The Well-Revered King of Shoes Finally Comes to Harvest on its

Transcription

The Well-Revered King of Shoes Finally Comes to Harvest on its
The Well-Revered King of Shoes Finally
Comes to Harvest on its Name?
Research on Apparel/Footwear Industry (1)
My Investment Logic
Raise the Bar
- Raise the bar high enough for normal companies hard to pass thus only GREAT companies can
- Higher bar (stricter criteria) save A LOT time and energy squandered on normal companies
- The best way to learn is to learn from the Best; Leader of an industry teach us best, not followers
Invest in Causes, not Results (Qualitative v.s. Quantitative)
- Quantitative Results reaffirm your analysis and judgment in Causes but not the other way around.
- Defining Causes: 1) People/Products; 2) Brands - “Share of Mind”; 3) Model/Strategy; 4) Technology;
Moat as Causes (Economic Competitiveness)
- Moat is something central to competitiveness yet others cannot easily imitate or acquire
- There must be some reason that competitors cannot easily imitate or acquire this ability
- The reasons are causes, usually a magic-like process that built up a GREAT company’s moat
Trends as Causes (Structural or Cyclical)
- Without moat, many companies still grow under macro-structural or micro-cyclical trends, however
- Though many benefit from structural changes, only a few win biggest, so Select those with Moat
- Those benefit from cyclical trends are Not Worth of serious consideration of investment
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Arguments for Consumer Stocks and Selection Criteria 1 - Business Traits
Consumer stocks as a group usually possess strong financials, growth opportunity and relatively
high predictability for investing, which are favored by long term value investors as evidenced by
Warren Buffet’s huge concentration (around 50%) of holding in the consumer stocks. The reasons
for these merits are built inherently in consumer companies’ similar business model.
Please note not every consumer company has all these traits, and some companies not classified as
“consumer” might still possess some of the traits. In general, no matter the classification code, the
more such favorable traits a company possesses, the more it’s doing a “consumer” business (such as
some internet businesses), and the wider economic moat the company is like to have thus more
ideal for investment.
Ferragamo basically satisfies all 8 criteria and can be considered a good
candidate for serious long-term value investment.
-Only Criteria 3, 5, 7 are partially met by Ferragamo:
1)The sales network of Ferragamo has some franchise stores though are gradually bought back
2)The operational process for Ferragamo is not complicated but not as simple as one wishes
3)The ASP of Ferragamo is in mid-range for consumption item, usually from $400~$1000+
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Arguments for Consumer Stocks and Selection Criteria 2 - Consequences
•High Predictability
1) Company of $100M sales a) 1M customer each $100 sales v.s. b) 2 customers each $50M sales
2) Law of Large Number
3) Simple process/products and repeated buying/demand not affected by rapid tech change
•Organic Growth and Scalability
1) Large market base from repeated buying/demand
2) Strong brand creates “share of mind” for prepared customers to purchase once channel is ready
3) Simple process can be quickly expanded to different geographies
•Sensitivity to Consumer Demand
1) Directly facing consumer demand/behaviors, guarantees changes adopted quickly
2) Bullwhip effect in supply chain avoided which made the upstream volatile in capex and profit
•High and Stable Margin
1) Higher price negotiation power with each individual consumer v.s. businesses
2) More qualitative nature makes the buying psychological process more emotional rather rational
3) Strong brand and self-owned channel charge price premium
•Strong Cash Converting Ability
1) Direct payment from end consumer avoids trade credit issues thus strong cash position
•Less Capex and Operating Cost
1) Focused on marketing and design implies lower need for capex while as well as simple process
often means lower operating cost
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Content – Salvatore Ferragamo
Heritage
Management
Industry
Business
Financial
Valuation
Note: All financial figures in the research are in EUR, except for those particularly mentioned.
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Ferragamo in QGV Model
Quality (Causes)
Business: Excellent business, high valued add, repeated buying and high margin
Moat: Irreplaceable position in women footwear and widely respected name –
Huge moat built since its founding and hard to copy
Management: Family controlled with different roles/responsibilities well defined,
IPO provides exit channel for members not committed to footwear business
Growth (Results)
Top line: double digits growth across regions except Japan (-2.9%), Europe
(28.6%), US (28.4%), Latin America (30.6%) and Asia (37.4%) 2011Q3YTD (9m).
Bottom Line: Operating leverage obvious (85% + Q3 YTD FY2011 vs. FY2010)
Harvest on Name: The growth of big name fashion house depends on their will to
trade between their built sense of scarcity and revenue. Ferragamo is on the way.
Valuation
Entry Chance: The ongoing European crisis provides excellent opportunities.
Historical PE: At the trough of 2008-2009 crisis, LVHM at 10+ PE, Richemont at
9+ PE, Hermes at 17+ PE, TOD at 10 PE, Ferragamo should trade Hermes level
because of its less complicated business line and growth stage.
Recommendation: EPS12 = EUR0.52~0.55, below 18~ PE level indicates price
range of EUR9.0~10 could be of great interest to buy for long term.
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Risk and Weakness
Single Brand as Double-Edge Sword
1)Strong leverage on one brand but also risk exists for non-diversification
2)Brands of similar prestige often adopted similar one brand strategy with some branching into subbrands with lower prices (Empori Armani etc.)
Conservative Management
1)Conservative for brand monetization (good for long-term brand image but less short-term upside)
2)Few industry break-through (focus on Classics) after Fiamma Ferragamo, unlike Prada’s Muccia
Recent Hot Designer Brands
1)Shoe Designers such as Louboutine and Jimmy Choo winning huge popularity and recognition
2)The high-end competition from other fashion houses branching into shoes with “total look”
Different Brand Perception
1)Differentiation across markets, with US/Japan/Korea/Europe most respected while others less aware
Overall Luxury Market Growth Prospect Dampened with Recession
1)Overall worldwide luxury market estimated to grow at 5/6% from 2011 to 2014, with shoe/leather goods
the fastest category at 8%+.
2)Hanging EU recession possibility may dampen demand but also creates entry opportunity
High Exposure to Japan
1)High exposure to tough consumer environment in Japan (16.2% of 2010 turnover) which has been
materially impacted by the earthquake and tsunami events in Q1-2011.
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Favorable Trends
Worldwide M-Type Society
1)The world is becoming more M-type with large income disparity, only luxury targeting high end and SPA
retailers targeting mass might succeed.
Worldwide Aging Demographics
1)Luxury mainly being consumed by aged more affluent consumers where worldwide aging population
matches the positioning.
EU Cost Structure
1)High exposure to US dollar (21% of 2010) and other currencies with most of costs in Euro (60-65% of
the total based on our estimates) gives good cost reduction in view of EUR depreciation.
Relatively Unexplored US/EU and Asia Market and Buying Back Channels
1)US/EU and Asia (excl. Japan) relatively less presences compared to its established names
2)Buying back previous franchisees creates possible margin improvements
Brand Power Penetrating into Asia and Emerging Market
1)The respected Brand is still relatively less exploited in emerging markets where consumers are less aware
of Ferragamo heritage and quality, but the communication is changing consumer perception.
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Heritage – Founder Salvatore Ferragamo and His Story
• Salvatore Ferragamo (June 5, 1898 – August 7, 1960), born in farmer’s family southern rural Italy. After making first pair of shoes at 9 for his sisters Salvatore decided his career in shoemaking. He learnt shoemaking fast and soon found nowhere to upgrade skill in Florence.
• In 1914 Ferragamo move to California. Ferragamo became affiliated with the burgeoning Hollywood industry, he found success there, his shoes and himself became popular among movie stars and celebrities, with a long period of designing footwear for the cinema.
• He was unsatisfied by mere physical beauty of his shoes, and proceeded to develop the comfort for wearing, so he proceeded to study anatomy at the University of Southern California.
•After spending 13 years in the US, Ferragamo returned to Florence in 1927, chasing his dream to produce handmade shoes en mass and to satisfy common customers’ needs. He began to fashion shoes for the wealthiest and most powerful women of the century.
• Ferragamo concentrated in experimenting with design, applying for patents for ornamental and utility models and some related inventions. His notable inventions included wedge heel, ‘invisible’ sandal, metal heels and soles, sock‐shoe, sculpture heels, gloved arch shoe.
• Although he filed for bankruptcy in 1933 due to bad management and economic pressures, Ferragamo reemerged and finally bought Palazzo Spini Feroni in 1938, which now houses the company's flagship store and museum and expanded his operation during the 1950s.
• Salvatore Ferragamo died in 1960 at the age of 62. At his death his wife Wanda and later their six children (Fiamma, Giovanna, Fulvia, Ferruccio, Massimo and Leonardo) ran the Ferragamo company.
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Heritage – Founder Salvatore Ferragamo and His Story
• Within a year after her father's death, Fiamma debuted her first collection, in London, to great acclaim. She also became ambassador for the company. By 1967, Fiamma was also recognized with the Neiman Marcus Award.
• During 1970s Ferragamo modernized production methods, adding mechanized and automated production lines in order to meet the growing demand , its capacity grew to as high as 11,000 pairs per day. The company shrewdly overcame the difficulty of maintaining its commitment to proper fit by developing an extensive range of sizes and shoe widths.
• After introducing an assortment of leather goods, including luggage, the company launched its own line of knitwear in the 1980s. In 1980, Ferragamo added its first ready‐to‐wear clothing collection to complement its footwear, accessories, and knitwear, enabling the company to promote its "total look."
• During the 1980s, the company began opening its own stores, and by 1990 operated 18 stores in Italy, Zurich, and London. By then, exports represented 75 percent of Ferragamo's sales, while the United States alone accounted for some 48 percent of the group's total revenues.
• By the mid‐1990s, Ferragamo, which had weathered the worst of the recession of the early 1990s, prepared for further growth. By 1993, the company's sales had grown to more than $200 million worldwide. Although hurt by the death of Fiamma Ferragamo in 1998, the company maintained its steady growth rate. This was aided in part by the group's first acquisition of Emanuel Ungaro, which helped boost Ferragamo's presence in the ready‐to‐wear, fragrance and beauty products market.
• In 1998, the company signed a licensing deal with dominant Italian eyeglass manufacturer Luxottica to release eyeglass frames.
