Is the Luxury Industry Okay?

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2:35Hello and welcome to Fashion People. I'm Lauren Sherman, writer of FUX Fashion and Beauty Memo Line Cheat. And today with me on the show is Bernstein analyst, Luca Solka. We're talking first half 2026 results from LVMH, Caring, Hermes, and plenty more. Before we get going, I wanted to remind you that if you like this podcast, you'll definitely love Puck where I send an email called line sheet. If you're a fashion person, you get that reference. It's an original look at what's really going on inside the fashion and beauty industries. Line sheet is scoopy analytical and above all fun. Along with me, a subscription to Puck gains you access to an unmatched roster of experts reporting on powerful people and companies in entertainment, media, sports, politics, finance, the art world, and much more.

3:26If you're interested, listeners of Fashion People get a discount. Just go to puck.news slash fashion people to join Puck or start a free trial. Happy Friday, everyone. Hope you had a great week. I have updates for you. As many of you know, I was on a self-imposed shopping freeze where I was permitted by the rules of the freeze to buy vintage and workout clothes. I obviously did not make these rules up because it was only helpful to me to an extent because the majority of the clothes I buy are secondhand. However, I will say that I did not really buy anything for two months except for some very good 1990s era Calvin Klein on Vinted.

4:08Big shout out to the Fashion People listener who sourced that stuff for me. It was amazing. All under 100 euros. I'm very excited to see it. And also to my friend Galbi who traveled to the edge of the 12th Aranisman to pick up one of the packages. I hear it was a harrowing experience and I'm very grateful. I'm excited to see this stuff and get it dry cleaned when I get back to Paris. Anyway, this past week I did sort of break the seal. The shopping freeze is technically over. I was like, I'm really not going to buy anything new until the fall anyway. But I did buy a Cleo Camp reversible boatneck top upon the recommendation of Carolyn Foe, fashion people guest.

4:51And obviously, Liana Satinstein did a piece on them a while back. But Carolyn, I don't know. She was like, you should get one. I'm excited. I got butter yellow, not black, which is very daring for me. I also bought some vintage jeans. I got a pair of Nicola Jesquer era Balenciaga trousers, corduroys. They're amazing. And also a rosé nickels top that I will wear to a puck event this fall. I wish you could write off clothing. Anyway, these are all obvious and easy purchases and all the vintage was like average like 200 a piece, which made it justifiable as well. I also bought two Nike skim sets, mostly because they were on sale but I do need new workout clothes like I just do my review I like the bras a lot the bottoms are also fine and honestly better than anything else I've tried I have not tried aloe bottoms yet I will soon maybe I will go to aloe before I leave I do not want to stand in line so if there's a line I'm not going to stand in it or wait to try stuff on or maybe I'll just order them to the house and return.

6:06But I also like the way the Nike skim stuff is branded. I'm not looking to be some fashion plate when I go to LaGrie, but I do wish there were more options still. I just think there needs to be, I guess live the process. This is what, I'm going to try it. I've known Robin forever. I'm going to try a bunch of that stuff too. It's super chic and it's basically the same price as all the more mass brands. But I just wish there just needs to be a few more things. This is a, it's like you can buy 5 ,000 different styles and brands of denim. Why can't you do that with activewear? Anyway, more updates at some point.

6:54Hopefully you're still listening. This week on Line Sheet, I actually wrote quite a bit about shopping, including fashion's increasingly complicated, complex, I would say, relationship with the row, which we used to talk about constantly on here. I think we even did a dedicated episode to it. I forget who my co-host on that was. Maybe Becky or Marissa, I can't remember. Or maybe Jacob, I don't know. We don't really talk about it so much anymore. What happened? Well, Phoebe Philo happened, but also, I think it's a confluence of things. The row, at the same time Phoebe Philo coming up, Matt too, obviously coming up, this sort of change in the way we are all dressing, the row really benefited from the sort of sweatpants forever in 2000s, in 2020s pandemic era.

