In Phoebe We Trust

0:04Hello and welcome to Fashion People. I'm Lauren Sherman, writer of Puck's Fashion and Beauty Memo Line Cheat. And today with me on the show is Bernstein analyst Luca Solca to discuss the best and worst of earnings season. LVMH, Kering, Richemont, and more. Plus, stylist Sarah de Mavalex joins me to unpack the latest Phoebe Philo collection and discuss her influence on the fashion world at large. Happy Tuesday, everyone. I'm going to make this really quick because we have Luca and Sarah on this episode. Check out line sheet this week. I have a piece on Quince. What exactly is it? Why does everyone hate it?

0:53We're going to really get into it. And I also, I looked into what was happening behind the scenes at American Eagle with this Sidney Sweeney campaign kerfuffle and how the executives there are managing it or not managing it. You need to read my piece to find out. Also, Sarah Shapiro has a great look at the sort of state of the premium denim market on Tuesday. But really quickly on this Luca and Sarah episode, super fun, lots of insights, not high, low, all high, high, but kind of the business and the pleasure of fashion in one episode. Luca was joining us from a remote location and we had some technical difficulties.

1:42So sound isn't super great, but I think it's good enough and I hope you enjoy it. Luca Soka, welcome back to Fashion People. It's always an honor.

1:57Luca Solca:Thank you very much indeed for inviting me, Lauren. It's a pleasure. Are you on holiday yet or not? You just sent out a report, so I suppose no, but are you about to go on holiday? Not yet, no. We hope that inflows are going to be fading during the week so that I can take some time off or at least chill out a little. Understood. So let's talk about this earnings season. what is your big takeaway like do you think that the industry has peaked and that we are all doomed no i i think that the industry is clearly suffering from one of the most important if not the most important nationality the chinese continuing to be on the back foot there's also a sense that high net worth individuals, rich consumers are spending.

2:57Luca Solca:Well, aspirational consumers and middle-class consumers are on the back foot everywhere, not just in China. And the other thing is there's quite a significant polarization between soft luxury and hard luxury. After all, we saw the Dury Maisons of Richemont in the double digits, while LVMH with Fashion Leather Goods was minus nine and Gucci was minus 25. I think that some of the headwinds are connected to value for money perception. I believe that the Dury at between$5 ,000 and$10 ,000 looks a lot cheaper than Handbag in the same price range. and I think that there's indeed a need for a soft luxury to sort of adjust the mix and clearly beef up the newness.

3:55Luca Solca:Selling the same product at two or three times the price they had before the pandemic isn't going to do it so there's that, there's the Chinese, there's the uncertainty but the world has been going through with international trade debates and negotiations still up in the era for some countries. I particularly feel that as I'm a half Swiss and we're all flabbergasted by the 39 % tariff rate applied or at least threatened to be applied by August the 7th. so there's a lot of things that are still very much in the era of which the most important one is the Chinese for sure if they were to progress on a u-shaped recovery I think that soon enough we'd be concluding that the industry is not doomed with the amount of savings and firepower that they have accumulated but at the moment uh this is yet to appear okay there's many questions here but one question i have is this this attempt with a lot of the luxury brands to go further up market and compete more easily against an hermes where it does feel like a value for money thing in every aspect of this because if you look at like coaches performing really well in the U S it feels like to me, people who for the last 10 years have been trading up to the true luxury brands are now, and also younger consumers who maybe would have traded up are now buying coach bags or, or what have you.