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Heritage – Young Ferragamo
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Heritage – Santa Barbara Shop
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Heritage – Palazoo Feroni in Florence
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Heritage – Ferragamo with Christian Dior
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Heritage – Brief Timeline of the Company
• 1927 ‐ Salvatore Ferragamo founded the first company, based in Florence
• 1938 ‐ opening of the first flagship stores in Italy (Florence and Rome) and Britain (London)
• 1948 ‐ opening of the first store in the United States (New York)
• 1965 ‐ first collections of leather goods and ready to wear women's clothing
• 1971 ‐ collection development and silk accessories
• 1975‐80s ‐ development of men's clothing and footwear collection
• 1986 ‐ opening of the first store in Asia (Hong Kong)
• 1991 ‐ opening of the first store in Japan (Nagoya)
• 1994 ‐ opening of the first store in China (Shanghai)
• 1995 ‐ opening of the first store in South Korea (Seoul) and opening of the Salvatore Ferragamo Museum in Florence
• 1998 ‐ startups in the eyewear market
• 1999 ‐ opening of the first store in Latin America (Mexico City)
• 2006 ‐ opening of the first store in India (Mumbai)
•2010 ‐ opening of its first flagship store in Turkey (Istanbul), Qatar (Doha), Egypt (Cairo) and South Africa (Johannesburg) and achieving the target of 91 flagship stores in Greater China
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Heritage – Ferragamo Dynasty Carrying on the Business
• Wife Wanda: She has led the group since 1960, currently Honorary Chairman.
• Eldest son Ferruccio: He is currently President of the Company.
• Eldest daughter Fiamma: She is the designer of some best‐selling Ferragamo shoe models, such as Vara, she died in 1998. • Giovanna: She is currently Vice President of Ferragamo Finanziaria S.p.A.
• Fulvia: She has run the fashion label’s silk accessories division since the Seventies. She is Vice‐
President of Salvatore Ferragamo Italia S.p.A.
• Massimo: He is Chairman of Ferragamo USA, the Ferragamo company that has handled the brand’s distribution in North America since Fifties.
• Leonard: Since 2000, He has served as CEO of Palazzo Feroni Finanziaria S.p.A, the family’s holding company.
• Michele Norsa: Managing and General Director of Salvatore Ferragamo Italia S.p.A.
• Massimiliano Giornetti: Creative Director.
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Heritage – Ferragamo Dynasty Carrying on the Business
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Heritage – Ferragamo Dynasty Carrying on the Business
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Heritage – Ferragamo “The Shoemaker to Stars”
• Since the time of Silent Movie ‐ Mary Pickford, Pola Negri, Theda Bara, Joan Crawford, Gloria Swanson, Andy Warhol, Rodolfo Valentino and Douglas Fairbanks
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Heritage – Douglas Fairbanks & Lillian Gish with Ferragamo
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Heritage – Hollywood Boutique Shop in 1937
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Heritage – Ferragamo “The Shoemaker to Stars”
• Hollywood Stars in Golden Era ‐ Audrey Hepburn, Marilyn Monroe, Bette Davis, Sophia Loren, Elizabeth Taylor, Greta Garbo, Judy Garland
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Heritage – Audrey Hepburn with Ferragamo
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Heritage – Audrey Hepburn with Ferragamo
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Heritage – Sophia Lauren with Ferragamo
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Heritage – Celebrities
• Royal Families and Celebrities ‐ Eva Perón, Diana, Princess of Wales, Duchess of Windsor, Queen Elizabeth, Queen Elena of Italy, Margaret Thatcher, Lovers of Musonini and Hilter.
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Heritage – Continuing Patronization by Celebrities
• Nowaday Celebrities ‐ Madonna as Evita in “Eva Peron”, Drew Barrymore as Cinderella in “Ever After”, Zhang Ziyi in“Crouching Dragon”, Angelina Jolie Nicole Kidman, and Julia Roberts.
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Heritage – Continuing Patronization by Celebrities
范冰冰
Avril Lavigne
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Heritage – Continuing Patronization by Celebrities
Rachel Wood
Rachel Wood
Jessica Parker
Rachel Wood
Bar Refaeli
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Heritage – Continuing Patronization by Celebrities
Asia Argento
Rachel Wood
Donatella Finocchiaro
Cindy Crawford
More at: http://meitu.sg.com.cn/1112/2019/IQH61PHN00AWAAAC.html#p=TB1DIXL9
Heritage – Continuing Patronization by Celebrities (Greater China)
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Heritage – Continuing Patronization by Celebrities (Greater China)
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Heritage – Continuing Patronization by Celebrities (Greater China)
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Heritage – Continuing Patronization by Celebrities (Greater China)
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Heritage – Continuing Patronization by Celebrities (Greater China)
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Heritage – Continuing Patronization by Celebrities (Other Asian Countries)
金素恩
金素妍
成宥利
少女时代 Yuri
朴艺珍
Abhishek Bachchan
尹恩惠
金正恩
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Heritage – 80th Anniversary in Shanghai
金泰熙
莫文蔚
高圆圆
梁朝伟
张静初
董洁
林志玲
杨子琼 梁永琪
章子怡
林嘉绮
杨采妮
范文芳
陈坤
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Heritage – Ferragamo “Shoemaker of Dreams”
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Heritage – Ferragamo Creation and Patents
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Heritage – Ferragamo Creation and Patents
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Heritage – Ferragamo Creation and Patents
• Fiamma Ferragamo created Vara line in 1978, out of an observation that boutique line didn’t have a model that was both sporty and elegant.
• Since then, production on the Vara has never stopped, and more than a million pairs have been sold, making it the most successful shoe in its category.
•Over the years, it has been made in every possible colour, fabric and skin, without losing any of its charm. It has inspired countless imitations.
•The most recent version, the Varina, is offered in the Spring 2008 collection, and puts a modern spin on this Ferragamo classic.
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Heritage – Ferragamo Creation and Patents
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Heritage – The Big Names in Women Footwear
Roger Vivier is credited with the design of the first stiletto heel in 1954, and designed shoes for Christian Dior from 1953 to 1963. Customers includes Ava Gardner, Gloria Guinness, The Beatles and Queen Elizabeth II for her coronation in 1953. Roger Vivier was acquired in mid‐1990s by TOD’S, current with annual sales of circa. 30M.
Founded by American footwear designer Levine Couple. Positioned high‐end and creative designs. Patronage includes several US first ladies, Hollywood stars such as Barbra Streisand, Marilyn Monroe, and Jane, Fonda etc. The label was once closed in 1975 and shortly revived in 2008, and now under a Luxembourg investment fund.
Founded by French designer Charles Jourdan known for designs of women's shoes starting in 1919. The brand first uses innovative materials and later with more conservative designs. After 2000 it went into decline and was sold to Lux Diversity. Notable designers for it includes Patrick Cox and Josephus Thimister.
Founded by American footwear designer Kenneth Cole, became famous with series socially concious/politically sensitive ads. Positioned mid grade. 2010 Sales USD457M. 施维 Email: [email protected]
Heritage – The Big Names in Women Footwear
The fashion house was founded in 1913, starting from leather goods. Muccia inherited the company in 1978 and released line of shoes in 1984. The sales of footwear is EUR503M for FY10.
Founded by American footwear designer Steve Madden in 1990, inspired by rock and roll stars of the 1970s, being famous for the thick, chunky heel. 2010 Sales GBP635.4M. Founded in 1978 initially as a footwear fashion house, famous being able to quickly translate runway trends into styles attainable by mass consumers. 2010 Sales estimated USD1125.9M. In 1999, Nine West was acquired by Jones Apparel Group.
Named after Italian footwear designer Sergio Rossi, best known for his collaboration with Versace in the 1970s and Dolce&Gabbana in 1990s. Now with 42 directly owned boutiques and 32 franchisee stores, it’s owned by Gucci Group, under PPR. 2010 estimated sales under USD100M.
Diego Della Valle, Dorino's elder son, expanded the workshop started in 1920s and started manufacturing shoes for American department stores in the 1970s. Diego created brands of lifestyle named Tod's, Hogan and Fay. In 2003, Italian designer Bruno Frisoni was hired as Roger Vivier's Creative Director.
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Heritage – The Big Names in Women Footwear
Founded by Italian shoemaker, designing and handcrafting high‐
quality luxury shoes and accessories, now with around 40 franchises around Europe, America, Japan, China and Australia. Magli is now a privately‐held upscale brand leader footwear, leather goods, etc.
Founded by U.S. shoe manufacturer Seymour Weitzman and inherited by his son, designer Stuart Weitzman. The brand uses unique materials and famous for attention to detail. His shoes are sold in 48 countries.
Founded by Spanish footwear designer Manolo Blahnik, became famous to public after “Sex and City” show and Kate Moss’ wedding. Founded by Malaysian footwear designer Jimmy Choo, became famous after a record 8‐page feature in 1988 Vogue, patronage from Diana, from 1990 further boosted image. 2010 Sales GBP85.3M. Valued and bought at GBP526M by Vienna based Labelux.
Founded by French footwear designer Christian Louboutin, designed shoes under Roger Vivier, for Chanel, Yves Saint Laurent, and Maude Frizon. Came to publicity when Princess Caroline of Monaco’s compliments were circulated. Patronage from Jennifer Lopez and Madonna further increased popularity. Some 30+ boutique worldwide.
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Heritage – The Big Names in Women Footwear (Future Potential)
His eponymous company makes luxury shoes and other leather goods, and is famous for its dagger logo. There are two main lines, Cesare Paciotti and Paciotti 4US, aimed at a younger market. The company is privately held.
Founded by Canadian–British fashion designer noted for the use of unusual materials and mixture of Avant‐garde and traditional styles. The brand is patronized by Vivienne Westwood and John Galliano. The designer has been director for Charles Jourdan.
Founded by British designer Beatrix Ong (grand‐daughter of Sun Yet Sen), known for her 'classic with a twist' shoes. She has been touted as 'The New Choo‘ with collection featured in Vogue, Elle and Vanity Fair and continues to by patronized by musician and movie stars such as Bryan Adams and Kate Moss. The company is privately held.
Founded by Israeli‐born fashion designer Yotam Solomon, his design has been seen on celebrities such as Nikki Reed, Christian Serratos, Monet Mazur, etc. The designer’s namesake line is priced between $400 and $1,000, YOTAM SOLOMON II Footwear is expected to retail for $150 to $300. Shoe designer from Zimbabwe, based in London, specializing in luxury ladies shoes, and is famous for its conceptual design ethos. Liam became the first ever protege of BFC British Fashion Council Accessory designer Rupert Sanderson.
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Management – A Family Business Adapting to Changes
Ferragamo has been continuously run by its family members, firstly Salvatore then his wife Wanda as the head of family. The family has been very close but the limited post for members to work for the company (Salvatore made it 3) created immerse internal competition.
One solution to the internal pressure is to go public and let family members not committed to the businesses to cash out. As the CEO Ferruccio Ferragamo pointed out
Today we are 63 potential shareholders. I have six children; we are six brothers and sisters from my father. Twenty‐three grandchildren; already there are grand‐
grandchildren of my father's. First of all, we want a stronger company. The second point is to bring the company public. It has two advantages. The first is that everything you do is for the strength of the company. Second, the future shareholders should not be trapped as shareholders. They should be free to sell, to buy, whatever they want to do. If the company's strong, the family will be strong.