7:47And people were kind of like, yes, I would love a pair of cashmere sweatpants from the row. I have a bunch of money. And it sort of shot up in popularity going from being a sort of really insidery brand to something that a lot of people who live in Brentwood buy. Not that they weren't before, but it really became the sort of basics for that group. And I think it still is. You go on the website, stuff is still sold out. But I don't think it's in the conversation as much with fashion insiders. And one of the reasons for that is we don't really see their images of their clothes much. Like the stills on the site are still styled to a point of that you need to use them for your references forever, but they're not passed around the way they used to be.

8:37And I think some of that is on purpose. Obviously, they have really strict rules around their fashion shows. But I think it's also because they don't want people to copy them. But being copied is how you sort of take over the culture. So my question for the row is, do they want to be a brand with a loyal following that doesn't waver? Kind of Rick Owen style, but bigger, obviously. But like that kind of thing where it's kind of you go to the row for these certain things. And if you're a real person, you're a real person your style never changes or do they want to rule the world uh because they did for a while i think either either path is fine they'll be fine they're very conservative the way they operate they have amazing investors who will back them there's no rush but i do think that they're probably grappling with this internally just from some of the strategic business decisions they've made but read more online and let's get going with the fact luca solca welcome back to fashion people very very quick return thank you very much for having me you know this is the friday episode so what did you have for breakfast uh today just had um a bowl of milk with the weetabix that's awesome luca i was wondering because the last time you were on on a friday you had a biscuit and i was wondering if you had there was uh you know it's

10:07Luca Solca:indulging in sugar, but this morning I thought fiber was healthier. So I tried to limit my sugar intake as much as I possibly can. Well, you look great. And you know, it's funny, Luca, everybody's obsessed with protein and they forget about how important fiber is. It is, I think. And also reducing sugar and salt if you can, but that's another question. That's another podcast. The sugar is easy. Salt, not so much for me. I love it. Anyway, it's been a busy week for you. So I understand why you're trying to be healthy. There were so many. So really quickly before we get into the luxury earnings super week, you write these notes to investors after the earnings come out.

10:55And I am always amazed as someone who writes up, I'm very prolific. I can write a lot in a quick, short amount of time. Can you explain your process of how you and your team write these notes? Because I'm always amazed. They obviously come out right after the earnings. You do a short thing and then you do a follow up. But like, how long does it take you to write them? What's the process? Is your team submitting thoughts to you and you can put them all together? What's the editing process for an analyst?

11:25Luca Solca:Yes, indeed. We work as a team. I have the good luck of having two senior associates working with me, a junior associate also on the team, and then another analyst, Maria Mehta, who covers the mid-cups and helps me with the rest of the coverage. so we split responsibilities we um i sort of write a mantra or so to speak a key message coming out of the print which gives the tone and the investment implications that we should draw and then my team fits into all of the moving parts the numbers at the table we sort of produce the tables ahead of time so that we fit in the actuals and the deltas are calculated automatically and so on they send me a draft I go through it and then if it's okay off it goes or if it needs to be changed we change it and then it goes out it's quite um i mean the fast reaction piece just after the print is relatively straightforward what takes more time is the highlights from the call because we need to listen to the call now these days you have the advantage that you can potentially also be helped producing a good summary because of artificial intelligence and everything else, but you still have to go through the number implications, so you need to change the model in a way that makes sense, and that too we do as a team.

13:13Luca Solca:So we managed to go through a week like this, which was exhausting because we have a good team working on all of the updates. Some of these updates this week were also overlapped, like I see Lolluxotic and Kering partially overlapped, which made following these updates also more difficult. Okay, so how do you choose when you're going to ask a question? Because there was one LVMH quarter, probably two quarters ago, that you were not on, you didn't ask a question, and I DM'd one of the board members. It's like, why didn't Luca ask a question? And I thought maybe they didn't let you or something.