5:49I don't know if coach is an anomaly or if that is what is happening, but what I've noticed from like Saint Laurent or even Bottega Veneta, which was already on the higher end, has raised prices. Certainly Gucci tried. You just had a report this morning looking at Hermes and Prada. Prada has tried this also everything is is more money do you think that those brands you can't really go back right you can't you can't stop if you've if you've raised prices can you walk that back or do you think that they are going to have to just sort of wait it out until the consumer sees that there is a value there that it is deserving of those prices i know chanel even said that they went push too far on the pricing part of it my two cents is that it definitely

6:56Luca Solca:makes sense and it's appropriate for brands to scratch upwards and move into a higher price range if they can find credible products and if they can find a credible way to do it I think Louis Vuitton with Capucine had done a fantastic job in 2013 demonstrating that the brand could do a lot more than just canvas bags Having said that, I would make two remarks First, the sky is not the limit And second, you need to be careful especially when you are a very large brand not to forget or leave behind a significant portion of your customers. And I think that even Hermès, which is often quoted as the quintessential high-end brand by their own admission last week, said that they have volume businesses, they have silk, they have perfumes, and so on.

8:04Luca Solca:And with those products, they need to serve a very large audience. And that is, I think, a vital trait of the modern luxury goods industry. The modern luxury goods industry is not really about exclusivity. It is about the appearance of exclusivity, because in order to be as big as it is and And in order to grow as fast as it does, it has to appeal to a very large consumer audience, which includes aspirational consumers. If you leave that space empty, then other players will move into it. And I think that those that have a credible proposition, like Coach or like Ralph Lauren or like Todd's, I've been having a field day getting into that space and providing consumers, especially when it comes to handbags, with good quality products priced, I think, between$1 ,000 and$2 ,000 or euros.

9:10Luca Solca:And that, I think, is a space that the major luxury goods brands in Europe cannot just forget about. maybe smaller brands maybe canvas bags maybe in the case of prada nylon bags but for sure if you exit that space altogether then you're gonna feel it on the total revenue because even if the top two or three percent of consumers account for maybe 30 40 percent of your revenues the bottom 50 % still account for 10%. And in a relatively slow growth environment, you cannot give up 10 % of your sales. And I think that that is more of a problem when it comes to LVMH for Dior than for Vuitton, because coming to your question, what you need to do is you need to adjust the product mix.

10:05Luca Solca:You need to make sure that you stretch upwards, but you don't relinquish the entry price segment. And if you did, then you just need to introduce new products at that sweet spot price so that you can get the market back. Yeah, I want to go to the individual groups and talk about a couple of the specific brands within the groups. But on this bigger thing, how much do you think the other element of this is the secondhand market? How much do you think the second-hand market is impacting consumer behavior now? I know it's still very niche, but do you think that's going to become a bigger thing for consumers?

10:55Luca Solca:I think for sure, like in watches, the second-hand market is a good way for consumers to enter. the major brands at a more compelling price point. Clearly, there's a trade-off because you're not getting a new product. You're getting a second hand product instead, but it costs less, and if it's in good condition, then it's almost as good. This applies to Rolex, for example, but this can apply also to the major handbag brands that alone are responsible for the very vast majority of the second-hand market we see in the category. If you take Hermès, Vuitton, Dior and Chanel, they are the lion's share of what consumers buy.

11:51Luca Solca:So I think, indeed, consumers have alternatives. You mentioned Ami, Paulin. We mentioned a few brands that come from a credible background. I like my G-Line.

12:09Okay, so let's go through some of the companies. And I love to start with Richemont and go down the list, but I feel like you've kind of, maybe we can kind of dig into the pros and cons or the positives and negatives at all the three big groups at least. So at Richemont, you mentioned the fine jewelry is doing well, and I see that too. Why spend five or ten grand on a bag that's going to wear and that you're going to end up reselling when you can get a pair of diamond earrings or a watch or something for that same price? But the watch market obviously is not as strong as fine jewelry. What's going on at Richemont?

13:02And then let's talk briefly about their fashion brands too.

13:07Luca Solca:I think that Cartier and Van Cleef are clearly leading with jewelry. And there's a lot that they're selling at less than$10 ,000 or at less than$20 ,000 because indeed at$5 ,000 of$10 ,000, a piece of jewelry or a Cartier watch looks a lot more compelling than a handbag. By the way, the specialist watchmakers at Richemont are nowhere near as good as the Jewelry Maisons. But when we look at the growth of watches as a product, we see that it is a lot better than the specialist watchmakers division is doing. And that is because the Cartier watches are selling very well. so uh quartier is firing on all cylinders both uh jewelry and uh watches which i think is uh again back to the idea that uh the category is a lot more compelling today and uh make no mistake richmond unlike some of the other niche players that we referenced to before uh is also suffering from quite a weak support from Chinese consumers.