The family has been planning the IPO since early, and tried to go public in 2008 selling 40% of shares but cancelled due to market volatility. At the IPO of 2010 June, the family sold 25% of the shares with a proceed of EUR440 most of which is to be used for expansion.
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Management: Professional Managers Come In
Ferruccio Ferragamo (Chairman) From 1996 to Present: CEO of Ferragamo Finanziaria Spa 1984‐2006: CEO of Salvatore Ferragamo Spa 1970‐1984: General Director of Salvatore Ferragamo Spa Joined Ferragamo Group in 1963
Michele Norsa (CEO) Joined Ferragamo Group in 2006 as CEO 2002‐2006: CEO of Valentino Group and General Director of Valentino Fashion Group Spa 1997‐2002: Marzotto Group (General Director of Apparel Division and other positions) 1994‐1997: CEO of Benetton Sportsystem Active and Chairman of Killer Loop 1985‐1993: CEO of Sandys Group (Sergio Tacchini) Massimo Barzaghi (Director of Supply Chain and Europe Region)
Joined Ferragamo Group in 2007 as Director of Supply Chain and Europe Region
2001‐2005: CEO of Invicta Holding Spa and Chairman and CEO of Diadora‐Invicta Spa
1997‐2001: Marzotto Group (General Director of Missoni Men Division)
1991‐1997: Benetton Sportsystem Group (General Director of Rollerblade brand and other positions)
Ernesto Greco (CFO)
Joined Ferragamo Group in 2007 as CFO
2006‐2007: CEO of Natuzzi Group
1989‐2006: CFO of Bulgari Group
James Ferragamo (Director of Women Leather Product Division)
Joined Ferragamo group in 1998, taking a position in women shoes development and production and then becoming General Merchandising Manager
Massimiliano Giornetti (Creative Director)
Joined Ferragamo group in 2000, then becoming Men RTW designer
Appointed creative Director in June 2010
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Management – Keeping The Ferragamo Style, Choosing Designers
Ferragamo Style is classic, yet conservative. The continuity of iconic Ferragamo classic style has been well reserved by Ms. Fiamma after her father’s death untill 1998, when she died as the Creative Director.
Since Fiamma’s death, Ferragamo has 3 chief designers for its fashion line. The change of designers is not that frequent compared to industry average though more stability and recognition is desirable.
2001 ~ August 2007: Graeme Black, Former designer for Armani women collection, Reason for Leave – Ambition unsatisfied by Family's Control
August 2007 ~ August 2010: Cristina Ortiz, Former designer for Prada, Reason for Leave – Difference of Styles, Ortiz’s sexy fashion not in line with Ferragamo staid image
August 2010 ~ : Massimiliano Giornetti, a 11 yr veteran at Ferragamo moving from designer of men’ s collection.
The Ferragamo now is more reliant on keeping their tradition of high quality, hand made products and leverage on their existing name recognition to satisfy customers in need of quality rather than pushing more trendy and novel creations.
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Management – Balancing between Quality and Investor Pressure
Ferragamo has been a symbol of quality in the world of footwear for a long time. Salvatore Ferragamo himself and his family uphold comfort, quality and their name against mindlessly chasing trend and profit. The continuity of very high quality wearing experience of Ferragamo shoes win the brand a huge good will. For many years Ferragamo made arguably the most comfortable woman's shoe available and exemplified Italian quality, craftsmanship and innovation. Particularly Ferragamo has a unique position in women footwear compared to other fashion houses. Ferragamo ranked above other big name (Prada, Gucci, LV, etc…) fashion labels in their turf – women footwear. However, Ferragamo encounters a struggle as to balance between quality and investor pressure when it becomes a public company. Public investor in Ferragamo, though a small portion of the voting basis, will present pressure for the company to increase return on equity versus the long‐
time held family principle to place quality first before profit.
There will be strong inertia in the company to preserve quality against chasing financial return even after IPO though the company’s gradual more aggressive growth strategy, particularly in Asia shows that Ferragamo is entering the phase of leveraging its respected heritage to harvest financially, as in the case of Louis Vuitton and Hermes. 施维 Email: [email protected]
Industry – Fashion Industry Overview
Haute Couture
Haute couture is made to order for a specific customer. Use of
the name is under admin of Chambre syndicale de la haute
couture. Current members include Chanel, Dior, Givenchy,
Van Cleef & Arpels, etc. Usually Haute Couture is not quite
profit-making but many fashion houses chose to maintain it for
artistic/traditional consideration v.s. commercial ones.
Prêt-à-Porter Designer I
Prêt-à-Porter is the French for “ready-to-wear”, implies factorymade clothing, sold in finished condition, in standardized sizes.
Most big-name fashion houses make profit in this categories
and have their most resources invested herein. The top class
of Prêt-à-Porter usually comes from previous Haute couture
houses and have most talented designers behind them.
Prêt-à-Porter Designer II
There are differences among Prêt-à-Porter Iines, the major
distinctions come from the heritage of the brands, and the
name of the designers. Many less-claimed designer brands
belong to this classes.
Non-Designer Brand I
Non-Designer Brand II
Though similarly made to “ready-to-wear”, the brands with no
particular designers associated with are classified to lower
ranks. In this category, those closely following the fashion
trends set by major “Prêt-à-Porter “ names can be classified in
this rank, such as Zara, H&M, Mango etc.
Those brands that are not sensitive to fashion changes or have
established their own styles. They still focus on mainly on the
quality and manufacturing of the clothing as compared to the
design and esthetic aspects of wears.
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Industry – Fashion Industry Overview
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Industry – Fashion Industry Overview (Brand Positioning)
Price – High
Hermes Ferragamo
Chanel
Louis Vuitton
YSL
Dior
Valentino
Versace Prada Gucci
Donna Karan
Dolce&Gabbana
Burberry
Emporio Armani
European Luxury
Armani
Les Copains
Mid‐High Escada
Max Mara Comme Des Garcon D&G Miyake Jill Sanders
Marc Cain Marc Jacobs
DKNY
Hugo Boss Michael Kors
Yoji Yamamoto
Tommy Hifiger
Calvin Klein
Ralph Lauren
Kenzo
Manra
2nd‐Tier US/Japan/Germany
Mid‐Low
Gerry Weber
Persona
SXM
MUJI
Low
Zara
Esprit Mango
Masstige SPA Model
Benetton
H&M
C&A
Uniqlo
Classics
Updated
Trend
Industry – Steps of a Luxury Brand to Create Scarcity (European Luxury)
1. Win Status– Social status of your first clients is foremost ! Tie to Crowns and Celebrities.
2. Tell Story – create the sense of scarcity among the mass, through • Patronization (celebrities publicly endorse your products and brands, case of Givenchy) • Fashion Show (four fashion weeks – Paris, Milan, London and New York); • Media (major fashion magazines – ELLE, Vogue, Happer’s Bazaar, Vanity Fair; and fashion related TV programs; other publication targeting HNW consumers) • Opinion Leader– Setting fashion agenda and concepts and proclaim itself as idea originator by hiring most creative and well known artists/designers to produce eye‐catching works.
3. Harvest ‐ Charge higher price or sell larger volume based on consumers’ perception of scarcity
Celebrities
High Status
brand
Building Ties
1
brand
Win Status
brand
Higher Price
Larger Volume
Harvest
3
Sense of Scarcity
Mass
Celebrities
High Status
Status Improving
brand
2
Celebrities
Media
Op. Leader
Tell Story
Patronage
Fashion Show
Mass
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Industry – Establishments in Luxury Industry
1. Celebrities – Those at the center of consumers’ focus, whose lifestyles are widely admired and followed. • Circle: European Crowns and Nobilities, Renown Houses and Heirs, Stars, Top Professionals
2. Designers ‐ Those continuously create novelty and styles, setting the fashion trend (discourse power)
• Circle: Graduates of Renown design school, experience at big name fashion house
3. Fashion Media – Those judge what valuable fashions are and select what to tell to mass audience
• Circle: big name fashion magazines (Bazaar, Vogue, Elle, etc) and TV programs Communication
celebrities
Share of Mind
follow
collaborate
patronize
Events
media
tailor-make
impress
report
collaborate
Brand
designer
consumers
appeal
Distribution –
Retail/Wholesale
Share of Market
Share of Channel
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Industry – Establishments in Luxury Industry (cont)
nobilities
Culture
Communication
celebrities
follow
collaborate
Societies
Events
tailor-make
media
critics
report
designer
schools
appeal
History
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Industry – 2nd Tier Brands in U.S, Japan and Germany, etc
•
2nd Tier brands usually founded by nascent designers who renewed fashion concept in certain ways and promote the business using mass‐media/production methods.
•
2nd Tier brands don’t have such long history and influence in development of fashion as the top tier brands. However, their own influences and prestige's grow with their living designers’ charismas and design careers. Some of them join the top‐tier group later, such as Versace.
While the top tier brands have their origin of brands catering to the crowns and nobilities with long history (such as Cartier, Hermes, etc), the 2nd tier brand usually get notoriety after winning prestigious awards and catering to celebrities.
•
•
The top‐tier brands originated in Europe have traditional competitiveness and focus on artistic design while the 2‐tier brands, particularly have competitiveness and focus on the joint design with mass‐marketing.
•
Best examples of Masstige companies are in U.S (DKNY, Calvin Klein, Ralph Lauren, Michaels Kors, Tommy Hifilger), with some in Japan (Issey Miyake, Takada Kenzo, Comme Des Garcons – Kawakubo Rei) and German ones (Hugo Boss, Marc Cain, Gerry Weber), etc.
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Industry – Masstige SPA Models
•
Masstige = Mass + Prestige, a market niche catering a broader consumer group yet with strong brand image to create prestige experiences for the consumers.
•
SPA = Specialty Retailer of Private Label Apparel, the concept of which is first realized by U.S apparel retailer GAP, and later adopted by Uniqlo and Benetton, Zara, H&M, Uniqlo and C&A, etc. This concept can be expanded to other areas (SPL).
•
Core components of SPA:
1. Speed Response to Customer Demand and Profit Generating
2. Merchandising (MD) decides designs not vice versa
3. The actual selling results decides Visual Merchandising (VMD)
•
Characteristics of SPA:
1. Directly selling to end‐consumers (to own consumer information is essential)
2. Directly managing stores and media contact (to manage the end VMD and service)
3. High‐level use of centralized information system (enable quick response to demand)
4. Proactive management of merchandising (MD) (integrate supply and demand quickly)
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Industry – SPA Models and Global Task-Differentiation
Distribution
Contractor
Trend
Production Capacity
Material Price
MD/VMD
Marketing
Merchandising
Self-owned
Design
Buyer
Fashion Analysis
Outsourcing
Store 1
Demand
Information
Demand
Information
Purchasing
Production Plan
Integrated Information System
Production
Outsourcing
Store 2
Production Schedule
Demand
Information
Contractor
Store 3
Distribution
Manufacturers
Purchasing
China, Vietnam,
Mexico, etc
Mixed
Design
Merchandising
Stores
Consumers
Europe, North America and Japan
Mixed
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Industry – Establishments: Celebrities
Royalty
Heirs
A large group of media follows European Crowns and report their private lives where they exert a big influence on fashion and public’s impression of their choices. In particular, their wedding/crowning ceremonies usually generate huge public interest, in consequences the commissioned ateliers’ status raised quickly among general public. The wedding of Prince William and Kate Middleton was broadcast in 180 countries and estimated 2bn people view the ceremony in various media.
