Last week, a number of mid-price brands reported struggling revenue in North America as inflation continues to impact spending. Elsewhere, Showfields filed for bankruptcy and Chanel increased prices in China. 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. –Danny Parisi, sr. fashion reporter
Trouble at mid-price brands
Several large mass-market brands signaled they were entering rough waters last week. Puma hosted a pre-earnings report call ahead of its earnings announcement on October 24, and analysts left the call lacking confidence in Puma’s upcoming results. One analyst said Puma’s earnings guidance was likely “out of reach.” The results were so discouraging, it led to Puma’s largest single-day drop in share price since the pandemic.
The main issue is waning demand in North America, where analysts expect Puma’s revenue to be down around 10%.
Meanwhile, Levi’s is also expecting difficulty with its North American revenue in the near future. Net revenue for Levi’s Americas was down 5% this quarter.
Ad position: web_incontent_pos1
Both brands cite the difficulties facing middle-income consumers who, under pressure from inflation, are more conscious than ever about their purchases. Other brands in this segment, like Adidas and JD Sport, have also reported or anticipated lowered sales in the near future.
Earlier this week, I spoke with Judy Duzich and Larry Mentzer from the newly reopened Century 21 NYC about the precarious position low-price brands and retailers are in. According to Mentzer, on the one hand, when the economy is tight, people seek deals which is a positive for brands with low price points. But on the other hand, the core customers for those brands are the ones most heavily affected by economic turbulence and most likely to curtail their spending. (Look out for my full talk with them on an upcoming episode of the Glossy Podcast.)
The next few months leading into the holidays will be critical for many of these brands to recapture some of the lost spending that this year has wrought.
Ad position: web_incontent_pos2
Chanel increases prices in China
Even luxury brands aren’t immune to curtailed spending. While Chanel raises prices regularly, often doing so twice a year, it’s recently started to develop a disparity in its pricing across regions motivated by waning spending at the aspirational level.
Chanel raised prices in China last week, so that a flap bag now costs the equivalent of around $11,000 compared to $10,000 in France. Luxury spending, while still strong in China, has slowed in recent months.
Showfields files for bankruptcy
And speaking of retail troubles, the New York-based retailer Showfields is reportedly filing for bankruptcy. The company will close two of its existing stores in Miami and NoHo, and focus all of its efforts on growing the newly opened Brooklyn location and its D.C. store. Showfields’ business model, in which brands pay a fee to set up a presentation and product within the store, puts it more in line with an online marketplace like Amazon rather than a traditional wholesaler.
According to founder Tal Nathanel, the pandemic had a major impact on the store’s ability to operate, but Showfields has little debt and hopes that the bankruptcy filing will not be too disruptive to operations.
