catwalks to carats: luxury sector heats up - Thomson Reuters

catwalks to carats:luxury sector heats up

REUTERS/JESSica Rinaldi

From the United States to China, from jewelry to sports cars, upscale goods and services are growing faster than expected.

LUxUry iS Spreading. Sales of upscale goods and services are growing more

quickly than expected and across the board – be it the world’s largest luxury market in the United States or the fast-growing

markets of China, russia and Brazil. From expensive jewelry and designer clothes to cosmetics, glamorous hotel rooms and sports cars, rich consumers everywhere are pursuing those special purchases that set

them apart from the crowd. Top executives from new york, paris, London and Hong Kong told the reuters global Luxury and Fashion Summit of May 23-25 that steadily rising sales in the sector are likely to last.

may 23-25, 2011

global luxury and Fashion summit

Global lUxURy and FaShion SUmmiT may 23-25, 2011

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luxury execs see strong 2011, more m&a

chamPaGnE anyonE?: Bar 3 at Le Bristol paris in an undated photo. REUTERS/GUillaUmE dE laUbiER/ comPany handoUT

by aSTRid WEndlandT and Phil WahbapariS/neW yOrK May 24

LUxUry gOOdS makers expect 2011 to be one of their strongest years in recent

history, thanks to fast-growing China and a return of global consumer confidence, luxury executives said on Monday.

Whether it is five-star hotels, sportscars, fancy dresses or expensive face creams, consumers are splurging again and putting behind them the dark days of the financial crisis, executives told the reuters global Luxury and Fashion Summit.

Sportscar maker Lamborghini, L’Oreal’s

luxury unit division, Cerruti, roberto Cavalli, parisian five-star hotel Le Bristol and Coach inc all gave upbeat outlooks for this year in spite of Japan’s woes and debt worries in europe.

nicolas Hieronimus, head of L’Oreal’s luxury unit division, said there was no reason to believe consumption in europe would deteriorate and he expected the maker of Lancome creams and yves Saint Laurent lipstick to beat market growth this year.

Meanwhile, roberto Cavalli, known for its lavish animal prints and colorful cocktail dresses, said sales should surge by as much as 30 percent this year, boosted by travel shoppers and and strong demand from asia.

Forecast................................................2-3Furstenberg.............................................4China .......................................................5M&a ........................................................6Visa .......................................................7-8raw Materials ....................................9-10Lamborghini ........................................... 11Sheiseido ................................................12Coach .....................................................13yoox ........................................................14Moda Operandi ......................................15Watch Sales ...........................................16artisans ............................................. 17-18

index


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Lamborghini Chief executive Stephan Winkelmann said he expected to sell around 1,500 cars this year, up from 1,302 last year, depending on deliveries of its new aventador model which starts at 300,000 euros ($421,000) and can reach 600,000 euros in China.

Coach, a leather goods maker, is selling more of its pricier handbags now, CeO Lew Frankfort said in new york.

The Bristol hotel in paris, which recently won the right from the French government to call itself a “palace,” said the year had started very well and it expected first-half revenues to be up 10-15 percent against the same period in 2010.

UPTicK in m&aTHe pOSiTiVe OUTLOOK in the industry is also triggering a fresh round of mergers and acquisitions.

Just after Bally-owner Labelux said it would acquire fashion brand Jimmy Choo on Sunday, roberto Cavalli Chief executive gianluca Brozzetti told the summit in London potential buyers were queuing up to buy the italian brand.

“We have a long queue that is coming to us, because they can smell there is something positive going on,” Brozzetti said.

and some buyers are coming from the east.Hong Kong luxury meanswear operator

Trinity which last year bought italy’s Cerruti fashion house, said it was keen to acquire more heritage brands in europe to fuel its expansion in China, set to become the world’s biggest luxury market.

pascal Berclaz, head of small Swiss luxury watchmaker Quinting, said buyers were back in 2011 and his brand was getting approached about two or three times a month as opposed to once every six months last year.

Meanwhile, fast-growing French fashion brand Zadig & Voltaire, said it was also getting approached but the door remained closed.

“i have a lot of people knocking on my door but i usually don’t answer them as it is a loss of time,” Zadig & Voltaire founder and Chief executive Thierry gillier told the summit in paris.

earlier this month, U.S. consultancy Bain raised its 2011 growth forecast for luxury sales to 8 percent at constant currencies from a 3-5 percent range after sales data from major luxury groups such as LVMH, Burberry, ppr and Tod’s beat market expectations.

Bain expects sales in europe and the United States to be 7-8 percent and

25 percent in China.Overall, luxury goods sales should total at

least 185 billion euros in 2011, up from 172 billion euros in 2010, Bain estimates.

“The selling at wholesale for the fall and winter of 2012 is actually going fast and that is yet another good sign,” said Marc-andre Kamel, head of Bain & Company’s retail and Luxury practice for europe, Middle east and africa.

Still, bumpy stock markets elsewhere could hurt luxury spending, experts said.

“Bottom line is you take a market like new

york City and it is levered to the stock market, it’s not just the bonuses down on Wall Street, it’s employment,” said Shawn Kravetz, who runs Boston-based hedge fund esplanade Capital.

despite the upbeat outlook, some executives say that consumers remain cautious and still seek out bargains.

“Our positioning as a democratized luxury brand has never been more in vogue than it is today, Coach’s Frankfort said.

(editing by Bernard Orr and erica Billingham)

QUEUinG UP: roberto Cavalli CeO gianluca Brozzetti attends the reuters global Luxury and Fashion Summit in London May 23, 2011. REUTERS/bEnJamin bEavan

Luxury spending: total value vs. per capita

Source: Bain & Co., government authorities Note: Greater China includes China, Hong Kong, Taiwan and Macau

Reuters graphic/Van Tsui

19/05/11

Luxury goods market ranking by country, 2010estimate - € billion

Luxury goods spending per capitaranking by country, 2010 estimate - €

Growth,’09/’10 est.

The U.S. is the undisputed leader in consuming luxury goods while Greater China is quicklyclosing the gap with Japan. Hong Kong is No. 1 on a per capita luxury spending basis.

