Valentino, the iconic Italian luxury fashion house, has hit revenue projections of over $1B. Wowza. Talks of an IPO as soon as 2017 are now in the works, although not confirmed.
According to Bloomberg, sales have more than quadrupled since 2009 and are greatly attributed to creative directors Maria Grazia Chiuri and Pier Paolo Piccioli. With market predictions of doubling revenue in 2016, twenty-five new stores are planned. China accounts for roughly 25% of Valentino’s business.
In France, SMCP filed for a possible IPO after doubling sales over the past three years. The company owns Sandro, Maje and Claudie Pierlot and defines itself as “accessible luxury”. Rumors estimate the IPO to be valued at the $1B mark as well. And like Valentino, plans for expansion are sought to propel growth in China, the U.S., Spain and Italy.
Do all roads lead to China?
China still remains a huge playing field for business. As the population shifts from lower income to middle class, consumer sentiment is still seeing strong growth despite a slowing fourth quarter in 2015. A report by Reuters examined the consumer product playing field in China (think Starbucks, McDonalds, CPGs) and of eighteen companies, a strong thirteen had sales grow with only two companies reporting flat sales. Where consumer spending has thrived, industrial business has slowed (construction etc) attributing to the transition of China into a maturing country. Reuters summed the growth economy well; “Several CEOs said the divergence was a normal sign that China's economy is maturing from one based on industry to one fueled by consumption”. China is in a growing pain period from investment-led, to industry-led to a consumption-led economy. For Starbucks, creating the morning ritual of coffee for the middle class in 2010 was 50 million. In 2020, China's middle class is projected to be half a billion. Growth opportunities for consumer products are exponential. Even more interesting, the growth is coming from lower tier and coastal cities, and not the metropolitan hubs we all know of.
But other reports, notably from luxury fashion houses Burberry and Prada, have had negative growth in China. Burberry has discontinued wholesalers and licensing in order to manage the business directly, while strategically investing in digital. Whereas Prada has made zero moves to revoking their established license with Puig. Last summer’s “Black Monday” stock market crash - the doomsday of trillions of dollars - only fueled the luxury stock slump. According to the Savigny Luxury Index, LVMH, Kering, Richemont and Hermes all recorded their worst monthly drop in revenue since 2008. As Burberry’s lust fades in China, Prada’s upmarket pricing could be risking the still very new emerging middle class and the changing culture.
So where does that leave us? Cautiously optimistic. The shift in spending is potentially tremendous, yet the cultural shift in luxury is another story. It will be interesting to see how the other luxury fashion houses fair this spring.
By Launchmetrics Content Team
The Launchmetrics content team is always on the lookout for new trends in the fashion and technology sector. We are geeks with style and lovers of good stories!
