Tariffs & The Art of Retail Maintenance

0:03Hello and welcome to Fashion People. I'm Lauren Sherman, writer of Puck's Fashion and Beauty Memo memo, line sheet. And today with me on the show is retail real estate guru, Jonathan Schley. We're talking Prada Versace, Tariff Mania, Glossier's Downround, and plenty more.

0:27Hi, everyone. Hope you are having a great week. I am actually on vacation this week. I'm in Tokyo with my family. So the next few episodes are going to be a little bit more evergreen than usual because I'm chilling out. This week on Line Sheet, I've got some details on the state of Louis Vuitton's factory in Texas, which has faced plenty foreseeable challenges since its opening in 2019. I thought the Reuters story on the factory and its struggles was really good, but at the same time, maybe not understanding what the point of the factory is. So I got into that in my piece. It's worth reading both of them, I think.

1:08I also have an update on the search for the next editor of Vanity Fair, and I also did an unscientific survey on the best running tights with pockets. The answers may surprise you. Sarah Shapiro takes a look at Love Shack Fancy and analyzes whether their licensing strategy is working. I personally think of Love Shack Fancy as sort of a shabby chic meets Betsy Johnson situation, and I assume licensing is the way to go as they inevitably lose their luster with tweens and teens. You can't be cool forever with that crew, especially when that crew becomes young adults who think it's super tacky to wear Love Shack fancy miniskirts.

1:52Anyway, enjoy, and I will be back with a quick update for you on Friday. Jonathan Schley, welcome to Fashion People. Thanks, Lauren. Thanks for having me. So before we get started, this is a news day, so we're going to just run through a bunch of interesting topics that I know you have an opinion on. But maybe you can... I met you years ago through the journalist Misty Whitesidell, who has actually been a guest on this podcast and writes a lot for the New York Times at the moment. But she was working at WWD at the time, I think, and introed us because your background is super unique. You are a retail real estate person, advisor, and then you also have done a lot of writing yourself, especially about cars for the likes of high snobiety, et cetera.

2:49But how did you get into the fashion business? uh so i mean i i sort of reject saying i'm in the fashion business um you know i'm i am a senior vice president at cbre for what we call retail advisory and transaction services which is a really long-winded way of saying a real estate broker but primarily work with uh brands in the luxury apparel beauty home space etc focusing on their retail strategies uh globally um and how i got into that was quite randomly actually uh i started in hospitality at ace hotel as you know or i should say for one of the owners of ace hotel focused on the retail uh in those projects in physical spaces in those projects.

3:41So I've always sort of approached those relationships in a more brand partnerships way than a transactional real estate broker way, I would say. And then sort of accidentally became a real estate broker after that, mainly after the project in downtown LA, which was when you and I first met. Got it. At some point for another podcast, not for fashion people, but the ownership structure of hotels is so fascinating. We cannot get into it right now, but the Ace Hotel in particular, I just stayed at the one in Brooklyn. And this is like my husband and I talk about the ownership structure of hotels for like hours.

4:25It's so fascinating. Very complicated and very differentiated, especially geographically. Yeah. But if you all have ever been, And is the Ace Hotel still in downtown LA or is that still an Ace? No. I think sadly not. Yeah. I used to stay there before I lived in LA. There was an Ace Hotel downtown and anyone who stayed there who has been downtown LA, not the Arts District, downtown, downtown would know that there's like an Ace Shop around there and Acne. There's all these great stores around the Ace and I don't know which ones you were responsible for and which ones you weren't. But I remember that Acne store opening in that incredible, it was like an art deco building, right?

5:11Eastern Columbia building, yeah. Eastern Columbia building. You were really integral. Those were my, yeah, those were my deals. Yeah, I, you know, I always sort of just say, I just got really lucky to always have really good calling cards in the sense that, you know, working with Ace and then my first retail deal was Acne Studios downtown LA, right, which is a pretty good place to start. So fortunate in that regard. Yeah. So it's an interesting place to be coming from. And then you're upset. Anyone who follows Jonathan on Instagram knows he is a big Porsche guy and is also just like a car expert once he changed a flat tire for me when my husband was out of town.

