MARKET INTELLIGENCE
SHORT READ
PART 1
2023 JULY ISSUE
Written by : Andrew Sia
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From the Desk of the Publisher
Of all the twelve pieces that we posted in this report, 7 pieces are related to the shoes and sneakers. We came across them during this time. Lately we have a special interest in featuring sneakers as it is something that has become the mainstream for footwear.
To choose the right shoe for the right occasion is most important. I am sure that you will also agree.
Ultimately, I would like to get also the recognition in this special field and receive the consent from them. For the part from Salvatore Ferragamo, it is nice to learn about its history. Please look for my another piece specially dedicated to Salvatore Ferragamo.
Contents:
Macy’s Encouraging News
Adidas & Beyoncé Part Ways
John Lewis’s Challenge in Today’s Retail Climate
Foot Locker is Looking for Changes
Freight Outlook Gives Way to Retailer’s Dim Forecast
Adidas’s Nightmare with Ye is Not Over Yet
Introducing the Sneaker, Hoka, a Shoe for Serious Runners, Older and Injured People
White Sneakers Goes With Everything
Introducing Vio Motion Technology
LVMH Becomes First European Company to Hit $500 Billion Market Value
European Union Commission Shown Concerns Over Possible Cartels and Unfair Competition Practices
Salvatore Ferragamo’s New Challenge in Luxury Market
Macy’s Encouraging News – WSJ, March 30, 2023
R.H. Macy’s was founded in 1858 and became a division of Federated Department Stores in 1994. It is affiliated with Bloomingdale’s Department Stores. In 2015, Macy’s was the largest U.S. department store. As of October 2022, it has 445 department stores, 46 furniture stores, 1 furniture clearance, 9 Backstage stores, 7 Markets by Macy’s. Its flagship store is located at Herald Square in New York City. The company was said to hire 130,000 employees as of 2017. Its Herald Square is one of the largest department stores in the world. It has 1.1 million square feet of retail space and covers almost an entire block with more than 100 shop windows.
Its chief executive, Jeff Gennette will step down next February after a tenure since 1983 as a management trainee. He was graduated from Stanford University. He became CEO in 2017.
He criticized Macy’s merchandise as “sea of sameness” and started to cut back on basic clothing in too many similar colors and styles. He simplified pricing by reducing overlapping promotions, stripping out layers of management to speed up decision making. During the pandemic, he closed stores and modernized supply chain and push executives to use more data and analytics in the planning, for ordering and pricing of goods.
Macy’s is known for dividing its shoppers into 11 types and five life stages.
The company made a pledge in 2022 to spend $5 billion by 2025 to tackle the ranges of issues such as creating a more equitable work environment to support minority-owned businesses to climate change.
When Gennette took the helm in 2017 and sales of the department were losing to discount chains, fast fashion and online retailers. People were talking the death of department stores. Activist investors were pushing the store to sell its real estate which he fenced them off.
During the pandemic, the flow of goods was upended and the decision was not to stockpile them and this allowed Macy’s to emerge as a smaller but more profitable company.
It ended its most recent fiscal year with a sales of $24.44 billion, a little less than its 2019’s $24.56 billion before the pandemic started. But its profit doubled to $1.18 billion.
Jeff Gennette will be succeeded by Tong Spring who runs the Bloomingdale’s for 36 years.
Macy’s is known for its Thanksgiving Day Parade in New York City started since 1924. It sponsored the city’s Fourth of July fireworks display since 1976.
Adidas & Beyoncé Part Ways – WSJ, March 29, 2023
The Ivy Park collections that are planned for release this year will still take place, but afterwards Adidas & Beyoncé have decided to end their fashion partnership. Sales of Ivy Park brand fell more than 50% in 2022 and it underperformed Adidas’s projection.
Meanwhile Beyoncé released a couture collection designed in collaboration with French luxury house Balmain and it is inspired by her 2022 album “Renaissance.”
John Lewis’s Challenge in Today’s Retail Climate – FT, March 21, 2023
John Lewis operates department stores and the Waitrose grocery chain. Like Marks & Spencer, it is a touchstone of the UK middle-class. It is always looking out from the low-cost competition.
It has to raise £2 billion for a turnaround plan since it already implemented in 2020. But the target is hard to meet because of the high inflation. Its losses increased to £234 million last year and Waitrose’s market share losses outpaced everyone, including Tesco and Morrisons. Its sales per employee was a third lower than Tesco and a fifth lower than Sainsbury’s.
Its Chairwoman, Sharon White, cut costs by £300 million over the past two years and is looking for another £600 million by 2026. Its total revenue was £12.3 billion last year.
John Lewis Partner has a culture that includes big staff bonuses in good years and the company enjoys a worker democracy. The cut and the looking for any external investor may have an awkward relationship with its staff. Somehow a mutual consent would need to come up.
Foot Locker is Looking for Changes – WSJ, March 21, 2023
The sneaker and athleticwear retailer Foot Locker is forecasting a year of declining sales and a 30% drop in profit. The company is closing stores and exits businesses and expects the sales to decline between 3.5% to 5.5%. It is projecting a share of $3.35 to $3.65, short of $4.11 a share as expected by analyst.