Family members and especially heirs of big name houses in various industries also attract media. Jacqueline Kennedy , once first lady of US and later wife to Greek shipping titan Aristotle Onassis, brought her favorite Chanel lines to constant media exposure, and Chanel suit became a strongest symbol of bourgeois female chic through late 1950s to 1960s. Paris Hilton, used her great fame (though infamous) to endorse many businesses, including clothing/accessories, film, fragrances, night clubs, beer, wines
etc.
Stars/elites in entertainment and sports also have a large group of fans and huge media exposure. Audrey Hepburn brought once unknown Givenchy to the very height of female chic and widely followed by women who want to be ladylike. Micheal Jordan started to endorse NIKE since 1985 (2.5M for 5 yrs) and the brand quickly moved from a running shoe company and new comer to basket ball category to the market leader. Nike’s Air Jordan sneakers remained popular today (version 23).
Stars
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Industry – Celebrities: The Case of NIKE and Sports Stars (in USD)
“Just Do It” Campaign
Late 1995‐1998, Second 3‐peat
Late 1990‐1993, First 3‐peat
Signed 5‐yr $40M contract with Kobe Bryant, and a 7‐
yr $87M contract with Lebron James
Vince Carter and US team wear on 2000 Olympic
NBA Draft
NIKE Contrac
t
Product: Both functional and emotional, repeated buying, proprietary sales networks, moderate ASP.
Moat: Irreplaceable “share of mind” due to strong bond to NBA legendary stars and the Game.
Strategy: Partnering with Sports stars and Games with leading technology and sales network.
Structure: Growing with the globalization of NBA Games.
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Industry – NIKE History
1964: Nike's predecessor, Blue Ribbon Sports, founded on a handshake agreement, between track and field coach Bill Bowerman, and businessman also former miler Phil Knight.
1960s: Initially began importing the Onitsuka Tiger, ASICS (TYO:9736) running shoes from Japan.
1972: The first line of Nike footwear is introduced, including the so‐called "Moon Shoe“.
1973: Record‐holder Steve Prefontaine becomes the first major track athlete to wear Nike.
1979: Nike's Air technology patented by inventor M. Frank Rudy is introduced.
1980: Nike completes an IPO of 2,377,000 shares at $0.6~0.7 (after new issuance are considered)
1982: The Air Force 1 basketball shoe becomes the first to make use of the Air technology.
1984: Nike signs Michael Jordan to contract. the Air Jordan, originally is banned by the NBA.
1986: Corporate revenues surpass $1 billion for the first time.
1988: The famous tagline, "Just do it", is introduced.
1996: Nike signs Tiger Woods soon after he gives up his amateur golf status.
1997: Nike signs several hockey stars, including Sergei Fedorov and Jeremy Roenick.
2000: Nike Shox is introduced, worn by Vince Carter and others on US Olympic basketball team.
2002: Nike become the apparel sponsor of Manchester United until 2010.
2003: Nike acquires once‐bankrupt rival Converse for $305 million on July 9.
2003: For the first time in the company's history, international sales exceed USA sales.
2003: Nike signs NBA player LeBron James with an unprecedented $87 million contract.
2004: Nike creates the Exeter Brands, for lower price points. Revenues exceed $ 12.25 billion.
2006: Nike enters cricket market with a 5‐yr sponsorship of the Indian cricket team for US$43m.
2007: Nike introduces the Second Coming, a group of NBA players who represent Nike.
2010: Nike has revenue of $20.8Bn for FY2010 ending May, 2011.
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Industry – NIKE History
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Industry – Celebrities: The Case of UGG’s Hollywood Frenzy (in USD)
UGG holding is sold to DECK for 15M
Five times featured on "Oprah's Favorite Things“. First time in 2003 and latest in 2010 Oct.
Hired TBG and started to supply UGG boots to stars freely.
Stars such as Kate Hudson, Sarah Jessica Parker, Julia Roberts, Lucy Liu, Britney Spears, Cameron Diaz, Kate Moss, Madonna, Leonardo DiCaprio and Jennifer Lopez frequently photographed in UGG shoes.
Frequently featured in Vogue, Harper's Bazaar, Elle, MTV, InStyle, Cosmopolitan. Jimmy Choo Winter style
Manolo Blahnik
Designs
Product: Both functional and emotional, less repeated buying, most wholesale to distributors, moderate ASP.
Moat: Hard-to-copy “share of mind” due to creative marketing tactics and frequent endorsement by stars.
Strategy: Creative marketing winning endorsement by stars and large media exposure in major channels.
Structure: Hollywood platform to communicate the brand image and information.
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Industry – UGG History
1920s‐1950s: Sheepskin boots were known in rural Australia during the 1920s. by 1933 sheepskin boots were being manufactured by Blue Mountains Ugg Boots, and Mortels Sheepskin Factory was making the boots from the late 1950s.
1960s: In the 1960s, ugg boots became a popular option for competitive surfers, who used the boots to keep their feet warm after exiting from the surf.
1979: Brian Smith moved from Australia and started selling uggs in Carlifornia beach in 1979.
1995: Ugg Holdings was sold to Deckers Outdoor Corporation in 1995 for $15M.
1998: Deckers hired The Bromley Group to supply ugg boots freely to rock and movie stars.
2002: Deckers ended with 99.1M sales in 2002, fallen from 113.7M sales in 2000.
2003: UGG Classic Short Boots Featured on "Oprah's Favorite Things“. Early 2000s: Stars such as Kate Hudson, Sarah Jessica Parker, Julia Roberts, Lucy Liu, Britney Spears, Cameron Diaz, Madonna, Leonardo DiCaprio and Jennifer Lopez frequently photographed in UGG shoes, some placed and arranged by The Bromley Group team and marketing staffs of DECK. UGG became frequently featured in Vogue, Harper's Bazaar, Elle, MTV, InStyle, Cosmopolitan.
2005: Deckers ended with 264.7M in 2005, more then doubled from 2003.
2009: UGG teamed up with famous designers, such as Manolo Blahnik, Carlos Falchi, Rebecca Minkoff, and Rafe to create unique and original boots.
2010: Jimmy Choo desinged Winter Style for UGG.
2010: Deckers total sales for 2010 exceeded $1Bn, more than 10 times in 2002.
Source from Deckers’ annual reports and various reports. 施维 Email: [email protected]
Industry – UGG History
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Industry – Establishments: Designers
Yves Saint Laurent, one of the greatest names in fashion history, credited with both spurring the couture's rise and with rendering ready‐
to‐wear reputable. At age 21, he became the head designer of the House of Dior. His spring 1958 collection almost certainly saved the Dior from financial ruin.
Karl Largerfeld, a friend of Yves Saint Laurent at Chambre Syndicale de la Haute Couture. Taken the role as chielf creative designer for Chanel since 1983, and revived Chanel to a new height after Coco Chanel died as chief designer in 1971.
Jean Paul Gaultier, famous for his French haute couture design, , led the creative design of Hemers from 2003 to 2010, bringing the women ready‐to‐wear segment to fame, extending Hermes’ original travelling goods and leather business.
Gianni Versace,
single‐handedly created the House of Versace through courting celebrities such as Madonna, Elton John, Cher, Sting, and Diana, Princess of Wales. His chief designer role was replaced by his sister Donatella Versace after his death.
Jean Paul Gaultier, famous for his French haute couture design, , led the creative design of Hemers from 2003 to 2010, bringing the women ready‐to‐wear segment to fame, extending Hermes’ original travelling goods and leather business.
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Industry – Establishments: Designers (cont)
Tom Ford, famous for having turned around Gucci when being its creative director from 1994 to 2004. Gucci had been almost bankrupt when Ford joined, but soon Gucci sales increased by 90% in 1996. When Ford left in 2004, Gucci Group was valued at $10 billion.
Marc Jacobs, having been the creative director for Louis Vuitton since 1997 and he created the company's first ready‐to‐wear clothing line, which became a major revenue contributor of LV now.
John Galliano, largely strengthened Givenchy’s couture line and later made Dior’s accessories line very successful. Dior’s men’s segment Dior Homme is also created and brought to fame by another excellent designer Hedi Slimane.
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Industry – Notable Emerging Chinese Designer Brands
(夏姿) is a Taiwanese fashion house, whose founder(王陳彩霞) is often referred to as the Chanel of Taiwan. In 2008, it became the second Taiwanese design house to show a collection at the official Paris Fashion Week
Alexander Wang was awarded 2008 CFDA. His lines are now in more than 30 world’s premiere retailers including Barneys NYC, Neiman Marcus, Bergdorf Goodman, Dover Street Market, Browns, Otte and Selfridges. Wang is known for his edgy, somewhat masculine womenswear designs.
Vera Wang (王薇薇) is known for her wide clientele of couture bridesmaid gowns and wedding gown collections including Mariah Carey, Victoria Beckham, Avril Lavigne, Jennifer Lopez, Sharon Stone, etc.
Derek Lam (林达克), worked for Michael Kors in the 90s and in 2003 launched his label and debuted at the New York Fashion Week. In 2005, Lam won the CFDA awad and his line is known for his pretty, girly fabrics backed by clean, crisp silhouettes
Jason Wu (吴季刚), debuted his collection in 2006 and won the Fashion Group International's Rising Star award in 2008. Johan Ku (古又文)’s "Emotional Sculpture" collection, won Gen Art's Design Vision Avant Garde award in 2009. His signature design is sculpture‐like silhouettes with unique textiles and 施维 Email: [email protected]
extreme chunky knitwear.
Industry – Notable Emerging Chinese Designer Brands (cont)
Vivienne Tam - 谭燕玉, born in Canton and emigrated to Hong Kong later, was graduated from Parson Design School of New York. She debut with Eastern inspired clothing in 1994 later established her brands of Vivienne Tam Jade, Vivienne Tam Red. Her Mao collection and venerable Buddha collection won great successes.
Frankie Xie - 谢锋, graduated from Bunka Fukuso Gakui, Tokyo in 1990 and then worked in Nicole with designer Mitsuhiro Matsuda and later Kenzo. He set up JEFEN Fashion Co. in Beijing in 2000 and launched women’s fashion brand JEFEN. JEFEN marked Paris Fashion Week Runway in the official calendar and debut its ready‐to‐wear collection.