0 10 20 30 40 50

HongKong

Russia

SouthKorea

Germany

U.K.

China

France

Italy

GreaterChina

Japan

U.S.

0 200 400 600 800

China

Greater China

Russia

Germany

South Korea

Japan

U.K.

U.S.

France

Italy

Hong Kong16%

0%

23%

7%

6%

30%

7%

4%

10%

9%

15%


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Furstenberg works For her children

by aSTRid WEndlandT and vicToRia bRyan

pariS, May 25

DeSigner diane von Furstenberg, famous for her floral prints and

wrap dresses, is developing a perfume, a cosmetics range and a home line in a bid to rebuild a fashion empire she can pass on to her descendants.

The designer, who bought back her own brand in the late 1990s after it went dormant with licence-holders, told the reuters global Luxury and Fashion Summit her company was growing healthily, generating an estimated $1 billion in annual sales.

“i want to leave a legacy, something behind ... i want to leave something that will last after me,” Furstenberg told the summit in paris.

“already my granddaughter wants to be me and is better than me,” Furstenberg said.

The designer, who is also president of the Council of Fashion designers of america, said she had given the company to her daughter and son but retained effective control through golden shares.

Furstenberg was in paris to prepare the

September launch of her perfume called “diane.” She teamed up with a little-known French company called id Beauty which will also develop her cosmetics line.

“i went with a small company because i thought they would work really hard for

me and they’re very good in skincare,” she explained, sporting an ipad with a leather cover based on her very first print.

She said she expected the skincare line to be launched possibly as early as next year.

in addition, she planned to add furniture to the home range.

But while she was building the business, she said she was also preparing it to grow on its own.

Last year, Furstenberg said she hired as the fashion brand’s creative director yvan Mispelaere, who previously worked at prada, Chloe, Valentino and gucci. She said she was very satisfied with her choice.

“When you hire a creative director, it is like marriage, it is a total lottery but i congratulate myself for my choice. He understands what the brand is about,” she said.

Furstenberg put in the executive seat paula Sutter who used to work at donna Karan.

While she expected to be “less and less” involved in the creative work of the business, she said she planned to continue designing prints and growing the homewear line which was launched in February in the United States. (additional reporting by Silke Koltrowitz;

editing by Matthew Lewis)

REUTERS vidEo

Click to check out the video on reuters.com:http://r.reuters.com/qum79r

EyE on lEGacy: a model presents a creation at the diane Von Furstenberg Fall/Winter 2011 collection during new york Fashion Week February 13, 2011. REUTERS/JESSica Rinaldi

http://r.reuters.com/qum79

http://r.reuters.com/qum79


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luxury goods makers speeding along in china

by anTonElla cianciopariS, May 25

LUxUry gOOdS MaKerS may boast familiarity with China, but the pace

of change in the world’s fastest-growing country still startles them.

The world’s biggest luxury market within five years has become a second home for brands such Hermes, prada and Tiffany & Co that tap Chinese appetite for fast super sports cars, 10,000-euro ($14,060) handbags and diamonds.

Top executives of groups such as italian car maker Lamborghini and jeweller Harry Winston inc told the reuters global Luxury and Fashion Summit this week that Chinese rapid change can befuddle them.

“The biggest surprise you get in China is the speed of change,” Lamborghini’s chief executive Stephan Winkelmann told the reuters Summit in paris.

The head of Harry Winston, the luxury jewellery and watch retailer whose brand was immortalised by Marilyn Monroe, said the passion for true luxury in China has no limits.

“nothing is too big, nothing is too beautiful,

nothing is too expensive for the Chinese today. They are on a quest for true luxury,” Harry Winston’s chief executive Frederic de narp said in a telephone interview from Shanghai, where the company plans to open two stores by the end of the year.

italian online fashion retailer yoox, which opened the first western fashion brand’s online store in China last year, said tech-savvy Chinese shoppers are the most up-to-date.

“Chinese fashion people are changing. They are getting more and more sophisticated with a speed that i have never seen in my life with any customer,” yoox’s Federico Marchetti said.

“in two years from now they will be the most sophisticated customers of fashion in the world”.

yoox is planning to bring more high-end designers to China, with all online stores in Mandarin and transactions offered in yuan. Last year Hermes launched China-focused label Shang xia, which means “up down” in Mandarin.

For Belgian-born designer diane von Furstenberg, whose wrap dresses symbolised women’s freedom in the 70s, China has

always been a dream. She plans to open a website for the country.

“i was obsessed with China, still am,” the designer told the reuters Summit in paris. “Two years ago my new year’s resolution was to be known in China and i am now,” she said.

Money is running in China as fast at fairs and showrooms as it is on the internet, other executives said.

“during the Basel watch fair, a Chinese retailer offered to buy our entire annual production of the automatic golden Bridge model,” Swiss watchmaker Corum’s chief executive antonio Calce said.

Lamborghini’s Winkelmann said new wealth comes hand-in-hand with a passion to own the finer things in life.

“They come with their suitcases of money to buy. For me it’s still astonishing that these things exist. it’s the child-like enthusiasm for the things, which is something for me unknown in the western world”.

(additional reporting by astrid Wendlandt, pascale denis, nathalie Olof-Ors in paris, S. John Tilak in Toronto, phil

Wahba and dhanya Skariachan in new york)

madE FoR WalKinG: a model presents a creation by prada during the autumn/Winter 2011 women collection show at Milan's Fashion Week February 24, 2011. REUTERS/STEFano REllandini

China to become biggest luxury market

Sources: Euromonitor, CLSA

Reuters graphic/Christine Chan 19/05/11

Luxury consumption Compound annual growth rate 2009-2014 – %China’s key consumer sectorsChina’s luxury consumption forecasts

China’s luxury consumption to account for over a fifth of global market by 2020

Gaming

Luxurygoods

Communication

Education

% of global luxury mrkt

Bln EUR

0

20

40

60

80

'20'19'18'17'16'15'14'13'12'11'10 0 5 10 15 20 25 30 350

5

10

15

20

20%

25%

17%

16%


6

luxury brands under m&a pressure

by anTonElla ciancio and JESSica hallpariS/neW yOrK, May 24

Big LUxUry gOOdS companies will be pressured to make acquisitions to grow

even as stocks of high-end retailers and brands make deals pricey and some targets are reluctant to even listen to offers.