Foot Locker has a new CEO, Mary Dillon, since August, and she came from the beauty-product retailer Ulta Beauty. With her on board, she is moving out of shopping malls and lessen its independence on Nike. She is looking for online sales.
Nike has previously made up as much as 70% of its overall sales. The figure began to decline in 2022 as Nike has provided Foot Locker with fewer of its most popular products, such as Air Jorden sneakers.
In the coming years, Foot Locker is looking for Nike for as much as 60% of its sales plus diversifying its brand portfolio by adding Adidas, New Balance and Puma.
It has also planned to step up its technology investments and spend an additional $40 million on wages for its frontline workers.
Freight Outlook Gives Way to Retailer’s Dim Forecast – WSJ, March 23, 2023
Freight demand started to slow midway through 2022 as consumer spending moved away from goods to services and big retailers found themselves overstocked with inventories. Earlier on, everyone was rushing to fill store shelves driven by a relief from pandemic and the general wishful thinking.
That prospect had looked more questionable as retail sales have declined and more retailers and their suppliers are more cautious.
Nike Inc. said that it would reduce its purchase from suppliers and cut its inventory growth to 16% from its last two quarters with 40% growth. It had slashed its inventory by about $400 million from the previous fiscal quarter.
Kohl’s expressed the intention to hold less inventory this year after the retailer’s inventories were up 48% in the second quarter of 2022 year-over-year.
Textile companies are all working through their big stockpiles of clothing as they have found that as the people have returned to the office and those leisurewear that they favored working from home would have to change.
Example as raised by the Boston-based apparel company, Ministry of Supply Inc., saw that the dress pants with elastic waistbands have moved to zippered pants.
Shipping figures are showing signs of weakening demand as new orders are hold back. Container imports at ports of Los Angeles and Long Beach, the nation’s busiest port complex, plummeted 38% year-on-year in February.
The U.S. freight rail volumes were down 5.2% in the first 11 weeks of 2023.
Adidas’s Nightmare with Ye is Not Over Yet
Adidas incurred its first annual loss in decades because of its defunct collaboration with Kayne West. It is now trying to offload its inventory of Yeezy which is estimated to worth about $500 million. There are bidders for this inventory as there is a demand out there. And already there was a spike in Yeezy sales since Adidas and Ye parted last fall.
This sets the example of the risk of any deals with the celebrities whereas their behavior can cause fall out of line with the company’s value. The bigger the success the higher the risk.
Introducing the Sneaker, Hoka, a Shoe for Serious Runners, Older and Injured People – New York Times, April 6, 2023
Hoka was founded in 2009 and was acquired by Deckers in 2013, the same company who owns Ugg. It represents 36% of its company’s total revenue, from 21% two years ago. In 2022, its sales went over $1 billion. In the quarter ended February 2023, it reported a 90% growth in Hoka’s sales from the same quarter last year, hitting $350 million.
Hoka reached the upper echelons of sneakers by the trend winds of “ugly shoes” during the pandemic, and because of its comfort and support of the feet, it caught the older people’s attention.
Not only that, Hoka is a fastest growing sneaker brand because it is stylish and trendy. It started in the French Alps when three athletes, Nico Mermoud, Jean-Luc Diard and Christophe Aubonnet collaborated on a trail-running sneaker that hit store in 2010. From the beginning, the shoe had the oversize sole, an innovation designed to help people run down steep hills and mountains. The first idea was to make a slip-on that you could put over your shoes. The oversize technology that had been successfully used in powder skis, mountain bike wheels and tennis rackets.
The running community caught the word quickly after a runner in Boulder, Colorado who bought 770 pairs to sell the shoe at a trade show. It was adopted by elite athletes.
Hoka went further to develop its business and reached streetwear and fashion types, and not only the runners. It pays attention to older people or anyone who is injured and need a reason to embrace comfort.
Hoka is still small, relative to the big guys like Nike or Reebok. Hoka has 440 individual unique shoes for men and women in different colors and widths. Nike, for instance, had 10,000, but somehow the shoes have crossed into the mainstream.
Actually, the older people have found that the shoes gives the best comfort and cushioning. The chief of pediatric rheumatology at Hospital for Special Surgery in Manhattan talked highly about Hoka after suffering of ankle and foot pain.
It is also for hospital workers who are on their feet all day as it gives comfort and most important the support.
Its hiking model, Anacapa, everyday shoes, Clifton, and Trail runner, Speedgoat are instantly recognizable with a bulbous sole that looks like insulation foam and dreamy colors. Today you find them on the feet of the fashionistas.
White Sneakers Goes With Everything – WSJ, April 5, 2023
I remember in my youth I was wearing white only on tennis court as it was the only color accepted by the country club. But today, white sneakers go with everything, even with suits for instance.
In fact, we can find white sneakers in every brand to complete their range. And the brands can be from the top luxury brands to the most popular sneaker brands where they are selling something like $50 a pair.