Ma Ke ‐ 马可, graduated from Central Saint Martins in 1996, created EXCEPTION de Mixmind, a ready‐to‐wear line started in 1996 and retailed in China; and WUYONG, a haute couture line founded in 2006. In 2008, her fashion house WUYONG was appointed as a Guest member of the Chambre Syndicale de la Haute Couture in France.
Jiang Qionger ‐ 蒋琼耳, born into an artist family in Shanghai, also learnt from leading traditional Chinese artists in teens. She later graduated from Decorative Art School in Paris. Once as director for Hermes window, she later set up Shang‐Xia (上下) with Hermes as a minority owner, and acting as Creative Director.
邱昊: women and men’s line: Qiu Hao
陈平: women’s line: 王汁: women’s Pari Chen
line: Uma Wang Industry – Establishments: Media
Origin: U.S. Japan: Taiwan:
Country: 27
Birth: 1867
HK: 1970
China: 2001
US Cir: 714,249
Origin: U.S. Japan: Taiwan:
Country: 18
U.S. Origins
Glamour (1939)
Cosmopolitan (1886) Gentlemen’s Quarterly (1957)
Details (1982)
W (1971)
Vanity Fairs (1983)
WWD (1910)
In Style (1993)
Birth: 1892
HK:
China: 2005
US Cir: 1,248,121
Origin: FRN Birth: 1945
Japan: HK:
Taiwan: 1991China:1988
Country: 28 US Cir: 1,132,860
European Origins
La femme Actuelle
Grazia (1936)
L’Officiel (1921)
Donna Moderna
FHM (1985) Origin: FRN
Japan: Taiwan:
Country: 25
Japan Origins
Ray (1988)
JJ (1975)
CanCam (1981)
Vivi (1983)
Classy (1984)
Birth: 1937
HK:
China:
US Cir: 963,305
China Current
瑞丽(1995)
时尚COSMO(1998)
ELLE中国(1988)
时尚芭莎(2001)
Vogue中国(2005)
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Industry – Establishments: Fashion Schools
Central Saint Martin, College of Arts and Design, Central Saint Martin
University of the Arts London. Dated back early 19 century. Notable alumni include Alexander McQueen, John Galliano, Hussein Chalayan, Riccardo Tisci, Phoebe Philo, Paul Smith.
Royal Academy of Fine Arts Antwerp, located in Antwerp, Belgium, Royal Academy of Fine Arts Antwerp
founded in 1663. Notable alumni include Vincent van Gogh, Henry van de Velde, Linda Loppa, Ann Demeulemeester, Walter van Beirendonck, Dirk van Saene, Dries Van Noten, Dirk Bikkembergs, Marina Yee, Martin Margiela, Kris Van Assche, Haider Ackermann. Parsons The New School for Design, located in New York and founded in Parsons The New School for Design
ENSCI Les Ateliers
1896. Notable alumni include Marc Jacobs, Dean and Dan Caten, Norman Rockwell,
Donna Karan, Jane Frank, William Gropper, Tom Ford and Tom Morrow.
London College of Fashion
Fashion Institute
of Technology
Polimoda
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Industry – Establishments: Prestigious Awards: CFDA
The CFDA (Council of Fashion Designers of America)'s Annual awards Ceremony, which honors excellence in fashion design, is often called "the Oscars of fashion." Nominations are submitted by CFDA members and by select fashion publications, retailers, and stylists. Past winners include Calvin Klein (1981), Ralph Lauren (1981), Karl Lagerfeld (1982), Donna Karan (1985), Giorgio Armani (1987), Marc Jacobs (1987), Manolo Blahnik (1987), Gianni Versace (1992), Anna Sui (1992), Tommy Hilfiger (1995), Kenneth Cole (1996), Yohji Yamamoto (1998), Michael Kors (1998), Jean‐Paul Gaultier (2000), Tom Ford (2001), Alexander McQueen, (2003), Miuccia Prada (2004), Alber Elbaz (2005).
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Industry – Establishments: Prestigious Awards: Neiman Marcus
The Neiman Marcus Award for Distinguished Service in the Field of Fashion was a yearly award created in 1938 by Stanley Marcus. ecipients of the Neiman Marcus Awards include couturiers, non‐American based designers, journalists, manufacturers, and celebrities and style icons who had had a significant personal influence upon fashion
Past winners include Christian Dior (1947), Salvatore Ferragamo (1947), Herbert & Beth Levine (1954), Coco Chanel (1957), Yves Saint Laurent (1958), Roger Vivier (1961), Estee Lauder (1962), Valentino (1967), Fiamma Ferragamo (1967), Ralph Lauren (1973), Lev Strauss & Co (1973), Giorgio Armani (1979), Perry Ellis (1979), Karl Lagerfeld (1980), Issey Miyake (1984), Miuccia Prada (1995).
The Award is organized by Neiman Marcus, a luxury specialty retail department store. Neiman Marcus' international fame has led to its inclusion in many popular media. Television can quickly convey someone's wealth by making the character a Neiman Marcus shopper. The Award has been announced since 1995.
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Industry – Establishments: Prestigious Awards (cont)
The Dress of the Year is an annual fashion award run by the Fashion Museum, Bath from 1963. Notable winning dresses include Christian Dior (1973), Yves Saint Laurent (1973), Kenzo Takada (1976), Manolo Blahnik (1979), Calvin Klein (1980), Karl Lagerfeld (1981), Giorgio Armani (1986), John Galliano (1987), Jean‐Paul Gaultier (1988), Ralph Lauren (1992), Donna Karan (1993), Alexander McQueen (1996), Donatella Versace(2000), Tom Ford (2001).
The British Fashion Awards is a ceremony to present awards to those who have made the most outstanding contributions to British clothing design during the year. The awards are organized by the British Fashion Council and run as part of London Fashion Week each February. Notable winners include John Galliano (1987), Vivienne Westwood (1990), Alexander McQueen (1996), Hussein Chalayan (1999), Phoebe Philo (2004), Stella McCartney (2007), Sarah Burton (2011).
The Coty American Fashion Critics' Awards (awarded 1943‐1984) started in January 1942 by the cosmetics and perfume company Coty, Inc. to promote and celebrate American fashion, and encourage design during the Second World War. Notable winners include Oscar de la Renta (1967), Herbert & Beth Levine (1967), Ralph Lauren (1970), Levi Strauss & Co (1971), Calvin Klein (1973), Donna Karan (1977), Perry Ellis (1981).
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Industry – Establishments: Shows
New York
London
Milan
Paris
Every season, the fashion weeks start from New York and end in Paris. The first show started in 1943. There are two major shows per year. Autumn/Winter in Feb/Mar and Spring/Summer in Sep/Oct (menswear one month earlier, specific genre different). New York fashion week is known for its balance of fashion‐forward and commerce and sports‐lines.
The first show started in 1984. There are small shows for smaller and less known brands before and after the main week. But only big name fashion houses get on in the main week. Average time for a show is only 15‐20 minutes but cost more than half a million to prepare. London fashion week is known for its edgy and avant‐garde design.
The first show started in 1958. About 100 designer runway shows held for the week, attracting hundreds of thousands of people. About 40 fashion weeks are held in different cities around the globe, however the Big Four dictates the fashion trend. In Asia, Tokyo, Singapore and Hong Kong’s are most well‐received. Milan fashion week is known for its over‐
the‐top high‐concept fashion.
The first show can be traced back to 1910. Fashion magazine editors and buyers are the most important audience in the fashion weeks. Critics previews of designers’ work in fashion magazines and orders from buyers are most important feedbacks for the shows. Paris fashion week is known for its haute couture designs.
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Industry – Establishments: Shows (cont)
Japan Fashion Week in Tokyo, the most widely recognized fashion show only second the to Big Four, started in 1985, later restructured by the Council of Fashion Designers in 2005 as a way to garner more attention. It commenced in April for the A/W each year, the last in order after the Big Four. Brands include fur fur, Etw Vonneguet, Johan Ku, Eri Matsui, motonari ono, etc.
The Tokyo Girls Collection (東京ガールズコレクション), abbreviated as TGC, is a semiannual fashion festival showcases seasons fashionable streetwear by domestic brands, and are modeled by popular celebrities. TGC is widely received in Asia and creates frenzy every season. Notable participating brands include SWORD FISH, CECIL McBEE, gMALOUSE, C.C.CROSS, Praivate Label, DOUBLE STANDARD CLOTHING, LIP SERVICE, Kai Lani, ALBA ROSA, HbG, etc.
SPFW
Hong Kong Fashion Week for Fall/Winter, is the second largest trade fair of its kind in the world, and the largest in Asia organized by HKTDC. Participators are generally mass brands such as Hangzhou Shinsilu, and less‐known designer brands, both local and foreign ones.
Singapore Fashion Festival/Asia Fashion Exchange, started in 2002, aims to provide an international platform for showcasing Asian talent and to position Singapore as a gateway to Asian designers and markets.
The São Paulo Fashion Week is held in São Paulo, notable as "Latin America's pre‐eminent fashion event“, famous for its Latin Styles and bikini collection. It began in 1996, and changed to the current name in January 2001. Notable designers shows include Tufi Duek, Alexandre Herchcovitch and Amir Slama.
Industry – Establishments: The Traditional Powers
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Industry – Establishments: The Traditional Powers
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Industry – Top Luxury: LVMH
Year of acquisition: Fragrance expansion
New Watch & Jewelry
Acquire Fendi w/ Prada
DFS and Sephora began to achieve profitability
Watch and Jewelry line began to make profit.
Asia sales pass the mark of 30% of total revenue.
Watch and Jewelry line began to make profit.
Asia (excl. Japan) became the 1st segment (22.6%), larger than US (22.5%).
Total NO. of stores surpassed 2000
Product: Mostly emotional, repeated buying (soft luxury), expanding retailing v.s. wholesales, mid-high ASP.
Moat: A unique collection of hard-to-recreate names which catered elites for long thus “share of mind” in mass.
Strategy: Consolidation of best soft luxury brands, Expanding retailing network, Invest in growth in Asia.
Structure: Globalization of world culture creates growth opportunity to supply products of “minds” worldwide.
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Industry – Top Luxury: LVMH Segments
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Industry – Top Luxury: LVMH History
1743: Claude Moët and his son, Claude‐Louis, open Moët et Cie to sell wine.
1832: Jean‐Rémy hands over control of the company to his son and son‐in‐law; business is renamed Moët et Chandon.
Late 19 century: Moët's average annual sales were 20,000 bottles during the 1820s. By 1872 it rose to two million, by 1880 it had reached 2.5 million. At the turn of the 20th century, Moët et Chandon's clientele remained primarily within the upper echelons of society.
1854: Louis Vuitton opens his own packing and trunkmaking business in Paris.
1885: Louis Vuitton expands internationally by opening a store in London.