“if i’m a gucci or LVMH, i am confident i can do more faster with a given asset by the virtue of owning it,” said Shawn Kravetz, president of esplanade Capital.

“The buyer just says i can do even more with that. i can take a 10-year growth plan and make it happen in five, i can enter two times as many countries, i can build five new stores instead of two,” Kravetz said at the global Luxury & Fashion Summit in new york.

So far this year, luxury mergers and acquisitions have doubled the pace set for all of 2010, according to data from Thomson reuters. Luxury M&a totaled nearly $6.0 billion through May 20, compared with $2.9 billion for full-year 2010.

On Sunday, upscale shoe-maker Jimmy Choo agreed to be sold to german luxury-goods firm Labelux gmbH, which owns Swiss shoe brand Bally, as well as the derek Lam fashion house and British jeweler Solange azagury-partridge.

“a lot of these larger companies are going to be under even greater pressure to find ways to grow. and when they’ve penetrated even more of these international hamlets, acquisitions are going to be the way to grow,” Kravetz said.

Hong Kong luxury menswear operator Trinity Ltd, which last year bought italy’s Cerruti fashion house, said it is looking to acquire more heritage brands in europe to fuel its expansion in China, set to become the world’s biggest luxury market within the next decade. in January, Trinity raised $95 million specifically to fund acquisitions.

retailers operating in greater China, such as Trinity and ygM Trading Ltd, have been acquiring european brands as increasingly wealthy Chinese consumers turn to expensive

foreign brands for suits, handbags and shoes.“What we’ve seen obviously is that

companies have a lot of cash on their balance sheets, confidence again. We’ve passed the financial crisis,” said Scilla Huang Sun, Swiss & global asset Management told the reuters Summit in paris.

“Many companies are planning ipOs and we think consolidation in the luxury sector will continue. That’s positive because it will lift luxury stocks,” said Laurent Belloni, a fund manager at pictet premium Brand.

pictet premium says luxury stocks are trading at 17 times future earnings, but could rise to 20 to 22 times earnings, in line with historical averages.

SUiToRS lininG UPiTaLian FaSHiOn HOUSe roberto Cavalli said it has a long line of suitors, but wants to deliver on its turnaround plan before looking at a sale or initial public offering.

“We have a long queue that is coming to us, because they can smell there is something positive going on,” gianluca Brozzetti told the reuters global Luxury and Fashion Summit in London.

Clothing brands such as fast-growing

French fashion brand Zadig & Voltaire and Swiss luxury watchmaker Quinting also said they have been approached several times over the last two years.

They said they eventually turned down the offers as they preferred to keep control of their companies. “it was not our intention to sell,” Quinting CeO pascal Berclaz said.

“i have a lot of people knocking on my door but i usually don’t answer them as it is a loss of time,” Zadig & Voltaire founder and Chief executive Thierry gillier told the summit in paris.

initial public offerings are seen as a viable alternative to selling to a larger brand. Moncler, prada, Ferragamo are often cited as prime ipO candidates.

Kravetz said such companies are likely to move slowly towards the public markets since they many luxury brands are family owned and bogged down in history and bureaucracy.

“These companies move at a glacial pace. But a $10 billion ipO for prada could get the family’s attention,” Kravetz said.

(additional reporting by pascale denis, astrid Wendlandt and phil Wahba;

editing by richard Chang)

GiRlS don'T cRy: actress Hilary Swank arrives at the 83rd academy awards in Hollywood, California, February 27, 2011. Swank is dressed by gucci. REUTERS/lUcaS JacKSon


7

luxury sector wants easier u.s. visa rules

by Phil WahbaneW yOrK, May 26

An UnFriendLy U.S. tourist visa system is bad for the luxury business and the

government needs to ease its rules, according to industry officials.

The expense of applying for a tourist visa for the United States, followed by an often weeks-long wait to get the document, is turning off a lot of wealthy tourists from russia, Brazil and China and leading them to choose europe for their shopping vacations, several executives said.

“We absolutely want to support the safety of the U.S., but what’s unclear to me is how waiting three months to get a visa because there’s a backlog, as opposed to two weeks, makes the country any safer,” Starwood Hotels and resorts Chief executive Frits van paasschen told the reuters global Luxury and Fashion Summit this week.

international visitors spent $103.1 billion in the United States in 2010, up 10 percent from a year earlier. Spending by Chinese and Brazilian tourists rose 39 percent and 30 percent, respectively.

That growth could be even higher if the United States eased its visa rules, executives said.

“if you go to paris, to galeries Lafayette and printemps, you go to London, you go to Harrod’s, the asian tourists, the Brazilian tourists, the russian tourists are very brand-conscious, very luxury-focused,” Saks inc CeO Steve Sadove said.

“They would clearly love to see the U.S. cities as much as some of the european cities,” he added. Saks’ flagship store on Manhattan’s Fifth avenue is a major tourist attraction.

at Starwood’s famed St. regis Hotel in Manhattan, 35 percent of guests are foreign tourists.

indUSTRy lobbiES GovERnmEnTearLier THiS MOnTH, the U.S. Travel association urged the government to overhaul its visa system, saying it serves as a

virtual “keep out” sign.The trade group wants the U.S. State

department to extend its visa waiver program to more countries, and ensure it has enough staff to quickly process visa applications. it says the steps would boost tourism and tourist spending in the United States, creating 1.3 million jobs.

“if those (visa) regulations were lightened, would it help the tourism business? absolutely,” said neiman Marcus group CeO Karen Katz. The chain’s Bergdorf goodman store in Manhattan is also a big draw for tourists.

a State department official told reuters the Obama administration understands the industry’s concerns and its role in the U.S. economy, but must weigh security and immigration issues, hence the need for in-

person interviews for visas.department officials met with U.S. Travel

association representatives earlier this month.

Western europeans, Canadians and australians are among those who do not need visas when they visit the United States as tourists. Citizens of most other countries need visas.