14:01And in the end, you weren't on that part of the call.

14:06Luca Solca:No, no, I think that sometimes there's very prosaic explanations. You know, the way that the mechanics of asking questions work is that they open the lines quite a bit before the call. Some people were very keen being first, just connect like an hour before and they wait on the line, never mind the telephone bill, to be among the first in line. Sometimes I cannot do it because I have better things to do. I have to use my phone to talk to clients. And so maybe I end up at the bottom of the queue, and I don't get a chance to ask a question. I try to be as disciplined as I can and to get on the call as early as I can so that I can ask questions, because normally there's good questions to be asked.

15:04Luca Solca:And with a lot of my colleagues working with a very short-term horizon, I see that some of the fundamental questions are not asked otherwise. But it's very rare, I would say, that you get sort of denied the right to ask a question by the companies. I would say that this would be to some extent inappropriate. And I have no direct experience of this that I can report. Well, yeah, you're the priority. Definitely. I mean, the other, the interesting thing is one, one other question, and then we can get into it. But so the obviously become a sort of celebrity within the luxury fashion, executive community, lots of CMOs into Lucasolka, people asking me to make Lucasolka t shirts.

16:00But so yesterday, I would notice there's this editor, her name's Costanza Lombardi. And she she's interesting. She's like, she has a lot of, She does a lot of business analysis. She's like Gen Z business analysis. And she's good. I like her take. And I like the way she approaches it. She has fun with it. She obviously likes fashion, but is really into talking about the business and marketing and all that stuff. So she's been doing, she's been on all the earnings calls and she's just having a great time, which I totally understand. I love it when I have the luxury and time to be on the earnings call the whole time.

16:43But she was like quoting your questions. And I do this sometimes. Sometimes if I'm doing an earnings summary, I'll say, Luca asked this question in the call. What is that like for you that like, I know it's important for you to do press and to engage with the media because that is a way that you get, you know, investors to work with Bernstein. But what's it like for you for like this, this influence, this Gen Z influencer talking about Lucas Solka?

17:19Luca Solca:I think I can only say it's a privilege to be to be noted and to be respected as a voice looking at the luxury space you know we're as good as as our analysis and as our reputations and I devote time to interact with media not just because media can sort of act as a loudspeaker but also because I get a lot of interesting feedback and interesting input from you and from the other journalists I talked to. I think that being an analyst in this sector, being an effective analyst in this sector, requires more than just sitting at your desk and going through the Excel spreadsheets. You need to be going to the stores, you need to be talking to the retailers, you need to be talking to the key influencers, you need to be talking to the journalists to get a good finger on the pulse of what is going on.

18:24Luca Solca:And so I just, you know, I can only say I'm very grateful to the people that like what I'm doing or even don't like what I'm doing but disagree and provide interesting feedback. That is always very useful. We work in a job where you cannot always be right. That's for sure. Because we are trying to anticipate the future. Nobody can do that with 100 % hit rate. So we're all trying to do our best. And the more sources, the more homework, the more data, the better. Yeah, I think it's interesting at the Caring Investor Day, I met many of your peers who I'd never met in person before. And it is, you are, and there are a couple, I have a person who, Simeon Siegel, who covers, who works at Guggenheim now, who covers more of bigger, I don't want to say mass retail, but like Nike, stuff like that in the US.

19:37And you two are my sort of go-to analysts where I think you have the sensibility of what is happening in the culture and how that influences consumer behavior. And you think that way. And not every analyst does. And so let's talk about what you feel like this week overall said about the state of luxury industry and its long-term prospects.

20:05Luca Solca:I think that one way to understand what has been going on this week and the past week is to recognize that the consumer audience has been polarizing. If you're focused on the very rich and you're only focused on the very rich, take Loro Pihana, Cucinelli, Zegna, you're doing well. The top-end consumers are on the front foot. There's a wealth effect. Financial asset markets are up, but they feel good. They spend money. I think that the debate opens up when it comes to the middle class aspirational consumers. We're all very excited about the very rich consumers, but as important as they are, 90 % of luxury consumers spend between 1 ,000 and 1 ,500 euros per year.

