Last week, brands and retailers continued to struggle with inventory problems and resist the urge to discount. Elsewhere, luxury spending slowed down in the U.S. as it surged in China, and fashion continued its love affair with film. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, and the Glossy Beauty Podcast for interviews from the beauty industry. And you can click here to receive the Weekend Briefing in your inbox every Sunday. –Danny Parisi, sr. fashion reporter
Fashion’s inventory problems still abound
Fashion brands have too much stuff on their hands.
Last week, Under Armour reported in its earnings that its inventory had reached over $1.2 billion in the quarter ending March 31. Profit margins fell by 3% as the company resorted to steep discounts to work through all that inventory. President and CEO Stephanie Linnartz said there was a “sector-wide inventory malaise” across apparel leading to more discounting.
In January, our sister site Modern Retail reported on the “We made too much” sale trend employed by brands like Lululemon, Ursa Major and womenswear brand Carleen, turning their overproduction into a selling point. But in a tough economic environment, extra inventory is no joke. Margins are already compressed for many brands across the sector as costs of customer acquisition and production go up and spending is down. Even shipping costs getting slightly more affordable in recent months haven’t been enough to offset it.
At the Glossy E-Commerce Forum in Manhattan on Monday, a number of attendees and speakers spoke about the dangers of excessive discounting.
“The sluggish market really keeps me up at night,” said Heather Kaminetsky, on stage with our editor-in-chief, Jill Manoff. “Discounting is a race to the bottom. Lots of people have tons of inventory out in the market, but where is it going to go?”
Luxury slows down in the US, surges in China
Speaking of the “macroeconomic situation” — executives’ favorite euphemism for the combination of inflation, reduced spending and an uncertain jobs market — Canada Goose also reported earnings last week. The company saw U.S. revenue decline by 4.5%.
It blamed that decline on “the macroeconomics,” particularly the decline in luxury spending by the American consumer. In April, even LVMH, which has otherwise seen sales rising across the board, cautioned about a luxury slowdown in the U.S. LVMH saw an 8% increase in U.S. sales last quarter, but the company said that was due primarily to the success of Sephora in the region. Excluding Sephora, sales of LVMH goods have been flat in America.
Meanwhile, Canada Goose saw a 65% explosion of sales in Asia, which helped offset its declining sales in the U.S. After a rough couple of quarters, luxury spending in China seems to have returned with a vengeance.
Fashion x Film in Cannes and Venice
This past week was a good one for people, like me, who love both fashion and film. The Cannes Film Festival in France started on Tuesday. It will host the premieres of some movies I’m excited for, like Martin Scorcese’s “Killers of the Flower Moon.” Early red carpet standouts at Cannes have included Cate Blanchett’s Louis Vuitton two-piece look and Aishwarya Rai’s elaborate metallic gown.
Elsewhere in the film/fashion crossover world, Giorgio Armani announced that he’ll host a couture show in Venice in September to coincide with the Venice Film Festival.
Fashion and film have always been natural bedfellows. Influential designer Tom Ford even made the jump to directing films. Another Cannes film I’m excited for is Pedro Almodóvar’s “Strange Way of Life,” which was the first film commissioned by the newly launched Saint Laurent Productions and will feature designs by Saint Laurent creative director Anthony Vacarello. Saint Laurent’s film production company officially launched in April and is reported to be working with other filmmakers including Wong Kar-Wai, Paolo Sorrentino and David Cronenberg. I’m normally not one for branded content, but these are some of my favorite directors of all time, so count me in. Now I just need to secure an invite to Cannes next year.