The State department says it has issued 13.4 percent more visas so far this fiscal year than in the same period a year earlier. it says the number of tourist visas issued to Chinese nationals has risen 124 percent in the last five years.

Chinese travelers are among the world’s biggest spenders. snapping up Louis Vuitton LVMH bags and jewelry at Tiffany & Co in the world capitals they visit.

“how Does waiting three months to get a visa make the country any safer.”

International visitor spending in U.S.

Source: U.S. Commerce Department *Belgium-Luxembourg


19/05/11

Americas

Europe

Asia Pacific

2010/2009 change in travel spending, excluding passenger fares - % $ - billion

Asian countries are some of the fastest growing in terms of tourism spending in the U.S. withBrazil and Canada also up. European visitors are lagging and even down in France and Ben-Lux.

-5 0 5 10 15 20 25 30 35 40

JapanIndia

Hong KongAustralia

TaiwanSouth Korea

SingaporeChina

Bel-Lux*France

U.K.Germany

NetherlandsItaly

VenezuelaMexico

ArgentinaCanada

Brazil 4.216.51.56.11.7

2.31.34.58.63.10.6

3.80.53.31.03.40.52.9

10.2


8

They are set to overtake their Japanese counterparts as the second-largest luxury spender behind the United States within a few years.

a U.S. Commerce department study forecast the number of Chinese tourists visiting the United States will more than triple in the next five years.

“Quite frankly, the Chinese tourist is today the dominant influence in the gateway cities,” polo ralph Lauren Chief Operating Officer roger Farah said on a call with Wall Street analysts on Wednesday.

Tourists’ dollars don’t only benefit stores or hotels.

“Our sales at duty free are mindboggling,” said Bernd Fritz, chief executive of the perfume company Coty.

(reporting by phil Wahba; additional reporting by Jeremy pelofsky;

editing by John Wallace)

i'd liKE To ThanK ThE acadEmy: an eight-foot golden Oscar statues are delivered to the St. regis Hotel in preparation for the official Oscar night celebration in new york, February 21, 2007. REUTERS/Shannon STaPlETon

liTTlE blacK nUmbER: a model presents a creation at the ralph Lauren Fall/Winter 2011 collection during new york Fashion Week February 17, 2011. REUTERS/JESSica Rinaldi


9

GoldEn RinGS: an employee reaches for a gold bracelet at a jewellery shop in Hong Kong May 23, 2011.REUTERS/TyRonE SiU

raw material coststo hurt margins

by SilKE KolTRoWiTz and naThaliE oloF-oRS pariS, May 24

ReCOrd HigH priCeS for raw materials such as gold, silver, diamonds, leather

and cashmere will squeeze the margins of luxury goods makers this year because price increases will only absorb part of the hit.

as the global economic recovery picks up speed and emerging markets like China see booming growth rates, commodity prices spiral, boosting input costs for companies.

prices for precious metals, seen as alternative investments, have soared, supported by a weak U.S. dollar and low interest rates. Other raw materials, such as leather, cotton or cashmere, have become scarce due to high demand from asia.

“Companies are concerned about high raw material and production costs,” fund manager Scilla Huang Sun told the reuters global Luxury and Fashion Summit. “in the luxury space, high raw material prices will,

however, have a smaller impact than at other consumer companies because they represent a smaller percentage of their cost base.”

Comfortable gross margins of 55-75 percent, production mainly located in europe where wages do not explode as in China, and strong pricing power offer luxury goods groups some shelter from cost pressures, said Huang Sun, who manages a luxury fund at Swiss & global asset Management.

gold has rallied almost 40 percent in a year to a record high above $1,575 an ounce in early May, but has since retreated as the U.S. currency bounced from lows, making dollar-priced commodities more expensive for holders of other currencies.

at the end of april, average prices of certified polished diamonds were 19.6 percent higher than a year earlier, diamond

entrepreneur Martin rapaport’s benchmark price list showed.

“i think diamonds’ price will continue to rise until interest rates go up,” rapaport told reuters in an interview.

Higher interest rates prompt diamond cutters to sell more stones, thus increasing supply in the market, as they seek to lower their inventory costs, while also making consumers more wary about spending and

giving potential diamond investors good reasons to keep their money in the bank.

“High raw material costs hurt our margins because you cannot raise prices every time input costs rise,” Jean-Marc Jacot, head of upscale watchmaker parmigiani, told the summit in paris. “For parmigiani, these costs have doubled over the last two to three years.”

“high raw material prices represent a smaller percentage of their cost base.”


10

Jacot said, however, that wealthy Chinese and russians are ready to loosen their purse strings for top-quality items.

Management consulting firm McKinsey & Co conducted research that showed 28 percent of people in China were ready to pay full price for luxury items compared with only 6 percent in europe and 9 percent in the United States.

north american jewelry retailer Harry Winston diamond Corp said colored stones have grown increasingly popular with Chinese consumers.

“Because of the prohibitive price of white diamonds, i believe that they start to love colored stones as an alternative, which can have a nice volume at a moderate price,” the company’s chief executive, Frederic de narp, told the Summit in new york.

He said Harry Winston has benefited from soaring diamond prices because of a 40 percent stake it owns in a diamond mine.

chEaPER SilvER Mid-range JeWeLry makers and watchmakers, whose customers are more price-sensitive, may find it harder to raise prices and will look at other solutions, including using cheaper materials.

even though silver prices have nearly doubled over the past year to a record high

of $49.51 per ounce late last month, the less-costly metal could replace gold in some jewelry.

“With an increase in the price of gold, i think silver jewelry will see a new season in the market,” italian fashion house roberto Cavalli’s CeO, gianluca Brozzetti, told the summit.

italian goldsmiths have experimented with gold-plated silver jewelry and launched silver collections even for the upscale market to soften the impact of metal prices for consumers.

Fashion and accessories makers have to cope with rising prices for cotton, cashmere and leather.

Thierry gillier, founder and owner of fashion brand Zadig & Voltaire, said demand for cashmere is strong and he does not expect prices to fall anytime soon.

“For the time being, this is not a problem. Our margins are big enough to absorb this,” he said, adding he is trying to keep prices stable.