1913: Louis Vuitton opened on the Champs‐Elysees as the largest travel‐goods store in the world. Stores opened in New York, Bombay, Washington, London, Alexandria, and Buenos Aires as WWI.
1969: Louis Vuitton enters the Asian market with a store in Tokyo.
1971: Moët et Chandon merges with Jas. Hennessy & Company, the largest cognac producer in France, and is renamed Moët‐Hennessy.
1984: Louis Vuitton goes public.
1987: Louis Vuitton and Moët‐Hennessy merge in a $4 billion deal, Bernard Arnault capitalized
on the stock crash and owned 43% of the LVMH group with the backing of Lazard and Guinness.
1989: Bernard Arnault purged previous executives and officially took over as Chairman & CEO.
Early 1990s: Rampant counterfeiting, a difficult world economy, and its own flagging image.
1996: LVMH acquired DFS Group for its retail networks, Chateau D'Yquem, Céline and Loewe.
1997: LVMH acquired Sephora, the French retailer, and Douglas International. Louis Vuitton expanded into women and men’s ready‐to‐wear line under Marc Jacobs as chief designer.
Industry – Top Luxury: Richemont
Acquisition of watchmaker Officine Panerai and leather goods brand Lancel
Acquisition of watchmakers Vacheron Constantin
Acquisition of Jaeger‐LeCoultre, IWC and A. Lange & Söhne
Acquisition of a controlling 60 % interest in Van Cleef & Arpels
Interest in Interest in British American British American Tobacco Tobacco reduced to reduced to 18.6%
18.6%
Watchmaker passed 25% Fully Acquires of total sales
Van Cleef & Arpels
NO. of stores passed 800
Asia became 1st sales region
Split of Richemont's tobacco and luxury goods operations
Product: Mostly durable products (hard luxury), expanding retailing v.s. wholesales, very high ASP.
Moat: A unique collection of hard-to-recreate names which catered elites for long thus “share of mind” in mass.
Strategy: Consolidation of best soft luxury brands, Expanding retailing network, Invest in growth in Asia.
Structure: Globalization of world culture creates growth opportunity to supply products of “minds” worldwide.
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Industry – Top Luxury: Richemont Segments
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Industry – Top Luxury: Richemont History
1755: Vacheron Constantin was founded by Jean‐Marc Vacheron in Geneva, Switzerland. This makes it one of the oldest watchmakers in the world with an uninterrupted history.
1830: Baume et Mercier was founded by Baume family in Les Bois, Swiss.
1833: Jaeger‐LeCoultre was founded by Antoine LeCoultre in Le Sentier, Switzerland.
1847: Cartier was founded by Louis‐François Cartier in Paris.
1868: IWC was founded by Florentine Ariosto Jones in Schaffhausen, Switzerland.
1874: Piaget was founded by Georges Piaget in the village of La Côte‐aux‐Fées, Swiss.
1893: Alfred Dunhill was founded based on his father’s saddlery.
1896: Van Cleef & Arpels was founded by Charles Arpels and Alfred Van Cleef in Paris.
1908: Montblanc was founded by Claus‐Johannes Voss and August Eberstei in Hamburg.
1920s: Cartier formed a joint company with Jaeger‐LeCoultre, Cartier continued to use movements from Vacheron Constantin, Audemars‐Piguet, Movado and LeCoultre.
1972: Cartier Paris was taken over by a group of investors led by Joseph Kanoui.
1977: Montblanc was acquired by Dunhill following which lower price pens were dropped and the brand was used on a wide range of luxury goods other than pens.
1985: Chloé (which was founded in 1952 by Gaby Aghion) was aqcuired by Dunhill.
1988: Formation of Richemont, which then held Cartier, Alfred Dunhill, Montblanc and Chloé. Richemont also acquired Piaget and Baume et Mercier this year.
1991: LMH Group was founded with a 100% stake in IWC, 60% in Jaeger‐LeCoultre and 90% in A. Lange & Söhne.
2000: LMH was acquired by Richemont for CHF 2.8 bn.
施维 Email: [email protected]
Industry – Top Luxury: PPR
Acquisition of Gucci 42% interest. Later YSL, Sergio Rossi acquired thr Gucci.
PPR is born with acquisition of Au Printemps SA
Takeover of Redcats
Acquisition of Boucheron
Acquisition of Bottega Vaneta, Balenciaga, Stella McCartney, Alexander McQueen thr Gucci Group
Merger of La Redoute
Acquisition of PUMA
Continuing selling non‐core businesses
Increase interest in Gucci to 99.4%
Started selling underperforming non‐core business Product: A mix of soft luxury and non-core businesses, expanding retailing v.s. wholesales, mid-high ASP.
Moat: A unique collection of hard-to-recreate names which catered elites for long thus “share of mind” in mass.
Strategy: Consolidation of best soft luxury brands, Expanding retailing network, Spin-off non-core businesses.
Structure: Globalization of world culture creates growth opportunity to supply products of “minds” worldwide.
施维 Email: [email protected]
Industry – Sports Footwear: PPR History
1865: Jules Jaluzot, former department head at Bon Marché opened Au Printemps in Paris.
1905: Gustave Laguionie took the role of general partner after Jaluzot failed in speculation.
1923: Gucci is founded by Guccio Gucci in Florence, selling leather goods with classic styling.
Early 1940s: German occupation, and the postwar shortages of merchandise meant a period of survival rather than of growth for Au Printemps. Gucci made handbags of cotton canvas rather than leather during World War II as a result of material shortages. 1953: Guccio Gucci dies; and internationalization begins with new stores in US. Movie stars posed in Gucci for lifestyle magazines around the world, contributing to its growing reputation.
1970s‐1980s: Consecutive acquisition of specialty stores and food retailer by Au Printemps. A major acquisition of La Redoute, the largest mail‐order company in France. in the Late 1980s.
1989: InvestCorp International acquires a 50 percent interest in Gucci and forms a 50/50 joint venture with Maurizio Gucci. 1992: Groupe Pinault, a French conglomerate, acquired a controlling (2/3) stake in Printemps, and later merged as Pinault‐Printemps‐Redoute S.A. 1993: InvestCorp buys Maurizio Gucci's shares and gains full ownership of the company. 1994: Tom Ford is named creative director of Gucci, who successfully made the turnaround. 1999: LVMH acquires 34.4% of Gucci shares and in response Gucci forms a strategic alliance with PPR (Pinault‐Printemps‐Redoute); LVMH challenges the legality of the alliance; and Gucci acquires Yves Saint Laurent. 2001: A settlement agreement is reached among Gucci, LVMH, and PPR. 施维 Email: [email protected]
Industry – Top Luxury: Hermes
Close franchised stores to change to self‐owned. Bought a 35% stake in the Jean‐Paul Gaultier fashion house for 150 million francs.
Moved clothing segment to China, first John Lobb footwear store was also opened.
Belgian mode
rnist Martin Margiela left the company.
Jean‐Paul Gaultier, debuted his first haute‐couture collection
Patrick Thomas became the 1st
non‐Hermès to head company
Japan, 1st source of sales (up to 30%) significantly slowed down
Asia (exlc. Japan) became the 1st source of sales (22%), passing Japan (21%). Asia’s rapid growth contributed to Groups’
escalating results and share price increases.
Product: Traditional leather goods has great reputation, successfully transferred to silk, RTW and other lines.
Moat: Leather goods traditionally served only to royalties and have great “share of mind” in consumers.
Strategy: Leverage the reputation of leather goods to other new product lines, Expanding self-owned network.
Structure: Globalization creates growth opportunity to leverage on reputed French craftsmanship.
施维 Email: [email protected]
Industry – Top Luxury: Hermes History
1837: Thierry Hermès first established Hermès as a harness workshop on the Grands Boulevards quarter of Paris, dedicated to serving European noblemen.
1870s: Charles‐Émile Hermès took management and introduced saddlery and began retail sales.
1914: Hermès Frères was granted exclusive rights to use zipper for leather goods and clothing.
1920s: Émile‐Maurice added accessory line, groomed his three sons‐in‐law as business partners.
1922: The first leather handbags were introduced after Émile‐Maurice's wife complained of not finding a suitable one to her liking.
1929: the first women's couture apparel collection was previewed in Paris.
1930s: Hermès produced some of its most recognized original goods, including Leather Sac à
dépêches (later renamed the "Kelly bag") and Hermès carrés (scarves).
1949: launch of the Hermès silk tie, the first perfume, Eau d'Hermès, was produced.
1950s: Acquired its duc‐carriage‐with‐horse logo and signature orange boxes, scarf production diminished but Sac à dépêches bag became hugely popular after Grace Kelly spotted using it.
1970s: Hermès's insistence on the exclusive use of natural materials, order lapse and aging image made it stagnant compared to its competitors adopting new man‐made materials.
1978: Jean‐Louis Dumas, became chairman and began the turnaround and marketing strategy, concentrated on silk & leather goods and ready‐to‐wear, annual sales reported at US$50M.
1980s: Acquiring prominent French glassware, silverware and tableware manufacturers.
1990: Annual sales reported at US$460 million
1993: Hermès went public on the Paris Bourse, to lessen family tension on share valuation.
1990s: Continued extensively to diminish the number of franchised stores, buying them up and opening more company‐operated boutiques.
施维 Email: [email protected]
Industry – Top Luxury: Hermes History
施维 Email: [email protected]
Industry – Top Luxury: Christian Dior
Launch of perfume “J’adore”
and creation of new Jewelry line
Hedi Slimane became designer of “Homme” line, presents his first collection
Launch of the perfumes “Miss Dior Chérie”
and “Dior Homme”.
Major exhibition in Beijing, to celebrate the brand’s entrance into China.
Continued expansion of retailing network in Japan.
Kris Van Assche, new expansion of desiner of networks in menswear presents China.
1st show.
Major exhibition in Beijing, to celebrate the brand’s entrance into China.
Product: Evolved from famous designer brand, successfully diversified into mens’ wear, perfume, and other lines.
Moat: Great fame achieved during Christian Dior’s lifetime serving loyalties and corresponding “share of mind”.
Strategy: Leverage the reputation of womens’ wear to other new product lines, Expanding self-owned network.
Structure: Globalization creates growth opportunity to leverage on reputed French couture.
施维 Email: [email protected]
Industry – Top Luxury: Christian Dior History
1941: Christian Dior becomes design assistant for Lucien Lélong after military service in WWII.
1946: Backed by Marcel Boussac, Dior launches his own fashion house, with significant stake.
1947: Dior's "New Look" line revolutionizes women's fashion, emphasized feminine figure. The line was an immediate success, garnering a clientele ranging from European royalty to Hollywood starlets and generating sales of FFr 12.7 million by 1949.
1948: Company launches Christian Dior Perfumes, started licensing on various products.
1950s: Expanded to US, Britain, Mexico, Canada, Cuba, and Italy, introduced ready‐to‐wear line.