5:55I did. Although honestly, even if Dan had been in town, I probably... One of my great pleasures. I was near your home and I was like, this guy will actually come do this and be able to do it. And it's not going to be like a five hour thing. So thank you for doing that for me. My sincere pleasure. Anytime. I still owe you like stakes or something. No, it's all good. Okay. So, oh man, maybe you should come back to talk about fashion, retail, real estate, because I do have like a gazillion questions about that and how that stuff works. And And you're obviously your rivalry with J-Lux, which is probably just in my head.

6:37It's not a rivalry. Every time I see a J-Lux photo, I think of you. Or whenever I see a Shillay and your business partner post on a building, I think of J-Lux. So it might not be a rivalry, but I love it. Not a rivalry, but naturally a competitive business. Yes. Anyway, so last week was an interesting week in the fashion business because of all this tariff BS. And I do want to get to that because I know you have lots of opinions on it. But first, I want to talk about the big deal news, which was that Prada acquired Versace from Capri, the Prada group, which includes Miu Miu Prada, churches, and a couple other brands.

7:26Marchese, the candy. Patisserie. Yeah, patisserie, essentially candy store and a few other little things. They acquired Versace from Capri, the American group that owns Michael Kors and Jimmy Choo for essentially$1.4 billion. Not half of what Versace paid. Well, less than half of what Versace paid for it adjusted for inflation, but whatever. It was not, I mean, less than half of what Capri paid for it in 2018 adjusted for inflation. But honestly, not a terrible deal given the state of Versace right now, the state of Capri, which tried to merge with Tapestry and the SEC said, no, we're not allowing.

8:15Oh, the FTC said, no, we're not allowing it. So it's just been kind of, Versace is kind of a mess. it was growing and then it stopped growing and has actually seen a lot of declines, even in an era when there was a big bump in a post-COVID bump in fashion, Versace was struggling. So now it's owned by Prada Group, Italian company. In a transition between generations, there's a CEO who's not part of the family, but the next CEO will likely be the son of Muccia Prada and patrizio bertelli what do you think about this deal for versace and for prada yeah i mean look my experience is always going to be informed by the real estate and when i when i interact with brands you know either just socially as peers or professionally as clients you know i think the conversation about them what i always find fascinating is that you kind of have you know i think like real estate guys typically are the ones who kind of historically you'd expect to know the least right but they've tended to become and when i say real estate guys i mean like landlords and things like that you know they've become pretty sophisticated knowing the brands that are you know cool of the moment zeitgeisty etc whatever you want to say And I think that, you know, Versace in my world just hasn't really been in part of the growth conversation for a really long time on that basis.

9:56You know, in fact, the opposite, like getting rid of some stores for performance reasons. You know, so from that perspective, it's just sort of a little bit of a nothing burger. You know, I think Miu Miu, obviously, you know, when they had their last downtrend, Prada absolved themselves of a lot of that real estate very quickly for Miu Miu. So I think now on the tailwinds of Miu Miu being like super hot, you know, they're probably underdistributed, right, from a retail perspective. So I think there's probably good opportunities, you know. So Versace actually has quite good real estate despite their lack of performance in a lot of places, in a lot of primary markets that are otherwise competitive.

10:39So from that perspective, you know, my lens is just, it feels like a good opportunity for Prada to plug in some Miu Miu stores in some prime Versace real estate. from a brand perception perspective, you know, look, I think, you know, Prada, Miu, Versace, from my view, are three very different brands, you know, three very different prongs of consumers. It probably gives Prada as a group a lot of coverage on different types of consumers. It's, you know, it's that simple for me. Yeah, that's very similar. And I didn't even ask you for your opinion on this. And that's pretty much exactly what I wrote in line sheet last week was, I know they have real Versace has really good real estate.

11:24Miu Miu needs to ramp up distribution to ride this, you know, they've been growing. There was quarters where they grew over a hundred percent. Like that's not going to keep it. And I think people don't realize how small Miu Miu was prior to this explosive growth. And it's still a very small company. So I would say that they're going to ride this as long as they can. But I think on the... So the real estate totally makes sense. It was worth it for that. And as we both know, it always goes back to real estate. But I think on the consumer point, one thing that keeps coming up, which I think is like...