14:29Luca Solca:There's, I think, a temporary love affair of these consumers with local brands like Laoco Gold, but never mind the Chinese consumers. Richemont is doing very well indeed, even without a strong support, and even with the Chinese consumers was said to reduce their decline and not yet provide a significant contribution to gross. It's interesting you mentioned the Cartier watch thing. I wonder, is it possible to see, do you have any data on whether or not that's being driven by women? Because I just feel like I know a lot of people who are buying Cartier watches. I'm also of the age where if you're going to buy a watch, you probably are going to get it around this time.

15:21But do you think that some of the interest in Cartier watches is being driven by like a more pronounced female audience? And also, do you think or do you think it's just that like Cartier is the slimmer watch is what is trendy right now?

15:42Luca Solca:I think indeed Cartier as a brand is priced by ladies and I think that the bulk of their watches would be for ladies. I would definitely subscribe to that. The Cartier watches in a way are the entry price into the brand because if you buy them in steel and if they are in quartz, chances are that they could cost less than$5 ,000 and they're still a core Carquier product. So there's a lot of mileage you get for this price tag. Unlike now some of the soft luxury brands that for less than$5 ,000 would only be giving you a small bag look at the Chanel windows to confirm that. So I do think that Cartier has been able to rise as one of the most important watch brands globally in the high end, probably in second place behind Rolex in terms of total volumes with a significant skew towards female consumers.

17:00Got it. Okay, let's move. and, and on, on really quickly on the fashion division there, what do you think about the Chloe, Chloe? I, it's not a turnaround, the, the situation at Chloe, because, you know, I, I feel like the new designer, Shamina, Shemina, people, I, people who know her all, all pronounce it differently. I haven't gotten a pronunciation directly from her. But she's very beloved. People really like the collections. But I don't see it. I haven't heard of anything of it like really working at retail in the way I have heard about Alaya, especially the shoes.

17:43Luca Solca:I think that Richemont in fashion is doing particularly well as Idina Alaya had been very popular and very successful. Chloe has also been meeting with a lot of positive feedback. What we see from previous experiences is that those successes have tended to be transient because there's a lack of critical mass to sustain them, both in terms of support for these brands and in terms of retention of the key talent that are at the heart of those temporary successes. So fingers crossed for Richemont that this time is different, but the risk is that either their best talent is poached or that they don't necessarily have the wherewithal to support their brands and to make them break through the niche that they're being recognized in.

18:48Yeah, fingers crossed for them, because especially at Alaya, I think it really has become a go-to brand clothing-wise in the U.S., especially for a certain customer, and I feel like it could get bigger. But OK, let's let's move on to the big guns. Let's talk Dior LVMH overall, but Dior in particular, because to me, Dior, there's a huge opportunity there. There are a lot of people who would have never bought a Dior bag in their entire lives prior that maybe would buy one now will maybe buy a necklace. do you think it's wholly reliant on the luxury customer i mean one thing that i think people forget a lot is that you are at a very big men's business i assume a lot of that was in china what do you think is going to happen there given the feedback of jonathan anderson's first collection it was only men's but you know i have people messaging me asking me prices on bags things if they need to save up do you think it's going to be enough to to bounce that business back

20:02Luca Solca:well they seem to be off um to a good start uh jonathan anderson first show feedback is indeed positive it was only menswear and we'll see uh women's wear in due course in september but it does look promising. There was clearly a need, I think, in the case of Dior to regain the attention and the focus of consumers for a while had been very central in the industry and for a number of years Dior had been the hottest brand in the space. Not in the most recent years, and I think that bought us to be recaptured. And Jonathan Anderson, with new management and with more careful handling of price and mix, should move Dior significantly ahead in comparison to where it is now.

