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week of october 16 2022

Crosswalk’s Fashion Forecast Weekly Newsletter highlights 5 key takeaways from the past week as selected by our data scientists. These are trends expected to shape consumer demand throughout the fashion retail world.

SNAPSHOT FOR THE WEEK:

The Savigny Luxury Index (“SLI”) fell almost 5% in September amid concerns of spreading coronavirus cases in China, whilst the MSCI lost just over 2%. The Chinese government’s announcement of increased regulation of casinos in Macau also had an indirect impact on luxury stocks as investors took notice of the government’s increased rate of crackdowns on business and consumption yet again.

Going up

• Ferragamo was the only SLI constituent to post gains this month, ending just over 2% higher, on the back of first half results which saw the company swinging back into profit.

Going down

• Safilo lost almost 13% of its value in September – the positive newsflow of a deal with Instagram influencer Chiara Ferragni was offset by the loss of the Givenchy license later in the month.

• Estée Lauder lost almost 12% of its value this month. Confirmed reports that Amazon is planning an early holiday beauty sale in October, one month ahead of the planned holiday sales by the likes of Sephora and Ulta spooked luxury beauty investors.

What to watch

Amazon has designs on luxury. In 2021, it launched Luxury Stores including Altuzarra, Clé de Peau, RéVive Skincare, Rodarte, La Perla, The Conservatory and Elie Saab. Whilst it has not managed to secure a big brand name for its platform, it has nevertheless parked its tank on the lawn of luxury retail. The internet giant’s repeat move from last year to hold a holiday beauty sale before the holiday sales shows its intent to play hardball. The luxury sector had better brace itself for an unwelcome disruption.

Fashion’s Top M&A Targets

In the investment community fashion is quite often a risky bet. It’s difficult for brands to differentiate themselves in a saturated market, and even harder to achieve the scale required to turn a significant profit in a short amount of time.

However, early in the pandemic, appetite for fashion acquisitions increased as investors saw distressed assets as good deals such as licensing giant ABG (Authentic Brands Group) taking advantage and purchasing Lucky Brand Jeans in August 2020 and Brooks Brothers in September 2020. Then, as winners emerged from the crisis — with 2021 sales significantly up from 2019 — valuations rose, putting still-flush investors in a race to partner with top brands.

Now, the tables have turned once again. As inflation rises and consumer spending slows, fashion brands are looking for new backers. But as stock markets sink and the likelihood of a recession looms total transaction value (in Q1 of this year) in the global M&A market dropped to $725 billion, nearly 23 percent lower than the previous quarter.

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reselling

With the resurgence of throwback design trends in tandem with growing climate concerns associated with fast fashion, second hand shopping - commonly called thrifting - has gained heightened traction as social media platforms accelerate the established trend cycle. An evolution from “sneakerhead” culture of years past that thrived on flipping sought after styles, the booming resale market can be partly attributed to the importance of side hustles and savviness in the Youth market. Today’s market stretches far beyond footwear with platforms offering both modern and vintage apparel alongside home decor and handcrafted designs. However, while thrifting has always been a low cost resource, some argue that it has become gentrified by resellers who take advantage of low prices to incur large profits on platforms like Depop. So, what is the impact of reselling on the market and what does the future of flip culture look like?

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The Sherpa Community and their Impact

Committed to respecting the culture and heritage of the Sherpa people, a group who live along the Tibet-Nepal border, The North Face decided to rename its “sherpa” fleece products to “high pile”. The outdoor company wants to honor the history and role this Indigenous group played in the development of mountaineering in the Himalayan region—especially since the brand has worked so closely together with Himalayan locals for organized expeditions in the area. The North Face’s global athlete team also counts two Nepali athletes, Dawa Yangzum Sherpa and Nikki Shrestha, highlighting the role their culture and the outdoors has played in their identity. Additionally, The North Face also supports different foundations in the community, including American Himalayan Foundation and Stop Girl Trafficking. Taking this initiative as an opportunity to highlight the heritage of the Sherpa people is a first step in recognizing the connection between the outdoor lifestyle and Indigenous people, as we explore together as a conscious community.

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