12:04I made the joke. Sorry not to cut you off. if I made the joke that now they have a brand for Miami, LA, and New York. Well, it's 100 % true. You would say Mew Mew is LA? Yeah. Yeah. I went to lunch with someone on Friday at San Vicente Bungalows, and she was wearing Mew Mew shoes and had a Mew Mew sweater. And everything else was not designer, or it was designer, but not super obvious. But I mean, she looked really cool, actually. She was definitely the best dressed person at San Vicente Bungalows on Friday. But yeah, I think that the other thing is there are always cycles of what is in and what is out.

12:49And Prada has a sort of a base customer that never really leaves like a lot. I would say it's probably a woman in her 30s or 40s. And there is just a person who's always going to want to buy one piece from Prada every season. But there is also, that's limited in terms of who that reaches. Like Prada is probably the most universal of those three brands, but it's still not, it's not for everyone. No, but I also think it's the most evergreen from my perspective, right? Because they're never, they never, at least publicly, you know, in the media wars of luxury, they never seem to be trying to compete with the other big three, let's call them.

13:36Right. They just, they continue. I think they're pretty good at staying their own lane. Right. It's like, it's, um, you know, it's like Stussy versus Supreme. Like I would say like Stussy is the Prada of streetwear and Supreme is the LV trying to like bigger, bigger, bigger, all in your face, et cetera. Yeah, no, that's 100 % true. And it's a good base for a group. And it's really interesting. A lot of the people that I've talked to or a lot of messages I've gotten have been about the fact that Prada tried to build a group in the late 90s when Gucci Group was forming, when LVMH was acquiring a lot of brands and hiring young designers to refresh them and sometimes relaunch them.

14:22and Prada, the Bertellis bought Jill Sander and Helmut Lang and it was an epic failure. They owned them for, I think, less than five years or just about five years. They sold them for nothing. It didn't work. And there are several reasons this is very different. One is that Prada, Helmut Lang and Jill Sander were all of the same thing. If you were a customer of one of them in the nineties, you were probably a customer of the other one, or, or maybe you're a helmet person and you occasionally wore Prada accessories, or you were totally Prada, but you had Jill Sander coats or something like that.

15:03And, and so there wasn't a lot of differentiation and also they didn't have the experience Bertelli who was, and Mucha who were the, and they were co-CEOs for a time, but Bertelli, you know, really running the business in the late nineties, this was, no one had done that before. And so when you look at what, what they're building now, first of all, Bertelli is essentially retired. They have this interim CEO who he's not interim, but he's sort of in between Lorenzo Bertelli and Muccia Prada's child will eventually become the CEO of the company, but, but this guy, Andrea, who's, who's the CEO, he's, he's an operator and he's, he's managed Luxottica.

15:46Like he has a lot of experience. So I think the idea that they are going to get the Miami crowd. And also we are moving out of a phase of like, we went from logo mania to this subtle sort of norm core high fashion, if you want to call it quiet luxury. And now that I went to the last Versace show and it was sort of, it was really funny. The woman that I was sitting next to a fashion critic said, this is the worst show I've ever seen. And she was being hyperbolic, but then Kathy Horan gave it a great review. So it was interesting because I personally really enjoyed it and thought there were like all these fun ideas in it.

16:29It was a little bit wacky, but yeah I think there is a customer who will always be there for the glitz and glam but then also it just feels like everybody has a black cashmere sweater at this point we need some different stuff yeah I I mean I agree with that and I think it's okay to have some differentiation right I could always make the joke it's like you know about the like what the timeline and life cycle of a brand is where like you know like i'll use abercrombie as an example right like abercrombie came here and it was so successful and then as it fell off it was like you'd see random you know german and dutch guy tourists wearing like you know long cargo shorts mid calf and it would be like very weird and 10 years later you'd be like why is this dutch tourist look like an American from like 10 years ago, right?

17:27And then after that, it gets to Eastern Europe. And then after that, it gets to whatever, right? So I think as you see all these, like, as you have all of these different geographies that evolve in terms of where they sit in, you know, the cultural cycle, these life cycles extend beyond our purview in like a very significant way that I think we obviously are just more focused on, you know, the US and Europe and things like that. Yeah. Well, I mean, the extent to guys in really, really tight, skinny pants is a great example of that. For sure. Yeah. Because that cycle is actually starting again in Prada, the last menswear show they did.