21:15Luca Solca:Now, in our assessment, the bulk of the decline we had seen in the first quarter was very much coming from Dior with Vuitton in positive territory. In the second quarter, both brands have possibly been negative, but I think Dior a lot more than Vuitton. Okay, I know we're all waiting. I know we're waiting for this guy. But like Luca De Mio, is that how you would say it? Luca De Mio? Luca De Mio, yes. Luca DeMeo. So I know we're waiting. Everyone loves him. Everyone I know who is Italian, who's worked connected to him or know someone who's worked for him says he's amazing. This guy has never, ever, ever dealt with any kind of product like this.

22:02And also it's not like he can just fire everyone. Then there will be no one working there. So what do you think is going to happen. It does not seem good. It does not seem good right now. I'm worried. It seems like Bottega is being managed super well. I think Saint Laurent, they're managing it very well. The Gucci situation is tough. What do you think is going to happen?

22:29Luca Solca:Well, I think that the most important test is for them to work well at Gucci. If that was the case and we will soon see what demna is able to invent for gucci going forward luca would be finding a much easier opportunity to supercharge on the back of this potential success supercharge the gucci turnaround and also streamline some of the carrying's forays in various directions. But I would say at the root of the caring rebound, we would need to find a sparkle for Gucci and a vision for Gucci that works quite clearly at the risk of stating the obvious. The idea of making Gucci quiet and taking it more classic was a fiasco.

23:28Luca Solca:So there's a need to make Gucci be over the top, except in a different way than Tom Ford or than Alessandro Michele were able to do that. I also think that possibly we've seen the peak quite luxury, so the stage could potentially be set. Is there anything else from your perspective that people need to be watching for in Q3? I think that the most important points to be watching out for in Q3 is how the newness is going to hit the market. We're going to have an unprecedented line of new designers and new creative directors at the most important brands. This, I think, is going to be very much the point to watch in Q3.

24:24Luca Solca:current trading and the quarter itself is going to be important. But I think even more important is whether some of those premieres could potentially be well-received by consumers and by the industry at large. There's an unprecedented lineup of new creative directors eating the catwalk. And that, I think, is what is going to define the next 12 to 18 months. Luca, thank you as always. I hope you get a break and we'll talk next quarter for sure. Thank you. Have a great summer.

25:12Sarah de Mevalex, welcome to Fashion People. Thank you, Lauren. So I wanted to have you on briefly because we were messaging. You're one of my sort of go-tos for copying outfits. Anything you buy, I will buy also. But you know, you're an amazing stylist and I'm very inspired by your work and the way you live your life and how you dress and your interest in clothing. And we've had lots of fun conversations about shopping and how we spend spend and who inspires us. And I wanted to discuss this most recent Phoebe Philo collection because I feel like it was potentially a turning point for the brand, which is still under two years old.

26:01what did you think of of the collection which is will be released they they released images about two weeks ago and it will be available in stores starting early january what what was your impression i just loved it but to be to be honest um i think we spoke um of that privately like you and i when it was first released two years ago so the first edit um as they call it i already thought it was it was really really really good and i and i and i was not expecting you know like people were expecting crazy things and i thought it's actually um already really brilliant and uh and shifting something and then the second edit i mean the the collection so it's a collection and edit but like the first edit was what for me really good and then the collection B and C and now it's D I think I thought it was really I really felt that with the last one I have to say I felt this one was kind of a as you said a turning point it shows such a variety of

27:17her designs and taste I mean I have so much so much to say about it i think um it's it's incredibly clever um it can it can go it can you can like it and wear it i can like it and wear it a 55 years old woman can like it and wear it i have 25 years old friend who can like it and wear it it's like oh you know assistant or like everyone got something from it um which is quite surprising because it was not maybe the most conventional collection uh you have a furry type of shorts you have bermudas um you have a one piece kind of tiger um jumpsuit like that that that that outfit i was like this is so brilliant there is so much humor in it um I'm wearing her clothes and and I have to say yeah that's just it's just a way different feeling from any other type of brands or clothes I've worn I I agree I feel like it totally changed my interest and my approach to dressing in the last two years for you too and And also you can see it in everything.