21:00Luca Solca:And nevertheless, they represent 55 % of the total market. It's with these consumers that the battle is on. Quite clearly, these consumers today are telling us we see more value in a piece of jewelry at three four five thousand dollars then we see value in the same price in a bag and so that explains in my view the big gap between the growth of the jewelry maisons at richmond and for example the fashion leather goods division at of image of course there was the attempt last year to try and build value into what consumers see by adding to creativity, changing creative directors. Dior has been reviving on the back of Jonathan Anderson.

21:57Luca Solca:Chanel has been reviving on the back of Mathieu Blaisier. But as much as Dior has been resurging, and as well as Vuitton has been managed, which I think is very well, even with that, they're only growing at plus 1%. So I think it is becoming painfully obvious that there's more to do at the level of price mix, that you need to be paying more attention to the fact that a lot of consumers would love to buy luxury except because of cost of living inflation, because of more muted prospects in Korea, in China for example, they don't feel like spending the kind of money that brands are today asking for.

22:46Luca Solca:And so I think that there's some adjustment that needs to be coming. The good demonstration that that works this week has come from Caring. You could argue that Gucci has yet to invent a new and compelling aesthetic. And yet it was improving. How come? Well, Luca explained it very clearly in the conference call, by cutting prices and by repositioning Gucci downwards, in some cases, they have found exponential price elasticity behavior from consumers. The anecdotal evidence we have talking to shopping mall operators in China is that there's quite a few first-time Gucci buyers. To them, innovation is not very relevant because they liked Gucci in the past, and they couldn't buy it.

23:36Luca Solca:Now they can and they're going to Gucci. So of course brands need to be careful when they move downwards because cheapening the brand equity can be a very quick effect. Building the brand equity back up takes years so going down is very fast. Going back up is sometimes very difficult, if not outright impossible. But I think that what we've seen in America with the likes of Coach and Paul Ralph Lauren, what we've seen with Burberry is all converging to say, well, guys, let's wake up and face reality. We possibly went overboard in the post-COVID price increases, we need to adjust a bit more where we stand.

24:28Luca Solca:And I think that that is going to be the shape of things to come, because I don't see the cavalry on the horizon. I don't see a strong recovery in middle-class consumer demand in China coming to the rescue. So unless you want to continue to grow at 1 % or 2%, you need to do something, I guess. And I expect that the industry will take action.

24:57Growth gets romanticized. Control doesn't. And in fashion, control is usually what separates the brands that scale from the ones that stall. Because opening more doors is the easy part. Keeping pricing tight, assortments clean, inventory moving, and retailer relationships strong as you grow, that's the real test. From the$14 billion in orders processed annually for brands and retailers on New Order, they've seen it all. Inventory lives in one place, orders in another, pricing somewhere else, and by the time a team reconciles all of it, the moment to act on demand has already passed. What looks like back office friction on your side turns into something much more expensive on the retailer side.

25:40Slower responses, less confidence, smaller orders, and missed reorders. New Order's latest research shows 43 % of brands are focused on improving margins through better retailer negotiations. But no retailer is giving you better terms just because you ask nicely. In wholesale, leverage comes from walking into the conversation with the right inventory, clear pricing, and accurate product information. That's why New Order by Lightspeed exists. For brands, it gives sales teams a B2B platform to present products visually, market catalogs and line sheets, and manage orders in one place. for retailers, it gives them a better way to plan, sort and manage their buys.