18:10They did these very ankle, skinny, tight, like borderline offensive jeans or pants that, but also felt subversive because men's pants in fashion have gotten bigger. So it's like, there are still people wearing tight, low rise, skinny jeans from when Raf Simmons first introduced that idea 25 years ago, the trickle down is still exist with like regular guys across the world. Oh, sure. And now it's like the trend, the runway is matching what the last cycle of the trend is still what's still happening on the street, which is a fascinating, it's like a full circle moment, essentially. I mean, I was a hardcore 06 Deoram 17 millimeter boy.

19:06So I get it. But you won't catch me in that moving forward, I'm sure. I bet you would.

19:18Okay, moving on. Let's get this tariff stuff over with. Okay. So we know what happened. I don't know if you and I discussed this directly, but I assume... I don't think we did. I assume you also assumed that the tariffs would not be implemented across like a blanket implementation as promised on April 2nd. And in the end, there is a delay and most of these tariffs probably won't be put in place. There will be deals made and et cetera, et cetera. He already said, I mean, he already said yesterday about electronics and phones and computers, which is 30 percent, roughly 30 percent of the total Chinese export to the U.S., right?

20:08So it's obviously there's a heavy degree of showmanship. Yeah. So even in China, which he was going to keep the tariffs there, we're talking about Trump, the president of the United States. And my husband kept saying, because he follows Apple very closely He was like, they got an exemption last time They will this time And I kind of was like, maybe they won't Because this is the one hill he's going to die on But the reality is, the minute the bond market started to get screwed up He couldn't keep going on this tariff rampage So generally, what's your opinion about all this and where do you think it'll shake out in like six months?

20:55So, you know, I had some big deals in in out for signature, you know. In the last two weeks, you know, that sort of paused and sort of paused and sort of paused. and then you know come last thursday and you know you have the announcement at the end of the week or friday or whatever it was and you know i was pretty convinced at that point that those deals just wouldn't go forward or at the very least be paused and come monday morning you know signatures are in my inbox and everything's moving forward now i'd be lying to say there's obviously not concern. There's huge concern. But I also think that most of, you know, the seer, look, it depends on the brand, right?

21:41But let's say you're a very serious luxury brand, who you're talking 10 year timelines on things, right? You know, real estate deals or long term deals, you can't, no one's making, you know, long term plans on short term information, right? You just can't do it. So I haven't personally had anyone transactionally back out of a deal. I think there's, you know, it's mostly like, you know, keep going and carry on or let's just pause and see, but nothing fully stopping. Right. And I think that like everything, you know, not to get political, but like Trump has demonstrated on various subjects, right.

22:24That he likes to start fires so that he could be the hero to put them out, right? You know, like the U.S. and, you know, like the conversations about investing in the U.S. and on-shoring. It's like, you know, you had all these people like Apple and whomever else announcing we're investing X billions of dollars. But these were plans that were already in place, right? They've just now been PR'd to publicly reflect the demands of the administration, right? So I think, you know, I'm someone who believes the private sector is always smarter than the public sector, right? So I think I just don't see it as a real long-term issue, right?

23:08The other thing that I think everybody's ignoring, or not really talking about, but to your point about like once the bond market crashed, it was over, he effectively told the international community, all you have to do is dump US treasuries and now you get a deal, right? And that's not a great place to be because obviously the most important thing for the United States to maintain its position is to be a reserve currency, right? So we need people to, even if it's at a discount, meaning a trade deficit, transact as much as possible at the highest dollar volume possible in US dollars, right? So that's just like the part of the conversation that hasn't really been had.

23:51So I think eventually he has smart people around him, like, you know, like Lutnick, like Besson, like, you know, actual financial guys who I'm hoping they let him play his game for PR. And then, you know, it very quickly gets rolled back. And that's that's just his method. Right. You know, I mean, it's funny. There was all this talk about the Bill Maher dinner with Trump. Right. and you know Bill Maher spoke about it on his show this past weekend and he was like I hate to tell you guys there's not a crazy person living in the White House there's someone living in the White House who plays a crazy person on TV but my experience was that he's not crazy so I think he knows what he's doing and I think I shouldn't say I think he knows what I he's doing he is doing something intentionally is is the better way of phrasing it and you know I'm sure to some degree he just takes you know they just take pleasure from whatever it's tough but look here's what I would say I agree probably not crazy maybe not that smart and I agree with that the issue is very impulsive so like this is the thing that when I'm that's his MO yeah exactly and when talking to luxury executives what I think they, and I think a lot of people, a lot of executives miss sort of misjudged going back into this.