Leather prices are also up. The chief executive of Hermes, patrick Thomas, told reuters earlier this month that the price of various leathers used by the luxury group

had, on average, risen by 10 percent in the last year.

Changing eating habits in Western europe may be one of the reasons why calfskin, a favorite for luxury handbags, has become scarce.

“Tanneries use waste products from the meat industry. people eat less veal nowadays, so these skins are harder to get,” Stefano giannotti, manager of italian leather broker Fargo said.

He also said China, a country that used to export raw hides, has now turned into an importer. domestic demand for skins has risen and production has dropped as Chinese farmers have left the countryside for the cities.

Cavalli’s Brozzetti said the significant growth in accessory consumption has led to leather sourcing problems.

“There are some of the biggest players who are buying tannery companies to make sure they get the supply of the material they need,” he said.

(additional reporting by Mark potter in London, phil Wahba and John Tilak in new

york; editing by Matt driskill)

WaTch oUT: a visitor looks at watches at the parmigiani booth during the opening day of the "Salon international de la Haute Horlogerie" at palexpo in geneva, January 19, 2009. REUTERS/dEniS baliboUSE

“you cannot raise prices every time input costs rise.”


11

lamborghini to launch new ‘everyday’ model

iTalian maGic: The new Lamborghini aventador Lp700-4 is pictured during the second media day of the 81st geneva Motor Show at the palexpo in geneva March 2, 2011 REUTERS/dEniS baliboUSE

by anTonElla ciancio and hElEn maSSy-bERESFoRdpariS, May 23

ITaLian SUperCar maker Lamborghini is considering adding an “everyday” model

to its line-up, its chief executive Stephan Winkelmann said at the reuters global Luxury and Fashion Summit.

Lamborghini, a unit of Volkswagen’s audi brand, whose sleek cars bear the charging bull logo, sees the luxury super sportscar market returning to the record levels seen in 2007 by 2013-14, Winkelmann said.

around 35,000 super sports cars were sold in 2007, compared with about 26,000 last year, he said.

Strong demand from emerging regions such as China and russia is boosting sales of high-end models.

referring to plans for a third model, Winkelmann said: “We are going to have a third model. it has to be an everyday car. We want to have a car which is able

to be used on a daily basis.”Lamborghini, which competes with fellow

italian brand Ferrari, has not yet decided which segment the car will belong to, he said, adding that once that decision was made, the group would need about four years to get the car on the road.

The group does not plan to work with a partner on the new model, Winkelmann said, but he added: “We will use synergies where possible within the (Volkswagen) group.”

Founded in 1963 by passionate self-made man Ferruccio Lamborghini, the company was hit hard by the global economic crisis in 2009. it sold 2,430 cars in 2008, its record year.

Winkelmann said Lamborghini could sell around 1,500 cars this year, compared with 1,302 in 2010, although he stressed that this was not a fixed sales target and depended on deliveries of the new 313,000 euro aventador it will launch in the second half.

Lamborghini also sells the gallardo, which starts at around 180,000 euros, and stopped

making the Murcielago in May last year.“We will be growing but on a level which

for the time being is not so important for us as the fact we are building up a new order bank,” Winkelmann said.

The aventador supercar, which like its predecessors is named after a fighting bull, is already sold out for the first year and a half of production, he added.

Lamborghini should sell over 300 cars in China this year, Winkelmann said at the reuters Summit, held at the reuters office in paris on Monday, about a fifth of its total likely sales for this year.

Last year it sold 206 cars in China, excluding Hong Kong.

analysts at iHS automotive see China’s premium segment growing to 909,946 units in 2011 and 1.6 million in 2015, compared with 727,227 last year.

(additional reporting by James regan and astrid Wendlandt;

editing by Will Waterman)


12

shiseido aims to beat china market growth

by JamES ToPham and RiTSUKo ShimizU TOKyO, May 25

SHiSeidO, Japan’S top cosmetics firm, is aiming to grow its Chinese cosmetics

business faster than the market and is considering boosting the use of local raw materials to lower production costs.

“i want Shiseido to surpass the overall growth rate in the Chinese market and to reach the mid-to-high teens,” Hisayuki Suekawa, Shiseido’s president, said in an interview for the reuters global Luxury and Fashion Summit.

One of the world’s oldest cosmetics companies, Shiseido has been relying on China, where it has 5,000 speciality stores, as a growth engine as its profits slip in Japan, where the population is shrinking.

But Shiseido, with its namesake line of cosmetics and others such as Maquillage cosmetics and Cle de peau Beaute prestige products, has also been grappling with higher wages and increased competition in China, prompting it to look for ways to lower costs.

“When we brought the production technology over from Japan, the (supply)

deals came as well, so much of raw materials used still come from Japan,” Suekawa said at the firm’s headquarters in Tokyo.

“The focus previously was (on procurement from Japan), but we have made a list of local Chinese suppliers and are now trying to match our needs to them.”

Suekawa said that slightly more than half of the raw materials used at its two Chinese factories come from China.

Shiseido forecast a 40 billion yen ($488

million) operating profit for the year that started in april, a 10 percent decline from its previous year amid expectations of weaker consumer demand in its core Japan market and increased marketing investment.

To help it offset sliding demand at home, the company, which began as Japan’s first Western-style pharmacy in 1872, is looking overseas for profit growth and has set a goal of having multiple global brands that exceed a scale of 50-100 billion yen a year in sales.

in a three-year strategic plan announced in april, Shiseido said it plans to spend an additional 20 billion yen, 13 billion of which marked for use overseas, in its current financial year, on marketing and investment.

Suekawa also said the company which competes with France’s L’Oreal and estee Lauder eL.n in sales of high-end cosmetics, would look into acquisitions as part of its growth strategy.

Last year, Shiseido purchased U.S. cosmetics firm Bare escentuals for $1.7 billion.

earlier this month, Shiseido was outbid by Spanish perfume maker puig to buy a 45 percent stake in French fashion house Jean-paul gaultier from Hermes. Shiseido’s paris-based unit has a perfume licence contract with gaultier.

