Burberry Autumn/Winter 09 | Source: Burberry

Burberry targets India’s brand-aware middle class (Times)
“Burberry, the British luxury brand, is poised to enter a joint venture to expand its presence in India, a market in which the ultra-rich are thriving because of a soaring stock market.”

Phillips-Van Heusen 3Q profit up, raises outlook (AP)
“Clothing maker Phillips-Van Heusen Corp. on Wednesday posted a jump in third-quarter earnings, boosted by a $30.4 million tax benefit, and raised its full-year 2009 profit outlook citing factors including higher expected royalties.”

Burkle Acquires Large Stake in Barneys Debt (WSJ)
“Ronald Burkle has become a significant investor in Barneys New York in recent months, with his Yucaipa Cos. buying a chunk of the struggling luxury retailer’s debt.”

Gap profits rise 25 percent (Drapers)
“Profits at American casualwear giant Gap grew 25% over its third quarter boosted by improved sales at its value fashion chain Old Navy.”

My Techno: A Designer Viewpoint (IHT)
“Some are cyberexperts and others are technophobes, but most designers today embrace a variety of technology applications… there are all sorts of ways that designers are using technological skills without necessarily navigating through cyberspace.”

Gucci Facebook Page | Source: Facebook

Luxury Brands and the Case for $4,000 Sunglasses (IHT)
“Imran Amed, who runs a Web site called The Business of Fashion, said that two years ago, when he started urging big luxury brands to embrace social networking as a communications tool, executives of these companies told him the idea was ’stupid.’ He is getting a lot less of that these days.”

Zac Posen’s New Venture (WWD)
“Z Spoke is a new vocabulary for Posen, and the keyword is sportswear. ‘I think it’s going to surprise people,’ says Posen, who describes the 60-piece range, which is strong on separates such as knits, cotton shirting, blazers and pleated khaki shorts, as ‘minimalist and utilitarian.’”

Luxury Stores Trim Inventory and Discounts (NYT)
“All around Saks Fifth Avenue, merchandise is sold out. The $2,520 Marni shearling vest? Gone. The $5,295 Brioni leather bomber jacket? Only one left. The $1,995 over-the-knee Christian Louboutin boots? ‘All gone, except for this,’ said Nick Passerelli, a Saks employee, dangling a size 11 boot from his fingers.”

Will the high street scuff Jimmy Choo’s image? (Times)
“That does not solve the branding problem. If your business is selling trinkets (or shoes) to the truly rich and vulgar, does it make sense to market a range that tells the buyer that her wealth is, frankly, a bit juvenile. Or that her shoes are junior Choos?”

The Illusion of Brand Control (Harvard Business Review)
“You’ve probably heard by now that “your brand is no longer yours.” The assertion’s based on simple math. In the era of blogs, discussion boards, Facebook, Twitter, and other Web 2.0 tools, virtually everyone can get online and talk about your company and its offerings. As a result, the amount of information your marketing and PR departments can generate is only a small percentage of the total volume of content on the Internet about your firm.”

Pierre Mallevays of Savigny Partners | Source: Savigny Partners

Today, BoF brings you an exclusive interview with a key adviser to the private family trust which, as announced today, made an investment in Lanvin, one of the hottest fashion brands in the world.

PARIS, France — Over the past few years, under the creative stewardship of industry darling Alber Elbaz, Lanvin has risen to heights that most fashion brands can only dream of, with nearly unanimous positive reviews from buyers and editors and a seemingly insatiable appetite amongst luxury fashion customers for Lanvin’s clothes, accessories and jewelry.

There was only one problem. After having invested significant sums early on, Shaw-Lan Chu-Wang, who purchased Lanvin from L’Oreal in 2001, was not injecting any more cash to grow the business. This left Lanvin’s hyper industry buzz and brand potential underexploited.