25:22It's sort of like when you've, you've had a traumatic experience and you don't remember it or, you know, giving childbirth, no one remembers how terrible it is. That type of thing. Like when coming into this, all these billionaires were like, we got to play the game with him because it's going to make him like us. I don't think, I don't think you can do anything to make that guy bend to your will. I think it's, it's all about, he's playing a game and he'll go as far as he can. The question is, yeah, the question is like, to what end and, and what kind of destruction? And I, the tariffs thing, like people kept asking us, can you do a tariffs guide?

26:09I was like, no, this is not going to actually happen. Quit. And we did write about it a little bit. And Sarah Shapiro on my team who writes retail stuff for a line sheet, she's following it because there are interesting like points to be made. But the idea that you could prepare is just insane. Like there, There is no way to prep for this stuff. I think for me, the conclusion I came to, which was pre-tariff is going to be this way anyway, is the next two quarters are going to be kind of shitty because the economy wasn't going to be good no matter what. It's a tough. Inflation is high. Mortgage rates are still really high.

26:50And at the end of 2025, we're going to see things start to move around or change and consumer behavior pick back up. I still believe that. And the one thing that I that maybe this is a conspiracy theory, but I did hear this from several people was this idea that Trump was like essentially trying to tank the economy so that the Fed would be forced to lower interest rates. Yeah. So that may feel like a little bit too much, but maybe that's what's going to happen. I think there's lots of conspiracies floating around, which I will always, in the interest of entertainment, entertain for myself. However, you know, I mean, there's also I've also heard he wants to tank it.

27:40So there's a run on gold because Russia needs to rearm. Right. There's like a million of these things. Right. The one thing I'll say that's my bigger concern out of it is just that, you know, like COVID, like, you know, inflation in the name of COVID and whatever, all these companies have raised their prices so significantly over the last few years anyway. right and at the end of the day luxury you know real luxury capital l luxury if you're gonna be on the waiting list for a watch for two years right you don't care if it's if it was fifty thousand dollars when you put your name on the list or sixty thousand dollars when you receive it you're still buying it right because there's that waiting period right i also think you know my concern is that out of this people are going to very aggressively and quickly raise prices And then that's, again, going to be the next threshold long after tariffs have been reduced.

28:36And that's where I think it's problematic.

28:42That's kind of it. it's it's a concern i would say that there is a lot of price resistance already in luxury that they have to be careful because consumers even these you're absolutely right that if you're spending 50 grand on a watch you don't care if it's 60 grand and hermes is obviously the best example of this because they're and i talked about this on on peter hamby's podcast the powers that be last week. Like Hermes bags could be way more expensive than they are. And they price them in a way that make fewer of them and still make a great profit so that you don't flood the market. And I think what happened was a lot of luxury brands.

29:26I was looking for a dress the other day because we have like a bunch of events. So many dresses right now are four grand. And it's just It's like, I don't, even if I had that kind of money, like it's just dumb. It's not, it's, it's getting to this point. So I think there needs to be like a mental adjustment of, okay, this is what stuff costs. On the other hand, maybe this is an opportunity for people and especially people who don't buy$4 ,000 dresses, people who buy$400 dresses. Maybe this is an opportunity if the prices are raised across the board and at the lower end as well to stop buying so much stuff and go back to this idea of you buy one or two things every quarter to refresh your wardrobe.

30:20and that's it. Like there is an argument that none are closed. And I've, I've made this point millions of times, like a pair of jeans costs way less money when you adjust for inflation or even the price, the number, the number, if you didn't adjust, then they did in like 1950. Like you can buy a pair of jeans for$20 now and you could buy a pair then for$20. That's not normal. No, Well, I mean, I agree with you. The one thing I posted on Instagram when talking about this was like, you know, I think the only positive to come out of this is in the vein of exactly what you're saying is hopefully this leads people.