26:18So both sides can move faster and grow without losing control. Learn more at neworder.com. That's N-U-O-R-D-E-R.com. Hey, it's Jen Hatmaker. Here's what I've learned in midlife. Joy isn't the reward you earn after all the work is done. Joy is the work. That's what this new series on For the Love is all about. The sacred, yes. It's choosing delight, rest, and pleasure on purpose. Because saying yes to yourself, that's the thing that finally lets you fill your table with everybody else. Come find your sacred yes with me. Follow and listen to For the Love wherever you get your podcasts.

27:01So on the caring point, it's interesting and I'm thrilled for them because we want people to succeed. But do you think that these practical solutions that have been put in place, that the market has responded extremely favorably to, are enough to, do you think they're a band-aid? or do you think that they will, because all of this sounds good to me, but it feels like a short term next couple of months, next year solution, or not even year. Like, do you think that the, that it's good enough to get people? So, so basically what you're saying is, I don't want to put words in your mouth, but are you like, it always amazes me that I think the way that Burberry has been repositioned.

28:01I understand that like plaid scarves and, and, and trench coats. Those are classics that people would want. I really respect the way coaches managed, but I do not understand why people buy that stuff. Like it doesn't make sense to me. It looks exactly like everything else. And if you're a consumer who could afford Coach, you can afford a bunch of other stuff. And why would you buy Coach? And yet it's been extremely successful. And the combination of Todd, the CEO and Stuart, the creative director, they've done an amazing job with it. But the value in that brand is still hard for me as a consumer, but also as an observer of this industry to understand.

28:44Are you kind of saying that like, that's what Gucci is now? It's gonna be a thing where people want a designer bag and they make nice handbags and it's a little cheaper than buying a Louis Vuitton or buying Chanel and so they're gonna go there. Like my concern with the strategy is that it feels like a Band-Aid and not a solution to the fact that like, we still don't really understand what Gucci stands for. Maybe we are starting to now. I don't know.

29:16Luca Solca:No, I think that, first of all, we should recognize that price is one of the four Ps. So it cannot be a solution for everything, but having the wrong price gives you a handicap, let me say. And what I think Kikaring has been showing, if you pay attention, is that they're willing to take a realistic and pragmatic approach to pricing. Now, can it be enough? No, no, because there's four Ps. So, of course, there needs to be more to go with it. It's maybe a step in the right direction, one first step in the right direction, but then you need to follow up with creativity, you need to follow up with a compelling product.

30:05Luca Solca:This at least is buying time for Demna to come up with his own vision of Gucci, hopefully. But it's going to be a compelling vision, and if that was the case then we would be having a Gucci revival. For the moment you have indeed a bit of a short-term boost to some extent, and it cannot work alone. But it does show other industry players that the idea that, oh my God, we could be moving upwards forever and we could upgrade our mix forever because the rich are coming and so on for a mega brand is wishful thinking. And, you know, this is quite simple to understand. And it's not that the rich buy in the same proportion to the money they have, the same products that aspirational consumers buy.

31:04Luca Solca:I may have 10 million people spending 1 ,500 euros and buying a handbag, for example, and so I sell 10 million handbags. But if I have one person with all the money of these 10 million people, they're not going to be buying 10 million handbags. They're going to be buying a helicopter, a private jet, a football team. Do you see what I mean? And maybe one$1 million dress. Exactly. Exactly. So the mix, the category mix, as you move upwards in the wealth pecking order changes. So mega brands like Vuitton, like Gucci cannot do, I would even dare say like Hermès, because there's a lot that goes to the middle class aspirational consumers for Mermes.

31:57Luca Solca:So I think these brands cannot afford to forget that they have to succeed at both extremes if they want to grow at a decent pace. Yeah, I don't want to talk too much about Dior. I actually want to talk to you about Vuitton because I think it's in some ways going to be the bigger story in the fall. But I think one interesting thing about Dior that they did early on, and not saying it's fixed there in any way, I think it was interesting. It was very clear in the way LVMH communicated that they wanted to show it is working. The CFO talked about they've had double-digit growth, I think, in a lot of the regions.