28:44You can see it everywhere. The influence of it from the popped collar to the colors to muscle tees and trousers and the style of bag she designed that's sort of like flat. It's everywhere. Everywhere. In a way that is like actually quite for something that is like barely two years old to see how much for me to see how it shifted like literally like the imagery and and certain brands in the industry and you know uh first it was the white sheet she was using for the background picture and everyone started using a white sheet kind of a bit crimpled and it was the big sunglasses like my miles davis sunglasses and it's like as you said the muscle top and like the baggy trout It's just like everything got, she's just so ahead.

29:38There is something that is like so straightforward. And so when it came out, I was like, this is so in your face. This is like such like in your face thing where everyone was like, oh, quiet, luxury, beige, like, you know, like cashmere coat and stuff. Like from really good brands, actually, that are still very, really good and that we still love a lot. but it's just a different thing. It's just a different... I think it talks to a different type of woman maybe and the fact that you said it changed your perspective on how you want to dress. It's so interesting to me as a stylist and I always ask you, what did you buy this trip?

30:23What did you want to buy? What do you fancy? And we just fancy her clothes. There is something about it that you, it's just evident. Like every time I go to the Guerre Lafayette, where I think you've been. I have. Yes. And you bought stuff. I have. It's an amazing pop. It's a store. I agree with you. In a store. And it is wonderful. That women's floor overall is gorgeous. Really good. Yeah. And I was thinking about this for fall, actually, because I'll be, I'll see you in September. And what will I buy? I want another pair of trousers so I'll go there and buy a pair of trousers and I thought I'm gonna buy a pair of trousers every time I go to Paris now and then I'll go to Charvet and get something I'm just wearing a Charvet shirt with a Phoebe denim of course you are literally like yeah no I I got a new trousers like maybe a couple two three yeah two three weeks ago there and I just it's i was with friends we all got the same you know like they they had one in each size and we were three and we we got the 30 i got the 34 one got the 36 one got the 38 i think something like that the denim with the zip in the back and khaki so good i bought shoes and i will go back and buy them in another color because they are the best shoes i've been wearing for a very long time and yeah just a chavez shirt or a t-shirt and and that and that's it it's just the i want to throw everything i was saying that to my friend from la yesterday i want to throw everything i i i mean i will keep some stuff but like not to be that radical but throw a lot of things and just really focus on on all phoebe pieces and actual phoebe pieces yeah i mean when I look at my wardrobe so much of what I still wear that I pull out that's old is from Celine from trousers I have many trousers I have a really amazing blazer and it it does feel like these pieces will be similar what shoes did you get I'm so curious I got them so I got them the I call them the cardinal shoes um because they're very little 14 to me they I got those like a club club little loafers you know with like a small heel which is perfect you know me I'm quite small I'm very small and I got them in Augsblood and that's very cardinal cardinal all all French style but um I might get them in black I tried them in gray and they had a bit of a Margaret Thatcher vibe on me which I quite like but I was not uh I was not sure and then um yeah I think I will get them in black i got them i got the denim i have an obsession for her for the zipper for the denim zip and i got it in that very strange acid wash yes um uh uh the denim fabric treatment and i and i won it not long ago and and i just felt i had white t-shirts the trousers a charvet belt and the shoes and I never felt that comfortable in my life um and confident and also the trousers is very remind me like some sterling ruby pieces like the acid wash type of thing and um yeah I was I was just you know just just a white t-shirt and a denim from her with the zip and and it was the most like kind of efficient in a way.