(editing by nathan Layne and Matt driskill)

PoWdER and blUSh: a woman passes Japanese cosmetics company Shiseido's counter at a department store in Tokyo January 15, 2010. REUTERS/yURiKo naKao

Shiseido sales regions, top cosmetics makers

Sources: Company, Euromonitor

Reuters graphic/Christine Chan 19/05/11

Bln yen (% of net sales) Market share – %2010 Top 10 premium cosmetics makers

Americas87.6(13.1%)

Europe78.2 (11.6%)

Shiseido’s sales by geographical region, FY2010

Japan’s largest beauty products firm was the world’s No. 3 premium cosmetics maker in 2010

L’Oréal

Estée Lauder

LVMH

Shiseido7.2%

Procter & Gamble

Kao

Coty

Chanel

Clarins

Kosé

0 5 10 15

Japan382.9

(57.1%)

Asia/Oceania122.1(18.2%)

TOTAL670.7

bln yen

reuters://REALTIME/Verb=FullQuote/ric=EL.N


13

coach Focuses on priciest bags again

by maRTinnE GEllER andPhil WahbaneW yOrK, May 23

THe FanCieST COaCH handbags priced over $400 are finding more buyers,

allowing the company to move upmarket after introducing more lower-priced bags in the wake of the 2008 financial crisis.

The change means Coach inc can appeal to luxury shoppers who are spending more freely now. Coach’s pricing power allows it to offset rising production costs that dent margins.

at the same time, the retailer and manufacturer of leather goods and accessories will not raise prices despite higher costs for leather and labor in China, bucking an industry trend.

“We’re not contemplating raising prices in the future,” Coach CeO Lew Frankfort said at the reuters global Luxury & Fashion Summit on Monday. “Our customers are looking for excellent value.”

The shift to fancier bags effectively raises Coach’s average bag price to about $300, from about $288 during the recession after it launched the lower-priced poppy line.

“Customers have embraced them (bags above $400) and are buying them at increased rates,” Frankfort said.

Several executives for retailers such as gap inc have said in recent weeks that they planned to raise prices. But Coach is diversifying production sites, substituting materials and manufacturing more efficiently to offset rising raw material and labor costs in China, where it makes 85 percent of what it sells.

in april, when Coach reported its fiscal third-quarter results, Chief Financial Officer Mike devine said bags over $400 accounted for about 18 percent of sales, up from 10 percent a year earlier. He said the growth was fueled by a fashion trend favoring leather bags over ones made of fabric.

Frankfort said that despite gains in luxury spending, consumers are still seeking bargains, benefiting his company which offers more affordable products than higher-end rivals such as LVMH Moet Hennessy

Louis Vuitton Sa.“Our positioning as a democratized luxury

brand has never been more in vogue than it is today,” Frankfort said.

(reporting by phil Wahba and Martinne geller; editing by Matthew Lewis and

richard Chang)

noT RaiSinG PRicES: Lew Frankfort, chairman and CeO of Coach, inc., speaks at the reuters global Luxury Summit in new york, June 1, 2010. bREndan mcdERmid

Coach, Tiffany stores: U.S., Japan and China

Source: company filings Note: China includes Hong Kong


19/05/11

Coach Tiffany

High-end brands Coach and Tiffany are ramping up store openings in China—the fastestgrowing luxury market—even as they reduce their exposure to Japan.

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more in vogue than it is toDay. ”


14

yoox open to tech sector buy

by anTonElla cianciopariS, May 24

OnLine FaSHiOn retailer yoox would consider buying a technology provider

if an opportunity arose but is not currently planning acquisitions, its founder and chief executive said on Tuesday.

The company has enough room to expand as it looks to add 5-6 brands a year and focuses on boosting its position in the fast-growing Chinese market, Federico Marchetti told the reuters global Luxury and Fashion Summit.

“For now, (an acquisition) is not part of the plan,” Marchetti said. “But we are in the market for opportunities.

“any investment we can make in technology is something that is worth investigating at least,” he added.

yoox’s revenue is continuing to grow at “more or less” the same pace as the last 15 months, Marchetti said, without giving a

specific forecast for the year.yoox, which powers websites for top

brands such as Valentino and roberto Cavalli alongside its own multi-brand sites, saw sales rise 39 percent to 69.7 million euros ($98.04 million) in the first quarter. revenue grew 41 percent to 214.3 million in 2010, helped by its corner.com and yoox.com sites.

The company sees China, where it debuted last year with the launch of an emporio armani online store, becoming one of its top three markets by 2015, with the United States overtaking italy to become no. 1 this year.

The online retailer, which serves more than 100 countries, does not plan to enter the emerging markets of india and Brazil in the near future, however, as it already has enough opportunity to grow, including in China, the CeO said.

“everybody claims to be global, but we claim to be local,” Marchetti said. “if you want to compete on that market (China) you need to compete with the local players and

you need to be local and that’s our strategy.” The cost of setting up in China partially hit

net profit in the first quarter, when it fell 16.2 percent to 1.7 million euros. profits more than doubled to 9.1 million in 2010.

yoox is aiming to improve margins by innovating its central operations and distribution platform. it plans to invest around 20 million euros in the next five years, mainly in innovation.

Launched 11 years ago, yoox aims to add around 5-6 new names to its mono-brand business a year over the next five years, with the aim of reaching 50 by 2015. new openings include the launch of the online store for outerwear maker Moncler in europe and in the U.S. in the third quarter.

“We don’t want to grow faster than that, Marchetti said. “We want to keep the quality of our service very, very high.

“We will continue to focus on the top brands, but not necessarily italian,” he said, citing opportunities in Britain, the U.S. and europe.

The multi-brand business accounts for 76 percent of the group’s turnover, but Marchetti said he expected the mono-brand business to grow faster.

yoox, which has a market value of 641 million euros, almost half that of British rival aSOS, floated in Milan at the end of 2009.

Shares in yoox were up 3 percent to 12.36 euros by 1320 gMT, outperforming Milan’s all-share index.

(editing by James regan)

“any investment we can make in technology is something that is worth investigating at least.”

OTHer SUMMiT inFO

For information about all of reuters upcoming summits click:http://www.reuters.com/summits

China, rest of Asia help boost luxury sales

Source: Bain & Co.