Not anymore. Today, in a press release issued by Lanvin (and as reported in WWD), it was announced that Arpège, the brand’s parent company, has received a cash injection for a minority investment representing 12.5 percent of the equity. The investment was made with a “long-term” view, apparently an indication that the investor does not plan to flip the investment for a quick profit. This is a refreshing change from some of the disastrous investments we have seen in fashion brands in recent years.

I spoke with Pierre Mallevays who advised the private family trust on their investment in Lanvin to learn more about the dynamics of the deal and the fashion and luxury market in general. Pierre is a friend and colleague, and one of the leading investment experts in the luxury space, first having worked as Head of M&A for LVMH for over seven years, and now as Managing Partner of London-based Savigny Partners, a boutique M&A advisory firm.

BoF: There have been a flurry of new transactions (or potential transactions) announced in recent weeks, including those of Escada, Lacroix, and now Lanvin. Is the luxury M&A market turning a corner?

Yes, absolutely. The Escada deal is at the tail-end of the distressed transactions brought about by last year’s crisis, just like the Lacroix deal. But the significant rise of stockmarket levels since May this year has reduced the valuation gap between buyers and sellers. The M&A market came out of hibernation some time in September– deals are doable again.

BoF: After record valuations multiples of up to 13x EBITDA or more on transactions like Permira’s acquisition of Valentino and Towerbrook Partners’ investment in Jimmy Choo, are luxury investors today investing any differently, say with more reasonable expectations about valuations, returns and timing of exit?

You are right again. Private equity embraced the world of luxury goods with the view that there would be no end to the good times, spurred on by a solid economy generating an ever growing number of wealthy customers and seemingly endless reservoirs of growth in China and India. A lot of investors have been burned, and the mood is now all about opportunity investing as opposed to sector enthusiasm. A case in point is Brioni, a very good and pure play brand with excellent growth prospects, which allegedly failed to find a minority investor at a rumoured 10X EBITDA multiple.

BoF: What was the rationale for Lanvin to take investment from a private investor rather than a strategic partner from a major luxury goods group?

With Alber Elbaz at the creative helm, Lanvin has seen truly extraordinary critical and commercial success and, having turned profitable last year, is finally experiencing financial success as well. Why would Mrs Wang, who nurtured the company to success from the brink of bankruptcy, want or need to sell out to a major luxury goods group? Between her and Alber, Lanvin is a family of two. The family has just taken on a third member, a family trust itself, with a similar long-term mind.

BoF: When considering taking an investment, what are the three most important things a brand should consider?

Exit, exit, and exit. The agreed exit strategy (or lack thereof) is the natural pendant to the potential investor’s motives in making the investment in the first place. Too much time is generally spent on planning the first years of living together and not enough on exit scenarios. For the brand receiving the investment, it is very easy to get blinded by the need for cash or the potential for synergies.

BoF: Do you foresee any oft-speculated industry changing transactions actually coming to pass, like the acquisition of Hermès, Chanel or Armani, or the IPO of Prada?

While newsworthy, I don’t think the shareholder succession at Armani or perennially potential IPO of Prada would be industry transforming events. The Armani empire is a super tanker which is unlikely to change course easily, and the Prada IPO is a financial sideshow – what really matters there is the continued presence of the Miuccia Prada-Patrizio Bertelli dual engine.

The real industry changing events would be the acquisition of Hermès or Chanel, who are better guarded than Fort Knox, or of the Richemont group, and I don’t see signs of that either!