1957: Dior died, employment grew to 1,700, export accounting 50% of French fashion export.
1958: Yves Saint Laurent becomes lead designer for Dior, his trapeze line was successful, but his later "bohemian" look met heavy criticism.
1960: Saint Laurent was drafted, Marc Bohan became chief designer and serve Dior until 1989.
1970s‐1980s: Group Boussac became money‐losing under overseas textile competition and finally bankrupt in 1984, Bernard Arnault acquired it and divested industry operation only retaining Bon Marché department store and Christian Dior.
1990: Christian Dior acquires controlling share of LVMH, cutting back number of Dior licenses. 1990s: Sales increased from $129.3 million in 1990 to just over $177 million in 1995, while net income grew from $22 million to $26.9 million. 1996: Arnault names John Galliano as lead designer in order to revive Christian Dior image. 1997: Dior buys back control of ready‐to‐wear line, and retail chain, cutting licensees.
2001: Hedi Slimane is named to create new men's fashion line; company launches new retail concept, Christian Dior Haute Joaillerie. 施维 Email: [email protected]
Industry – Top Luxury: Christian Dior History
施维 Email: [email protected]
Industry – 2nd Tier Brands: Coach (in USD)
First Japan Flagship Japan suppassed ¼ of US Store in Ginza, sales. Japan growth slowed Tokyo
down to that of US
Sara Lee divested itself of Coach first Continuing growth of Continuing expansion by selling 19.5% of Accessories line, pass of network in Japan.
their shares of 25% of total sales
Coach at the Coach IPO
Opens First Hong Kong Global Flagship Store
Listing in HK, major China push
Rebuilt China team, aiming to triple stores (26 to 75+) in 3 yrs
Product: Successfully entered niche between ultra-high-end and low-end women handbag, filling gap of market.
Moat: Killer products created reputation of quality combined with acceptable pricing and low cost structure.
Strategy: Niche positioning with lower cost structure/mass production and effective marketing.
Structure: Globalization creates growth opportunity leveraged on mass production and reputation.
施维 Email: [email protected]
Industry – 2nd Tier Brands: Coach History
1941: Coach is founded as a family‐run workshop, making small leather goods in Manhattan.
1946: Miles Cahn joins the company and later began running the factory for its owners.
1960: The Sturdy cowhide purses is introduced and becomes a signature, luxury, trademark.
1960s: Cahn did research on leather and discovered a very complex method for processing leather to make it strong, soft, and durable. At the suggestion of his wife, a number of women's handbags were designed to be more affordable.
Early 1960s: Coach women's handbags were of much better quality than the thin leather pasted over cardboard material that was used to make other handbags at the time. This catapulted Coach to a prominent standing among high quality leather products. 1961: Cahn and his wife, Lillian, buy out the factory's owners.
Late 1970s:Company begins a mail‐order business and opens its first specialty stores.
1985: The Cahns sell Coach to Sara Lee Corporation for about $30 million; Sara Lee begins expanding Coach's product line and its channels of distribution.
1988: The company begins international push, opening boutiques in England and Japan.
1989: Sales reach $100 million, five times the level of 1985.
1992: The product line is expanded to include outerwear and luggage.
1997: The company enters into its first licensing agreement, a deal with Movado Group for a line of Coach watches.
1999: The company enters the e‐commerce realm with the launch of coach.com.
2000: Sara Lee sells 17 percent of the newly named Coach, Inc. to the public through an IPO.
2001: Sara Lee spins off remaining interest in Coach to shareholders. Coach valued at US1Bn.
施维 Email: [email protected]
Industry – 2nd Tier Brands: Ralph Lauren (in USD)
Rolled out a plethora of other brand extensions.
RL acquired Club Monaco to try to attract younger, hipper customers Tommy Hilfiger used to lure
RL bought European licensees, and then quadruple EU sales between 1999 and 2002. EU outlets are mainly specialty store versus US department Continuing buy‐up of licenses in Japan, Germany, Argentina, etc, and also from Jones Apparel Group.
Entered into Russia market. Acquired whole Japan licensees.
Asia passes 10% of total sales.
Assume Direct Control of Distribution in Southeast Asia
Product: Famous designer brand with numerous awards (Coty, Neiman Marcus, CFDA etc) wining “share of mind”
Moat: Early mover advantage in the era of fast growth of US fashion industry and globalization of US culture.
Strategy: Positioning with middle-class consumers with diversification into different lines using variation of brands.
Structure: Globalization, growth of US fashion industry and established US distribution channel.
施维 Email: [email protected]
Industry – 2nd Tier Brands: Ralph Lauren History
1968: Polo Fashions is created by tie salesman Ralph Lauren.
1970: Lauren received Coty Award for menswear, then began designing for women.
1972: RL was almost bankrupt because of poor financial management, Norman Hilton became Lauren’s business partner to improve the operation management of the business. 1970s: Began to concentrate on design and leave manufacturing, distribution to others. 1974: The first ads appear in NYC newspapers.
1978: Polo cologne is introduced.
1980s: RL entered into a period of phenomenal growth that carried it through the late 1980s. RL expanded its products to include fragrances, eyewear, shoes, accessories, housewares, and a range of other products. Yet even product lines expanded, the image became more secure and singular. “Laurenification of America" creating a unique American aesthetic.
1981: RL went global with its first international store on London's New Bond Street. 1983: An extensive, licensed home furnishings line debuts.
1986: The flagship store opens on Madison Avenue.
Early 1990s: Retail expansion slowed dramatically with the economic downturn.
1994: Sale of 28 percent of the company to a Goldman Sachs & Co. for $135 million. RL is at a crossroads as it embarks on improving retail operations and lure a younger generation. 1997: Polo/Ralph Lauren goes public while Ralph Lauren retained 90 percent of voting rights.
Late 1990s: RL rolled out a plethora of other brand extensions in the late 1990s, including shoes from Reebok and Rockport and a line of Polo‐brand jeans. 施维 Email: [email protected]
Industry –Harvest on the Name
Big name fashion houses have to be very cautiously balancing maintaining sense of scarcity (perceived quality and uniqueness) of their brands/products against winning financial returns as large as possible.
Big name fashion houses, particularly those having been controlled by financial investors or after IPO thus subject to investor pressure, usually choose to harvest on the name it built for financial returns and sacrifice its quality and hand‐made tradition (case such as LV, Hermes, etc).
However, too fast expansion of sales and retailing points often reduce the scarcity of the products thus the perceived status thereof. Reducing cost often results into loosing or even abandoning traditional craftsmanship with replacement of mass production in low‐labor cost regions/countries.
Disastrous strategies reducing the strength of brands include:
•Loss of charismatic designers result into stagnating or even falling design creation thus media exposure and public reception (case such as Chanel during 1970s)
•Too loose licensing policy of its name on too many unrelated products, or for too many licensees (case such as Pierre Cardin)
•Rampant piracy on its names and reduce the authenticity of products bearing the name (case such as Valentino)
施维 Email: [email protected]
Industry –Harvest on the Name (The Case of Pierre Cardin)
Cardin was known for his avant‐garde style and his Space Age designs. He prefers geometric shapes and motifs, often ignoring the female form. He advanced into unisex fashions, sometimes experimental, and not always practical. Cardin founded his own house in 1950. His career was launched when he designed about 30 of the costumes for "the party of the century", a masquerade ball at Palazzo Labia in Venice on 3 September 1951, hosted by the palazzo's owner, Carlos de Beistegui. He began with haute couture in 1953.
He was the first of the designers for the rich‐and‐famous to launch a ready‐to‐wear collection, the first to move into men’s fashion ‐ and the first to sell his brand‐name. Cardin was also ahead of the game when he ventured into China, India and Japan, respectively 30, 50 and 45 years ago.
Cardin, one of the first to take French fashion design labels into Asia in a big way and one of the first to develop brand licensing. The Cardin brand has put its stamp on hundreds of products from shirts to bottled water to olive oil to frying pans, floor tiles, sardines, in more than 140 countries. The group employs 450 workers but owns only one Cardin shop in France. However, it manages some 900 licences throughout the world and indirectly employs some 200,000 people. In 2009, Cardin sold 32 textile and accessory licences in China ‐ but not its brand ‐ to companies Jiangsheng Trading Company and Cardanro for 200 million euros.
A brand like Cardin does not increase (in value) like a normal brand because it is entirely based on licence revenues. Top names such as LVMH and PPR are less interested to acquire Cardiin because they want to control the brands they own. Cardin, on the other hand, gave a multitude of licences. Pierre Cardin is a brand that was at times a little too exposed, too used, too franchised and in a way intangible assets were greatly squandered.
施维 Email: [email protected]
Industry –Harvest on the Name (The Case of Valentino)
Valentino is founded in 1959 by Valentino Garavani. Valentino's international debut took place in 1962 in Florence. After the breakthrough show in Florence, Garavani started to dress the ladies of the international best‐dressed crowd such as his acquaintance from the Paris years Countess Jacqueline de Ribes and New York socialites Babe Paley and Jayne Wrightsman.
In 1968, he had one of his greatest triumphs, an all‐white collection, which became famous for the "V" logo he designed. By the mid‐1960s he was already considered the undisputed maestro of Italian Couture, receiving in 1967 the Neiman Marcus Award, the equivalent of an Oscar in the field of fashion. Then Begum Aga Khan, Farah Diba, Jacqueline Kennedy Onassis, Elizabeth Taylor, Marella Agnelli and Princess Margaret were already customers as well as personal friends.
Valentino held successful runway show in Beijing in 1993 but chose not to enter the China market then. It contracted with Baber Group in China 11 yr later for its exclusive distribution right of men’s wear. However, during the 11 years, many local copycats used Valentino’s brand name to exploit its fame. The Valentino name is used in men’s wear, women’s wear and leather goods etc. The real Valentino stores exited China in 2008 due to the overuse of its name and consumers cannot differentiate between authentic Valentino and fake ones.
The tragedy of Valentino’s name in China is partially attributed to the malpractice of brand management of Valentino group. Designer Valentino Garavani does not belong to the old Valentino family who also produce leather goods and wears and disputation existed long before. In 1978, agreement was achieved that Valentino Garavani has the right for use of “Valentino”
for ready‐to‐wear product while Mario Valentino has the right for use of “Valentino” for leather goods. And Giovani Valentino should use name GiovaniVALENTINO for his products.