19/05/11

Luxury goods market by region - € billion Wall St. bonuses - $ billion

The breakdown of the luxury goods market share has stayed largely the same except for a long-term decline in Japan and growth in China. The U.S. has been buoyed by Wall Street bonuses.

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http://www.reuters.com/summits


15

moda operandi tapsvc interest in Fashion

by Phil Wahba neW yOrK, May 24

MOda Operandi, a fashion e-commerce site, is raising its second

round of venture capital funding as investor interest in online luxury retailers grows.

The company, founded in February during new york Fashion Week, operates designer “trunk shows” online. it lets members pre-order designer clothes straight off the runway rather than have to wait for them to be available in stores.

Chief executive Officer aslaug Magnusdottir, speaking on Tuesday at the reuters Luxury and Fashion Summit in new york, declined to say how much she was raising but said she has been approached by several investors.

“The recent successes of gilt (groupe), rue La La and net-a-porter being sold has really

made this a much more interesting sector for a lot of investors,” Magnusdottir said, referring to recent deals.

Last year, Moda Operandi got a first round of funding from Boston-based venture capital firm new atlantic Ventures.

Magnusdottir, a native of iceland and graduate of Harvard Business School, was vice president at online discount site gilt groupe and co-founded TSM Capital, an early investor in fashion brand rachel roy, half of which was later sold to Jones group.

She said her service allows designers to sell garments that might otherwise not get sold.

“We kept hearing from designers that they created these beautiful collections and only a very limited portion of the collections would ever make it to the stores,” Magnusdottir said. “They felt that stores weren’t necessarily making the right decisions about which items to buy.”

Magnusdottir said she is hoping Moda Operandi’s membership will hit 100,000 by the end of the year, up from 15,000 at launch. Members must apply; some are denied entry.

She expects the company to be profitable by the end of 2012. The company does not disclose its results.

Moda Operandi has done trunk shows for designers such as alexander Wang and proenza Schouler. preorder and trunk shows make up about 10 percent of global sales of designer fashions, she said.

(editing by phil Berlowitz)

PRoFiTablE by End 2012: aslaug Magusdottir, CeO of Moda Operandi speaks during the reuters 2011 global Fashion and Luxury Summit in new york, May 24, 2011. REUTERS/miKE SEGaR

magnusDottir hopes membership will hit

100,000 by the enD of the year.


16

hong kong watch sales shine in 2011-sotheby's

by lEE chyEn yEE and donny KWoK HOng KOng, May 24

SOTHeBy’S, THe WOrLd’S largest publicly traded auction house, expects its auctions

for watches to increase by a quarter this year in Hong Kong, now its biggest market for such auctions, an executive said on Tuesday.

Sotheby’s, which competes with privately-held Christie’s, the world’s largest auction house, sees Hong Kong as an increasingly important market because it is now its biggest market for fine wines and Chinese art as well as watches.

it has sold a total of HK$73 million ($9.6 million) worth of wristwatches and other time-pieces so far in 2011 and expects the current pace to continue through the rest of 2011.

“i think it’s very do-able to repeat that in the next season,” Vanessa Herrera, director of China and Southeast asia and head of the watches department, told the reuters global Luxury Summit in Hong Kong.

Sotheby’s sold HK$109.3 million worth of time-pieces in Hong Kong in 2010.

“For us, we are constantly getting new blood, new people coming to transact. in our sales, 30 percent of the buyers are new,” said Herrera, who herself wears a rolex. “Watches are a very affordable luxury.”

Last year, Sotheby’s auctioned watches totalling $43 million worldwide, including buyers’ premiums.

in Hong Kong, Sotheby’s achieved record sales of HK$3.49 billion, driven by Chinese art, watches, wine and jewellery.

Sotheby’s reported net income of $2.4 million for the first quarter of 2011, reversing a loss of $2.2 million a year earlier.

Last year proved one of the best for both auction giants, with Christie’s posting a record $5 billion in sales and Sotheby’s making $774 million in revenue, six times more than 2009 and its second-highest after 2007’s record. it was a far cry from 2009’s drop in sales amid the global financial crisis.

(additional reporting by rachel Lee and alison Leung; editing by Jacqueline Wong,

Chris Lewis and Matt driskill)

To follow Reuters Summit coverage on Twitter, click here:http://link.reuters.com/dav69r

WaTch WhaT haPPEnS: a pink patek philippe watch ref. 2499 is pictured at Sotheby's auction house in geneva november 12, 2008. REUTERS/dEniS baliboUSE

“we are constantly getting new blooD, new people coming

to transact.”

Swiss watch exports

Source: Federation of the Swiss Watch Industry

Reuters graphic/Vincent Flasseur,Silke Koltrowitz

23/05/11

Global market

Australia

France

Thailand

South Korea

Austria

China

Netherlands

Russia

Kuwait

OmanOther (27.6%)

UK (3.4%)

Germany (4.7%)

Japan (4.4%)

UAE (4.5%)

Italy (5.3%)

France (6.3%)

Singapore (6.2%)

China (8.4%)

USA (10.8%)

Hong Kong (19.3%)

Swiss watch exports by country Jan-Mar 2011 Fastest growing export markets 2011/2010

Jan-Mar 2011exports

CHF3.9 bln

14.7%

25.6%

26.7%

28.3%

29.4%

29.9%

38.9%

55.8%

66.0%

79.1%

101.2%


17

WhERE havE all ThE aRTiSanS GonE?: a special ring and an ornamental key created by romanian jeweller Ovidiu paraianu, which he hopes to give to Britain's prince William and Kate Middleton for their wedding, are seen during an interview in Bucharest, april 15, 2011. REUTERS/RadU SiGhETi

luxury Firms struggle to Find artisans

by SilKE KolTRoWiTz and naThaliE oloF-oRSpariS, May 25

WHiLe Many adMired the elegance of the dress in which Kate Middleton

married Britain’s prince William last month, too few youngsters are interested in learning the skills required to make such garments.

Luxury goods sales have rebounded around the globe, boosted in particular by the ravenous appetite of China’s new rich for classy handbags, fine jewellery and quality timepieces, but many brands struggle to keep up with demand for the lack of qualified artisans.