Imran Amed is Editor of The Business of Fashion

CEO Talk is an ongoing series of discussions with fashion entrepreneurs and business leaders. Previous interviews are listed below:

Natalie Massenet, Chairman and Founder, Net-a-Porter
Camilla Skovgaard, Shoe designer and Entrepreneur
Susan Lyne, Chief Executive Officer, Gilt Groupe
Priya Kishore, Founder and Creative Director, Bombay Electric
Alex Bolen, Chief Executive Officer, Oscar de la Renta
Jeffrey Kapelman, Chief Executive Officer, Hilldun Corporation
Bonnie Takhar, Chief Executive Officer and President, Halston
Sara Ferrero, Chief Executive Officer, Joseph Group
Paolo Fontanelli, Chief Executive Officer, Furla
Stella Iishi, President and Founder, The News Inc.
Greg Furman, Founder and Chairman, Luxury Marketing Council
Sarah Curran, Founder and Chief Executive Officer, my-wardrobe.com
Brian Hill, Chief Executive Officer, Aritzia
José Neves, Founder and Chief Executive Officer, farfetch.com
Federico Marchetti, Founder and Chief Executive Officer, YOOX Group
Sojin Lee, Co-Founder, Fashionair.com

Bryanboy with Domenico Dolce and Stefano Gabbana | Source: Bryanboy

Luxury Firms Move to Make Web Work for Them (NYT)
“The luxury goods industry, struggling through a recession that has threatened some well-known names with extinction, is trying to cast off the kid gloves that have hampered its efforts to get a grip on technology.”

Saks beats Street with surprise profit, shares up (Reuters)
“Upscale U.S. department store operator Saks Inc reported a quarterly profit that beat Wall Street expectations for a loss, stoking investor hopes for a luxury market recovery and sending shares up 4.4 percent.”

Younger Buyers Challenge Luxury Retailers in Asia (NYT)
“Starting up or expanding in Asia is not merely a matter of replicating the tried-and-tested models used back home — This is especially noticeable in mainland China.”

Sophie Theallet wins CFDA fashion fund (Examiner)
“On Monday, November 16th at a gala event held at Skylight Studios in NYC Sophie Theallet was declared the winner of the $200,000 cash prize and one year of mentoring from industry professionals.”

Isabel Marant: breakout designer of 2009 (Telegraph)
“She is part of an astonishingly suc cessful group of female fashion designers… who are reinventing the notion of French style with their thoughtful and sensual, yet practical, designs that blend so well into our frenetic family and work lives.”

Mariella Burani mulls strategic investor (Reuters)
“Debt-laden Mariella Burani Fashion Group is weighing taking on a strategic investor after it failed to close a debt restucturing accord ahead of a Monday deadline, the luxury goods company said.”

H&M: October sales drop but Jimmy Choo range is a success (Drapers)
“Total sales across the group grew 7% in October compared to the same month the previous year. The results came as H&M opened its doors to its latest designer collaboration, this time with Jimmy Choo which drew crowds across the country this weekend.”

Asos enjoys overseas sales boost (BBC)
“A big push into new international markets has boosted sales at online fashion retailer Asos. International sales grew by 112% in the six months to 30 September. Asos added 56 countries to its reach and now trades in 114 places.”

Iman: The model entrepreneur (CNN)
“One of the most recognized models of the 1970s and ’80s, Iman has used her entrepreneurial skills to great effect in the fashion industry, with her own cosmetics business and in her charitable fund-raising work.”

Johann Rupert, CEO Richemont Group | Source: Connectingwatches

Rupert ready to resume the helm at Richemont (FT)
“Johann Rupert said yesterday that he would retake the helm as chief executive of Richemont from April, indicating that the world’s second-largest luxury goods group still expected storms ahead.”

Style bloggers take centre stage (FT)
“Also on the front row… sits a slender, less familiar figure dressed in grey T-shirt, jewelled necklace and tuxedo jacket. Meet Bryan Grey-Yambao, known as Bryanboy to the 215,000 unique users who visit his eponymous blog each day (British Vogue magazine, by comparison, sells just over 200,000 copies a month.)”

Tom Ford’s new focus (The National)
“From his single-handed revitalisation of Gucci to his innovative approach to the aesthetics of cinema, Tom Ford is a man of many accomplishments. However, his greatest achievement may be a much more personal reinvention.”

