying to mimic Hermes and Hermes business. Or when, I don't know when a company is doing really well, I'm trying to think of another one that has succeeded. Or Gucci with Alessandro or Balenciaga with Demna. When those were at the height, all these other brands kind of tried to copy them. And they see there's so much copying in Fash. That's not about product, it's about like business model. If suddenly something's working and then they're going to, everybody's going to do it. As we move into this period of growth, like, what advice or, you know, kind of points of analysis would you give these brands that are going to see that see Hermes and they think, well, we just need to do what they need, what they do, when the key is that Hermes doesn't do what anyone else does, they do what's right for them and that's why they're successful.
- [35:53]
Lucas Soka
I think you should be respecting your DNA and you should be. You should stay true to yourself. And I think that that is what Hermes does best. And Axel said it very, very clearly when somebody asked him whether they would be on the lookout to buy brands. He said, you know, we know how to run Hermes and we do a lot of the things right and we do a lot of things wrong. But then paradoxically doing things wrong, he's helping us, and it works. For Hermes, it's a bit of a magic formula. They wouldn't necessarily be able to run a brand that was different in nature. And they know how to play this game. I think every brand should be understanding the true reason why, what resonates with consumers, what could potentially be the pitfalls and work to avoid them and to enhance their equity with consumers. One very good brand example that I can think of that has been doing this over the past 10 or 15 years is Moncler. They haven't been mimicking anyone. They've been cognizant of the risk of becoming a uniform. They have continued to develop the brand into new spaces, not just into new categories, but also new price points. And look at what they've been doing with Grenoble bl. That I think is deeply rooted in the Moncler DNA. That is looking at what you, what cards you have and what kind of game you could play, irrespective of what brands with different cards do with. Because what they do to some extent, if you don't have the same DNA, is quite irrelevant to you. And maybe if there was a mistake that I've seen recoveringly over the years is brands trying to mimic somebody else. And that is never a good idea. I think being a Me too, without the qualities of the brand you're trying to imitate doesn't lead to success.
- [38:04]
Lauren Sherman
No. Everybody listen to Luka. I know. I always do. Thank you for being here. I know it's late where you are. I appreciate you.
- [38:12]
Lucas Soka
Thank you very much indeed, Lauren, and see you soon. Take care.
- [38:15]
Lauren Sherman
Thank you.
- [38:16]
Lucas Soka
Bye.
- [38:16]
Lauren Sherman
Bye. Fashion People is a presentation of Odyssey in partnership with Puck. This show was produced and edited by Molly Nugent. Special thanks to our executive producers, Puck co founder John Kelly, executive editor Ben Landy and director of editorial operations, Gabby Grossman. An additional thanks to the team at Odyssey, JD Crowley, Jenna Weiss Berman and Bob Tabador.