“Finding artisans and motivating the young generation for this type of work is a problem. Manual labour has been devalued by French society,” said elisabeth ponsolle des portes of French luxury lobby Comite Colbert.

“For example, it is very difficult to find furriers today or to motivate young people to learn this skill,” she said.

Comite Colbert, which represents 75 French luxury houses, organises visits to fashion or goldsmith ateliers in the hope of piquing young people’s curiosity about the professions.

Upmarket British jeweller Theo Fennell said finding apprentices was a challenge. “you think there’d be a queue round the block to become apprentices, but there’s not,” creative director Fennell told the reuters global Luxury and Fashion Summit in London.

He said many young people were not willing to devote much time and energy acquiring the huge skill base while making

less money than most of their friends.“The idea of doing a great day’s work,

producing something really beautiful ... it’s contrary to contemporary culture, the whole idea of instant fame and money without any effort,” Fennell said.

PaSS on KnoWlEdGEFrenCH LaCeMaKer Sophie Hallette, which saw two of its lace motifs on Middleton’s wedding dress, made in utmost secrecy by fashion house alexander McQueen, started weaving lace in Caudry in northern France in 1887 and attaches great importance to transmitting its art to the next generation.

“each apprentice works in a team with an experienced artisan,” said Maud Lescroart, who manages the family enterprise with her

“you think there’D be a queue rounD the block to become apprentices.”


18

brother. “Training a lacemaker, who will be in charge of the Leavers loom, takes seven years,” she said.

Sophie Hallette, which employs 200 people and hires about 20 new staff every year, works regularly for fashion houses such as Valentino, Christian dior, givenchy or Jean-paul gaultier.

Competitor and neighbour Solstiss, which also had one of its lace motifs on the royal wedding dress, said it was not easy to find young people willing to work on noisy 19th-century machines.

“They have to work long hours, and there are very busy times ahead of the fashion shows,” marketing head Herve protais said.

He said, however, that lacemakers, who earned up to 3,000 euros a month, enjoyed high prestige in Caudry, the cradle of French lacemaking. The industry suffered during the economic crisis and had to lay off staff but tried to retain its precious lacemakers.

The same holds true for the Swiss watch industry, where experienced

watchmakers are in short supply.Big player Swatch group insisted on the

importance of keeping qualified staff during the crisis and is looking to hire 1,000-1,500 people this year to boost production capacity.

rival richemont, owner of the Cartier brand, said it would add 800 jobs in production this year. “We accept that we will have to train people up for the jobs that we

have. We expect that many of the people to be recruited may be new to the watch industry,” spokesman alan grieve said.

richemont trains about 65 watchmakers a year and brands like Jaeger-LeCoultre or Vacheron Constantin rely on experienced employees to train the young.

“We have 12 apprentices today, and the number will go up to 16 in two years,” Vacheron Constantin Chief executive Juan-Carlos Torres said, adding most of the newcomers would be hired after their apprenticeship.

But it takes more than a watchmaker to make a watch, and recruiting micro-mechanics, who make the watch components, can be even more difficult.

“young people seem to turn their backs on these professions. if they disappear, however, the whole watchmaking industry will be affected,” said paul-andre Hartmann, director of a specialist school in Switzerland’s famous watchmaking centre Le Locle.

according to figures published by the Convention patronale de l’industrie Horlogere Suisse, 318 watchmakers and associated professionals were trained in 2010.

(additional reporting by Mark potter in London; editing by Will Waterman)

cRoWn JEWElS: Britain's prince William and Catherine, duchess of Cambridge travel to Buckingham palace in the 1902 State Landau, along the procession route, after their wedding in Westminster abbey, in central London april 29, 2011. REUTERS/KiERan dohERTy

“it's not easy to finD young people to work on 19th-

century machines.”


19

ThEo FEnnEllCreative Director and Founder Theo Fennell

Scilla hUanG SUn Fund Manager Swiss & global asset Management

FEdERico maRchETTi Chief Executive Officer yOOx

PaScal bERclazPresident Quinting Manufacture d’Horlogerie

JEnniFER FlEiSS Co-Founder and President rent The runway

JEan-maRc JacoT Chief Executive Officer parmigiani Fleurier

FloREnT PERRichon Chief Executive Officer Cerruti

GianlUca bRozzETTi Chief Executive Officer roberto Cavalli

lEW FRanKFoRT Chief Executive Officer Coach

ERic JEnninGSFashion Director, Men's Wear, Home, Gift & GoodsSaks Fifth avenue

anTonio calcEChief Executive OfficerCorum

laUREncE GEllER Chief Executive Officer Strategic Hotels & resorts

KaREn KaTz Chief Executive Officer neiman Marcus

GUy SalTER Deputy Chairman Walpole

alan chan Group Branding Director Chow Tai Fook

ThiERRy GilliER Chief Executive Officer Zadig & Voltaire

ShaWn KRavETz President esplanade Capital

hEnRi SEbaoUn Chief Executive Officer Carven

Paolo dE cESaRE Chief Executive OfficerLe printemps

William halimi Chief Executive Officer Barbara Bui

bERnaRd lambERT Chairman Societe des Bains de Mer de Monaco

aRnE SoREnSon Chief Operating Officer Marriott international

FRÉdÉRic dE naRP Chief Executive Officer Harry Winston

vanESSa hERRERa Director of China and Southeast Asia Sotheby’s

didiER lE calvEz Chief Executive Officer Le Bristol

hiSayUKi SUEKaWa Chief Executive Officer Shiseido

UlRiK GaRdE dUEChief Executive Officer georg Jensen

nicolaS hiERonimUS Managing Director, Luxury Division L’Oreal

aSlaUG maGnUSdoTTiR Chief Executive Officer Moda Operandi

TSai PEiyiFund Manager, Luxury Goods FundHua nan

summit speakers

STEvE SadovE Chief Executive Officer Saks inc

bERnd bEETzChief Executive Officer Coty


covER PhoTo: Models present creations at the diane Von Furstenberg Fall/Winter 2011 collection during new york Fashion Week February 13, 2011. REUTERS/JESSica Rinaldi

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