One step ahead: Prada the world’s most influential fashion label (Independent)
“From simple nylon rucksacks to willfully challenging shoes, one label has always been at fashion’s cutting edge. And that’s to say nothing of the yachts, architecture, art patronage…”

Fashion forward (Business Standard)
“For Singh, fashion is a minuscule part of a larger, more dynamic, and meaningful, world of design. He says, ‘I want to do products that are the very best. I want to achieve quality that one can say is great.’”

From the Cartier Collection, Richemont Group | Source: Cartier

Richemont’s Rupert to Take Over as CEO; Profit Slumps (Bloomberg)
“Richemont SA, the world’s largest jewelry maker, said Chairman Johann Rupert will replace Norbert Platt as chief executive officer in April, taking more control amid the deepest recession since the 1930s… Richemont’s first-half profit fell 60 percent.”

In downturn, luxury brand Bally eyes Asia and beyond (Reuters)
“Fresh from a makeover, luxury leather goods and clothing label Bally is out to woo fashionable Asians, but not at the expense of European and American customers who have been harder hit by the downturn.”

Bulgari shines after results, broker targets (Reuters)
“Shares in Italian jeweller Bulgari rise more than 4 percent after the company returns to a net profit in the third quarter and analysts raise their price targets on the stock.”

Lindsay Lohan at Ungaro a disaster: designer (Independent)
“Hollywood bad girl Lindsay Lohan’s first collection as artistic advisor for Emanuel Ungaro was a “disaster”, the founder of the French couture house said here, local press reported.”

Winner of Swiss Textile Award – Alexander Wang: Too cool for school (Independent)
“While some designers look to the past or future, Alexander Wang is as right here, right now as it gets. The American designer is zeitgeisty, he’s of the moment and in fashion-speak he’s also having a moment; quite an extended one to judge by his growing popularity.”

Guess Autumn/Winter 09 | Source: Guess

Guess Sets Its Sights on Europe (Business Week)
“The iconic maker of fashion jeans and other apparel is expanding fast in Europe with a new retail push and tighter control of its brand.”

A Not-So-Guilty Pleasure (NY Times)
“For months now, consumers have been hunkering down in an economic storm, buying only what they need to survive, like groceries, diapers, medicine — and shoes.”

Luxury brands are back to wooing Indian customer (Business Line)
“Niche luxury retailers are putting expansions back on track after a brief hiatus. Despite foreign direct investment restrictions, companies such as Versace, Oakley and Nike Golf are increasing area and product assortments to draw consumer interest in what they consider one of the biggest markets in Asia.”

Debenhams acquires Danish retailer Magasin for £12.3m (Drapers)
“Department store group Debenhams is to push into mainland Europe following the £12.3m acquisition of Danish department store business Magasin du Nord.”

Brioni joins forces with the Royal College of Art (Drapers)
“Luxury Italian menswear brand Brioni has signed a three-year deal with the Royal College of Art that will see one of the brand’s master tailors work with menswear fashion design students.”

Priestess NYC in Beijing | Source: Priestess NYC

NEW YORK, United States — The growing importance of the Chinese market to the retail sector is well known – particularly amongst large multinational fashion companies. Few smaller labels, however, have made it their mission to penetrate the vast country. But for Cody Ross, the New York-based Texan behind five-seasons-old womenswear label Priestess NYC, establishing a local presence in China early on is a critical part of his strategy.

“If you look at the statistics in China, there are 360,000 millionaires there now and the luxury and semi-luxury market represents about $6.5 billion,” says Ross, who also happens to be a hedge fund manager. On shifting consumer behavior in China, Ross continues: “It used to be that only men spent a lot of money on fashion goods for their girlfriends. Now about 80 percent of women are spending disproportionately more in the luxury and semi-luxury brackets.” The enterprising designer, who lived in Shanghai for three years, clearly sees potential in the Chinese market.

