The rocky start of retail to 2022

Fashion Stocks on Markdown

  • Many retail stocks have fallen sharply over the past two months
  • Uneven holiday sales, inflation and supply chain concerns weigh on investor sentiment
  • Retail tech stocks are the worst off, amid broader concerns about whether start-ups are overvalued

Investors are strongly betting that the mid-pandemic retail boom is over. The sell-off has caught up to long-struggling brands like Gap (down 10% in 2022) and Macy’s (down 12%), but hasn’t spared big recent drivers like Abercrombie & Fitch (down 12%) either. 7%). There is no single reason for the plunge. Supply chain issues hampered sales and Omicron scrambled demand forecasts. Customers may balk at rising prices, and the end of child tax credits in the United States will reduce the purchasing power of low- and middle-income shoppers. More generally, there is perhaps a sense that brands that have rebounded quickly from pandemic lows will have a harder time demonstrating that they can maintain that momentum over the long term. After all, the average apparel retailer wasn’t exactly in good shape in 2019, so a return to the pre-pandemic status quo isn’t necessarily something to celebrate. Digital brands are hurting twice. In addition to investor concerns about retail in general, these companies are wondering if we’re close to the end of a years-long tech rally that has resulted in blockbuster IPOs for companies like Farfetch (down down 31% this year) and Allbirds (down 18%).

The essential : One indicator of whether this is a temporary correction or the start of a longer downturn is whether the recent wave of fashion IPOs continues. Again, the tea leaves are mixed here: ABG, owner of Brooks Brothers, Forever 21 and other brands, has put IPO plans on hold in favor of private equity investments. But StockX is said to be getting ahead.

LVMH brands in demand

  • LVMH will report its fourth quarter and full year results on January 24
  • Louis Vuitton and Dior are on a roll, with the conglomerate’s fashion and leather goods division seeing sales rise 38% in the first nine months of 2021 compared to 2019
  • Sotheby’s will auction 200 pairs of Louis Vuitton X Nike Air Force 1 sneakers, designed by Virgil Abloh, between January 26 and February 8

There is a certain predictability in the financial results of high luxury. With one or two exceptions, the biggest brands have seen their sales and market influence soar, with no signs of slowing down. There is little reason to expect anything different from LVMH’s results this week. As for news, Louis Vuitton CEO Michael Burke said last week that the brand was in no hurry to announce the replacement of Virgil Abloh. Beyond that, expect an update on Tiffany, now under LVMH for a full year (last quarter the company cited the jeweler’s “remarkable performance”).

We’ll get a less conventional gauge of the Louis Vuitton brand’s heat two days later when 200 pairs of Louis Vuitton X Nike Air Force 1 sneakers go up for auction at Sotheby’s. The shoes, first seen on models at Abloh’s show in June, represent the latest edition of a particularly influential and lucrative collaboration. Abloh’s 2017 Off-White X Nike releases, known as “The Ten,” played a key role in bringing sneakers into the luxury mainstream. Several smaller versions followed; the Louis Vuitton X Nike shoes up for auction this week likely represent some of his latest sneaker designs. Proceeds from the auction go to the Virgil Abloh™ “Post-Modern” Scholarship Fund, which supports black fashion students. What they might fetch on the resale market is anyone’s guess; pairs of the designer’s version of the Air Jordan 1 Retro High OG last sold for over $7,000 on StockX.

The essential : The biggest luxury brands have thrived during the pandemic, while even LVMH has had a harder time setting up its smaller brands for such consistent success. A test of whether that changes is Céline: the brand is showing signs of taking off after a rocky start. Can he build on that momentum?

A week of minimalist sewing

  • Haute Couture Week takes place from January 24 to 27 in Paris
  • Almost all brands, including heavyweights such as Dior and Chanel, are moving forward with in-person shows, even though the Omicron variant forced the cancellation of some men’s shows the previous week.
  • Many events and parties surrounding couture shows have been canceled or postponed

The pandemic has created strange optics for the fashion industry from the start, but there’s something particularly shocking about a toned down couture week, showcasing fashion meant to be worn on red carpets and at galas that seem to be perpetually postponed. The week remains an important showcase for brands: for proof, look no further than Schiaparelli, who under the creative direction of Daniel Roseberry transformed a series of wow moments into the seeds of an international enterprise beyond couture. Similarly, Glenn Martens used Gaultier’s signature body prints for the Y/Project show last week and will be the brand’s guest designer this week. Pieter Mulier’s second show for Alaïa takes place outside the program on Sunday. And Fendi, which previously only featured couture in the fall, is also making an appearance this week.

The essential : When Armani and a handful of other labels pulled their shows a few weeks ago, it looked like the pandemic had called for another season. But the other dominoes never fell, and the brands seem more determined than ever to pursue the events in person.

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