Fashion companies are all about proprietary fabrics and paradigm silhouettes. They are often down to their last details. This time everyone has the white sneakers to offer.
You can find them in Berluti, Brioni, Gucci, Givenchy, Saint Laurent, and the like, they are all selling virtually look-alike white sneakers in four figures.
To the consumers, it is looked upon as the must-have and it is a category in fashion now. But by and large, when spotted across the street, they all look identical.
I have been recommending the Nike Air Force One to my circle of friends and I am going for a look at the Common Projects Original Achilles and make the comparison.
Introducing Vio Motion Technology
The American Podiatric Medical Association (APMA) is the leading resource for foot health information and it is representing 15,000 podiatrists across the United States. We have found that many of the Vionic products are carrying the APMA Seal of Acceptance, and this is used to promote foot health.
We suggest you to visit them at vionicshoes.com/apma for more information and take a look for the selections for the shoes that you would find the benefit.
LVMH Becomes First European Company to Hit $500 billion Market Value – FT, April 24, 2023
You can consider this as the result of Beijing’s decision to lift all Covid-19 related restrictions, and thanks to the Chinese consumers’ appetite for luxury goods. Shares in the Paris-listed company rose 0.3% to €903.7 to achieve a market capitalization equivalent to $500 billion. It has also brought Bernard Arnault and his family to $211.8 billion as the control share of the company. He is also the world’s wealthiest man, way ahead of Elon Musk’s $165 billion.
The company posted a 17% increase in revenue in the first quarter of the year. Its French rival, Hermès, had increased by nearly a quarter in the same period.
Among all the French luxury companies, LVMH’s growth outpaced the competition. It is almost double the market value of the beauty group L’Oréal, also the next biggest French-listed group. It is also more than double the size of Hermès. The Paris-listed Kering, which owns brands including Balenciaga and Gucci is valued at €72.7 billion.
So far the stock prices of LVMH jumped 32.9% this year with L’Oréal jumped at 31.1% and Hermès at 39.4%.
European Union Commission Shown Concerns Over Possible Cartels and Unfair Competition Practices – New York Times, April 21, 2023
Gucci’s Italian offices were raid by European Union antitrust officers and it was unannounced. It suspected that the fashion company has been practicing anticompetitive practices. Earlier on in March, the European Commission were investigating several beauty and fragrance companies linked to the supply of fragrance ingredients.
Also, last year it was looking into some fashion houses in connection with their changes in sales periods and discounting strategies that were deemed for potential violations of competition laws.
The European Commission was showing concerns that the companies may have violated EU antitrust rules that prohibit cartels and restrictive business practices.
Salvatore Ferragamo’s New Challenge in Luxury Market – FT, April 22, 2023
Ferragamo’s shoes adorned the feet of Hollywood starlets such as Audrey Hepburn. It sales has been stagnant at €1.25 billion last year and it has been in line with its numbers for the decade. If we compare with Hermès, who has made more than triple over the same period. For the first quarter of this year, it fall by 4% while Hermès enjoyed an increase of 23%.
Ferragamo’s problem starts with its roots. It is considered as old school and can only spend a pitiful 5-6% of its sales value for advertising and the young customers have not pay any attention to the brand for a while.
Under its new chief executive, the brand has hired a new and edgy creative designer, Maximilian Davis. It created a new logo and doubled its marketing expenses. In between 2023 and 2026, it said that it will invest €400 million more and target to double its revenue.
It is difficult for small brands to emerge as the giant in the luxury brand arena, LVMH is worth €450 billion, while Ferragamo is only €2.8 billion. It has made the future only glimmer.
The above shoes is of the credit of Salvatore Ferragamo for introducing the platform shoes in the late 1930s. As seen in this ankle-strap sandal, the platform, if only metaphorically, brings an anchoring weight to the wearer that is in direct opposition to the stiletto heel. With its reconfiguration of the arch and structure of attenuated insubstantiality, the high heel suggests the antigravitational effect of a dancer en pointe. On the other hand, the platform announces an earthbound weightiness more like the first steps of modern dance. Particular in the 1940s, platforms were designed with a high arch, but as exemplified here, they originated with the heel elevated only slightly above the toes.
This shoe is in the collection of the Metropolitan Museum of Art.
This sandal is more current and I would like to highlight it. This is not “old school” and this is known as Elina sandal retailing at $1,290 and it is available in Neiman Marcus.
So that you know, Salvatore Ferragamo was founded in 1927.
Salvatore was born in Italy. The family moved to Southern California, and first lived in Santa Barbara, later in Los Angeles. From 1915 to 1927, he relocated to Florence.
It was in 1923 in Florence and at the age of nine he started to design shoes.
Later he returned to the United States and began to make shoes for Hollywood movie stars. One thing that is worth to mention is his manufacturing of 12,000 sandals for 1923’s The Ten Commandments. Later he designed ballet flats for Audrey Hepburn and perhaps the most famous was for Marilyn Monroe’s white strappy stilettos she worn in The Seven Year Itch in 1955.