Even though Priestess NYC is young compared to the multinational fashion companies who have operations in China, it already has a regional headquarters in Shanghai, a research and development outpost in Shenzhen, and production facilities in Ningbo and spread across Guangdong province. This supply chain infrastructure is crucial for the company’s production process, but Ross also sees these facilities as a way to glean information on the Chinese consumer. “It’s perfect because you can go there, study the market and you interact with consumers there. It’s that interface that helps you translate the clothes for the Chinese customer.”

It’s this first-hand, insider insight that has helped Ross create designs that speak to the local market (the label’s best seller in China is a Qi Pao inspired dress). In just a few seasons, he has established a strong network of stores for his edgy, contemporary-priced wares and counts Björk and Lydia Hearst as fans. The label, which declines consignment orders (a typical practice for young labels who need to cultivate a customer base), is well placed in Beijing and Shanghai at six boutiques including i.t, the younger, more casual sister store of the Comme des Garçons-carrying I.T.

But Ross is also delving deeper into China, beyond Shanghai and Beijing. His clothes are now carried in Tianjin, Wuhan, Chongqing, Chengdu and Dalian. “You may not have heard of them before, but these are some of the biggest cities in the world,” says Ross. They are also high potential growth markets, with large direct foreign investments. “In the last year, retail sales in China generally grew at 19 percent and there’s incremental growth there. But in these second and third tier cities, it’s more robust at about 25 percent,” observes Ross.

In these cities, the label is targeting “directional and progressive consumers who pay attention to global trends,” says Ross. Compared to previous generations, these young, sophisticated shoppers have far greater exposure to Western fashion and they are more open to integrating it into their lives. That’s often because, with the economy booming, some of the residents have been able to finance education in the West or are employed at foreign multinationals.

Censorship notwithstanding, they also have unprecedented access to the internet, with over 300 million information-hungry Chinese web surfers, the largest internet user base of any country in the world. “There’s a lot of youth driven stuff and they are really receptive to cool, cutting edge fashion and media content,” says Ross.

Having lived in Shanghai, Ross, who is fluent in Mandarin, knows that in China, personal relationships are vital. To spread his message, he literally hits the streets. “I go there myself and meet with local store owners, editors, newspaper writers, and glossies. I tell them what Priestess is about, what it represents, and what the aesthetic is. And they take it on. If I can get them in front of me and have a captive audience, I usually generate orders and get press out of it,” says Ross. The label also applies the same local focus to product placement, dressing specific regional celebrities, instead of national stars, and holding events at local clubs.

Today, Priestess NYC does about 60 percent of its business in the US, with an impressive 40 percent coming from China. For other fledgling labels thinking of following in the footsteps of Ross and venturing into China, the financier cum designer has some advice: “I think the most important thing is to have cultural know-how and a sense of the dynamics taking place in China and the change that’s sweeping that country – it’s really all about knowing the local culture.”

Robert Cordero is a Contributing Editor of The Business of Fashion

Fashion industry downsizes: layoffs looming at Zac Posen, Gucci (NY Daily News)
“It’s a fashion nightmare — and no, were not talking about Lady Gaga’s latest ensemble. Buzz in Seventh Avenue showrooms is that Zac Posen and Gucci are about to have some major layoffs. As of Monday, Posen vice president of communications Karen Duffy’s position was officially ‘eliminated’.”

For cashmere capitalist, dignity is bottom line (Reuters)
“Motivated at age 15 by the tears in his father’s eyes when the former farmer was forced to accept a factory job, Brunello Cucinelli is anything but an orthodox capitalist.”

Changing face of the market (Times)
“Burberry has marched into the FTSE 100. Sir Philip Green has taken his Topshop chain to the United States. London Fashion Week has regained its lustre. Recession or no recession, fashion remains one of our leading exports. But on home turf life has been tough.”

Betting on the Return of the Big Spenders (WSJ)
“Roughly a year ago… There was talk of a shift away from conspicuous consumption and a newfound appreciation for the virtues of friends, family and home cooking. That was then. On Nov. 4, an auction of Impressionist and modern art at Sotheby’s brought in $182 million, well above estimates.”