By Eric Sylvers in Milan and Matthew Dalton in Paris
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 13, 2020).
The coronavirus crisis is widening the gap between the haves and
the have-nots of the luxury goods industry.
Virtually all luxury brands suffered revenue drops of more than
20% in the first half as boutiques were closed for months and
big-spending shoppers couldn't travel. But the industry's biggest
brands -- Louis Vuitton, Dior, Hermès and some others -- have held
up better than the industry as a whole and taken market share in
At the same time, midsize Italian luxury-goods companies
Salvatore Ferragamo SpA and Tod's SpA have sputtered compared with
their bigger competitors. Their brands were already suffering
before the pandemic, hampered by lack of investment in digital
marketing and e-commerce, a weakness that left them particularly
susceptible when pandemic lockdowns made online operations the only
way to connect with customers.
Analysts say the damage caused by the pandemic, coming after
years of declining results for Tod's and Ferragamo, could raise
pressure on the companies to seek outside investment or sell
themselves to one of the industry's conglomerates: LVMH Moët
Hennessy Louis Vuitton SE, Kering SA, Compagnie Financière
Richemont SA or Capri Holdings Ltd. The giants control much of
Italian luxury-goods production, including Gucci, Fendi, Bottega
Veneta and Versace.
"The trends that we observed before the crisis -- the fact that
the bigger brands outperformed the smaller -- continued and
accelerated," said Anne Le Borgne, who manages a luxury and
lifestyle investment fund with CPR Asset Management in Paris. "For
the sector, this could accelerate consolidation."
Tod's majority owner, Diego Della Valle, has repeatedly said he
is committed to the brand, and he has increased his controlling
stake over the past several years to 81%. Last month he reiterated
that he has no intention of selling Tod's. Mr. Della Valle has in
the past considered selling one of Tod's smaller brands, such as
luxury sneaker label Hogan, a person familiar with the matter
Florence-based Ferragamo, which is still owned by the family
that founded the company almost a century ago, also says it isn't
for sale. But the rehiring during the pandemic of a former longtime
Ferragamo chief executive as executive deputy chairman led to a 15%
jump in the share price amid speculation the company might be sold.
The Ferragamo family is often seen as an obstacle to efforts to
refurbish the brand, known for its Vara pumps and handbags.
Ferragamo's revenue plunged 60% in the second quarter, one of
the biggest drops of any large luxury company. In the first half,
revenue fell 47%, compared with 27% for LVMH, which owns Louis
Vuitton and Dior, and 30% for Kering, owner of Gucci and Saint
Laurent. The two conglomerates reported steep drops in earnings,
but remained profitable. Ferragamo will report complete first half
results in September, with analysts expecting a loss. The company
said revenue improved in all markets in July, the first month of
the current quarter.
Tod's, which reports first-half results on Sept. 8, could book
an EUR80 million ($94.4 million) loss in the period, according to
investment bank Equita.
The challenges facing the two companies predate the arrival of
the coronavirus. Tod's has had trouble connecting with younger
consumers, and both have lagged behind in online sales.
Due to a surge during the coronavirus lockdown, Ferragamo and
Tod's this year will get about 10% of sales through e-commerce,
according to Flavio Cereda, an analyst with investment bank
Jefferies. That remains below the industry average of around 15%,
which also grew during the lockdown, he said.
Paris-based LVMH and Kering have so far fared better during the
pandemic. LVMH has been able to lean on the strong momentum of its
biggest brands, Louis Vuitton and Dior, both of which have
well-developed e-commerce operations that have been able to offset
much of the hit from closing physical stores across China and the
Momentum at Gucci, Kering's biggest brand, had already begun to
slow before the pandemic. But Kering also owns two of the
fastest-growing brands in the industry, Bottega Veneta and
Balenciaga, and the group has extensive e-commerce operations.
The gap between industry leaders and some independent Italian
brands shows how those that neglected their digital operations
before the pandemic are struggling to catch up now.
The well-developed e-commerce operations of LVMH and Kering
brands helped them to satisfy demand even during the height of
lockdowns, when the industry was forced to shut bricks-and-mortar
stores. Both groups have also devoted significant resources during
the pandemic to cultivating top-spending clients even if they were
unable to shop physically in boutiques.
"As we move past the pandemic's initial shock, we are seeing
consumer confidence begin to return, with many customers now
shopping online for the first time," said Chris Morton, CEO of
Lyst, which ranks the fashion industry's hottest brands and
products by tracking the behavior of more than 9 million online
Ferragamo launched a refurbished website and e-commerce shop
during Italy's lockdown that the company says have resulted in more
traffic and online sales. But neither Ferragamo nor Tod's are in
the top 20 of the most recent quarterly Lyst Index, which is led by
Nike and includes Italian luxury brands such as Gucci, Fendi and
Bottega Veneta that are owned by one of the conglomerates.
Write to Eric Sylvers at firstname.lastname@example.org and Matthew Dalton
(END) Dow Jones Newswires
August 13, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Graphique Historique de l'Action
De Oct 2020 à Nov 2020
Graphique Historique de l'Action
De Nov 2019 à Nov 2020