34:06Efficient. It's very sharp and efficient. And you said in your face, it does feel very hard in a way that is right for this time. I wanted to talk really quickly about the pricing because if you look in America, it seems crazy. But then when you go to the Europe, it's actually really, I don't want to use the word reasonable, but like, it feels like a good value where it's not, look, all this stuff is expensive. And honestly, if it is of the quality that they claim it is, it should be expensive. I was looking at an old Vogue from the 90s where they had all the prices of the dresses and I did the inflation.

34:59And all these dresses would be six or eight thousand dollars that were in Vogue. So the prices are probably, but how do you feel as someone who is very conscientious about pricing and how do you feel about how they are approaching it? I am because we discussed that before you and I, I am more on the makers and manufacturing parts. Like I want a best, like I'm a freak of where things are made and how they're made. And I want to pay the right price for what I judge is the best quality. So it can be quite expensive, but it can also be like certain Shetland suite or like certain cashmere from like men's brand, And like men's shop in London from Savile Row and it's made in Scotland and it's probably the best yarn of cashmere.

35:53So I just I'm just very conscious of that. And I buy according to that. That's why I love Charvet so much. It's some of the best poplin they're using in the world. I mean, the best poplin. And it's made in France. And you're talking about a shirt that costs 500 euros, which for me is in a way quite reasonable. the pricing of the Phoebe pieces I would say that the jacket the leather jacket and the coat it's it is quite expensive in a way I don't know if expensive is the word but like it's quite it's a budget it's quite a budget and not everyone can it's pricey but then when the first edit was out I remember flying to New York for work and I went to the Bergdorf booth, like the first one.

36:51And it was just, it just opened like literally a few days before. And I tried on the coat and I'm still thinking about it like almost a year and a half. Yeah, a bit more later. and I tried this black wool with a full 100 % silk pale yellow lining coat, double-breasted, and it was the most amazing coat I think I ever tried on. And I still regret it. I hope one day I will find it again, actually, find the way how she will make it. She made another version of cashmere, but that was different. but it was 3 ,500 um and on the website in in europe in france it was like three three three three or three four thousand euro and if you look at other brands that are on the same kind of level on the market that will have been probably six so five or six for wool full sealed client coat so it was there is things that i find more pricey there are things that i find actually or you can buy a pair of really fancy nice shoes with the heels for like 900 euro when like certain pairs of like ballerinas or flip-flop are like 1500s for you know other other brands that we love um it it's not affordable for you know it's not like the most like it's not but it's not neither i don't think neither it's the goal neither it's like the the the where the market is neither it's like possible with the price of like you know the way they're making stuff everything is in maybe in italy or england or like so yeah i i it's pricey but you can still treat yourself, which I really love and appreciate.

38:45I can go on the booth at the Galilee Life by the Yates or I've been to Dover Streets in London and be like, oh, you know what? I'm going to try that pair of shoes and maybe I can live with it. That's my treat today. Yes, it is. It is a treat. So Sarah, final question for you. Yes, tell me. As a stylist, how has this changed how you approach? How has her reemergence and her influence on the market changed how you approach your work and has it at all? Or has it made you think differently when you're thinking of like a concept for a shoot or something? Do you feel that her sort of being the person that's sort of giving us all an idea of how to be has has influenced your work at all?

39:34Yeah, no, definitely. I mean, it firstly reflected on it reflected on me as it's reflected on you and i think on many women i have quite a few friends as i told you who are wearing it uh a lot or try to get more pieces as as they're coming out um it really reflected on the question of um it's strange it's really strange it's a bit being like at the shrink but to say that to you about femininity and sexuality and uh i think she done that at celine but in a very different way she she she was probably a different at a different stage in her life and different woman there there i think as i said it's way more straightforward it's in your face it's very punk so i think i approach thing thinking the more you kind of mess around the more you you know you you get stuff from it you I think she pushed people and um women and customers to ask more questions would I wear that weird green coat would I wear a denim that opened from like from my ankles to my bum like do like like how what is it referencing like um I was at Dollar Street and and I was on the booth and I saw that tiny George Michael and like framed portrait very tiny in a corner.