施维 Email: [email protected]
Business –Footwear Brand Positioning (Pricing * Classic – Trend)
Price – High
Ferragamo
Jimmy Choo
Roger Vivier (TODS)
Sergio Rossi
Mid‐High
TODS
Louboutin
Prada
Stuart Weitzman
Steve Madden
GEOX
Mid‐Low
Kenneth Cole
Nine West
STACATO
Stella Luna
Le Saunda
Low
Belle
C Banner
Daphne
Classics
Updated
Trend
Industry –Footwear Brand Positioning (Age * Emotion - Function)
30 above
Ferragamo
Roger Vivier (TODS)
Le Saunda
STACATO
20 ~ 30s
UGG
Belle
Jimmy Choo
Louboutin
Nine West
TODS
C Banner
Sergio Rossi Prada
Steve Madden GEOX
Himiko
Stuart Weitzman
Stella Luna
Kenneth Cole
Daphne
PUMA
Teenager
GEOX
NIKE
Dexter
CROX
Adidas
Kids
classic
trendy
functional
Industry – Sports Footwear: Adidas
Transfer from athletic Signed Tracy shoe company to major McGrady
Restructuring sporting goods to improve manufacturer after efficiency
acquisition of Salomon Worldwide
Visibility enhance by Flat worldwide sales Adidas's involvement but US strong growth with the 1996 Olympic under major US push Games and Sponsorship strategy.
of NY Yankees and endorsement of Kobe
Bought Reebok for USD3.8 billion
Improvement of operating under restructuring
11‐year deal to become the official NBA apparel Signed Tim provider.
Push for Beijing Duncan and Kevin Olympics, win Garnet
“Impossible is 2012 London Nothing” campaign
sponsor
Sold Salomon for EUR485M
Launch of biggest marketing camp in history ever
Alliance between Armani & Reebok
Product: Both functional and emotional, “share of mind” with high quality traits, repeated buying.
Moat: Strong linkage with major Sports Games creating “share of mind” and continued technology innovation.
Strategy: Linking different lines product lines with sports stars with endorsement to major Sports Games.
Structure: Globalization of Sports Culture (Olympics and FIFA) leveraged on mass production and technology.
Industry – Sports Footwear: Adidas History
1924: Trained as shoemaker, Adolf “Adi” Dassler, and his older brother Rudolf "Rudi" Dassler founded Dassler Brothers Shoe Factory in Herzogenaurach, after they returned from WWI.
1936: During 1936 Olympics in Berlin, Dassler drove to Olympic village with a suitcase full of spikes and persuaded Jesse Owens of USA to use his shoes. Jesse Owens won 4 gold medals in the year. Business boomed selling 200,000 pairs of shoes each year before WWII.
1948: The Dassler brothers part ways, and Adi Dassler starts his own shoe company (Adi‐Das).
1954: Adidas introduces screw‐studded soccer shoe, Germany national team won the 1954 world cup wearing Adidas, a triumph that was viewed as a symbol of Germany’s return from the ashes of war. Shipments exploded from about 800 pairs to 2,000 pairs of shoes per day.
1956: Started longstanding tradition of naming one of its shoes after the Olympics. Adopted marketing strategy as simply giving the shoes away to Olympic athletes, who wore them for a global audience, and later signing agreements to supply entire sports teams with footwear.
Late 1950s: Adidas attacked US market at a good time when rivals are of evidently lower quality.
1964: In Tokyo Olympic Games, medals won by adidas amounted to 80 percent of the total.
1978: Adi Dassler dies, and control of his company is handed to his son Horst Dassler. 1989: Horst died, Adidas was transformed into a limited company but remained family‐owned.
1980s: Increased competition began after 1972 Olympics, when a mob of companies hopped into the lucrative business. Though still dominant in core EU market, Adidas was thrashed in US market by emerging athletic shoe contenders Nike and Reebok. Adidas's US sales shrunk to a mere $200 million by the end of 90s, while Nike's grew to more than $2.4 billion.
1989: Weak management makes Adidas loss of EUR77M and later sold to Tapie for EUR289M.
1993: New CEO Louis‐Dreyfus began cost‐cutting, outsourcing and heavy marketing strategies.
施维 Email: [email protected]
Industry – Sports Footwear: Adidas History
施维 Email: [email protected]
Industry – Sports Footwear: Puma
a collaborative agreement with fashion designer Jil Sander
Earning depression due to major investment in brand enhancement and marketing, particularly within US.
Reorganization for a virtual structure.
Signing Italy national football team, creative marketing with Cameron team.
Investment in brand pays off with rising margins. Began retail expansion.
Improving margin due to pricing power gained from brand enhancement. PPR owns a share of 62.1% in PUMA after the takeover offer closes
Sponsor of the 2006 World Cup Champions (Italy)
Announcement of a aggressive 5‐yr growth plan
Hussein Chalayan appointed as creative director for PUMA
Position in Eco Sponsor of Bolt, who broke 100m, 200m world record
Product: Both functional and emotional, “share of mind” with high quality traits, repeated buying.
Moat: Strong linkage with major Sports Games creating “share of mind” and continued technology innovation.
Strategy: Linking different lines product lines with sports stars with endorsement to major Sports Games.
Structure: Globalization of Sports Culture (Olympics and FIFA) leveraged on mass production and technology.
Industry – Sports Footwear: Puma History
1948: The Dassler brothers part ways, and Rudi Dassler starts his own shoe company PUMA.
1952: Helsinki Olympics were a spectacular success for Puma and opened British market.
1958: PUMA boot is worn by players on both teams in the final in Sweden World cup. 1960s: A series of innovations including, export thrived with shippment to almost 100 countries.
1960s‐1970s: Puma's image carried worldwide by Eusébio and Pelé who favored “Puma King". 1974: Armin A. Dassler took over as CEO as Rudolf died, innovations continued to proliferate.
1982: Maradona sports PUMA boots during his first World Cup appearance.
1986: Puma went IPO, however the company began a long loss‐making decade.
1990: Matthäus wearing “PUMA king” led German team to win Italy World Cup.
1991: Swedish conglomerate Proventus AB became majority shareholder. Profit declined since mid‐1980s due to increasing competition from US rivalries and cheap image made by lower price ranges, PUMA was not profitable until 1994.
1993: Jochen Zeitz took over as CEO, initiating market‐oriented program including rigorous cost cutting, reorganization and repositioning of PUMA brand leveraged on trend research.
1995: Launch of “PUMA offensive 95” marketing program, with four aspects: 1) revival of classic Puma suede shoes; 2) Puma "World Team" composed by top sports figures; 3) creation of "Replica," a line of "fashions for fans“; 4) Street Soccer Cup, a worldwide street soccer game.
1998: Puma acquires 25 percent of Logo Athletic Inc, signed long‐term contract with WTA, and became first sports brand to combine fashion, with Jil Sanders.
1999: Monarchy/Regency becomes Puma's biggest single shareholder. PUMA began major marketing campaign in US, became one of four suppliers of NFL, and sponsor of NBA teams.
施维 Email: [email protected]
Industry – Sports Footwear: Puma History
施维 Email: [email protected]
Industry – Women Footwear: Steve Madden (in USD)
Implementing electronic data interchange (EDI) system to better manage inventory and replenshment
Acquisition of David Launch of mens’ line
Aaron for more Securities fraud sophisticated, charges led SP career‐ and fashion‐
dropped by 40%.
oriented women.
Out sourcing of most production overseas Increase marketing New brand SMNY is Accessories to college students created, targeting div. account and aggressive women aged 13‐20
15% of total marketing for sales
Stevies
SMNY succeeded POS reached 2,750 with 5% of total locations with 22 sales. Department Expansion of department stores. store POS at 3,500
accessory line
Men’s passed 14% of total sales
Start of licensing for accessories.
Retail passed 30% mark of total sales , later decreasing
Introduction of Steve Madden’s fix as fashion sport
Acquisition of handbag and apparel brands
Product: Mostly trendy and emotional, repeated buying.
Moat: Core “test-and-response” model equipped with information management quickly respond to customer need.
Strategy: Fast response with low-mid pricing targeting youth market, expansion into men, kids and accessories.
Structure: Established infrastructure of department stores support the growth.
施维 Email: [email protected]
Industry – Sports Footwear: Steve Madden History
1974: Steve took a job in a shoe store, later dropped out of college to work as a shoe salesman.
1980: Steve joined shoe wholesaler L.J. Simone Footwear and began designing teenager shoes.
1988: Steve negotiated with M.C.S Footwear to design ‘Souliers' line and received 10% profit.
1990: Steven opened his eponymous company selling to trendy Manhattan stores. The shoes attracted designer such as Betsey Johnson and Jill Stuart who used them in their fashion shows.
Early 1990s: Steve Madden had revenue of $124K in FY1991, $76K in FY1992, and $1.4M in FY1993. Steve Madden opened the first retail store in Manhattan's SoHo neighborhood.
Early 1990s: Steve Madden's Long Island headquarters included a facility for turning out samples ‐ by his young designers for testing in the company's four stores. Successful designs then were shipped abroad for mass production, followed by nationwide distribution.
1993: Steven Madden went public, raising $5.6 million, revenue rose to $5.33M for FY1993.
1996: Acquisition of David Aaron for more sophisticated, career‐ and fashion‐oriented women. Late 1990s: Steven Madden's styles hit with young women such as 'first daughter' Chelsea Clinton and centerfold Jenny McCarthy, the test‐design speed reached 10~15 a week.
1997: Steve Madden first licensed for handbags, sunglasses, hosiery, outerwear, and jewelry. The chain of Madden stores grew to 17. The David Aaron division opened its first outlet.
1999: Madden doubles its net sales and income, began selling Jordache footwear under license.
2000: Announced the creation of new Stevies brand of footwear for girls ages six to 12.
2000: Steven Madden is indicted on charges of federal securities fraud.
施维 Email: [email protected]
Industry – Women Footwear: Kenneth Cole (in USD)
Adopting cost reduction Kenneth role change and Launched women apparel. program, refocusing on Jill act as CEO. Redefine Margin up due to higher portion women footwear core brand goal and vision. of retail (35%) and men’s business Decreasing margins.
footwear.
Frist debuted Margin down Closed down 2 under‐
Subpar growth with margin on NY fashion due to performing businesses, deteriorating due to aging week runway markdown of reposition of KCNY, brand image, rising SG&A for men’s wear
inventory at both suspending wholesale. and average supply‐chain wholesale and Cutting SG&A and inv.
management.
retail Shrinking margin Retail rose to New due to lower sell‐
37% of total management and through and excess sales. entry in India.
wholesale inventory.
Replaced MIS.
KC debuted its children's line, men’s tailored clothing and sportswear.
Sales derived from retail passed 20%, and extensive international expansion began.
Product: Fashion sensitive and emotional, repeated buying.
Strategy: Failed to 1) put customers’ demand the first, and build a corresponding fast-response design/production
system “Years ago, I used to think [that] as a designer my responsibility was to determine what a customer
should wear. Today I've learned that my responsibility is to give them what they want.”; 2) Diversification into
other lines too early before established, concentration on core footwear not enough to produce brand equity.
施维 Email: [email protected]
Industry – Sports Footwear: Kenneth Cole History
1976: Kenneth Cole joined his father’s shoe business importing French and Italian shoes.
1982: Kenneth Cole, debuted a ladies' footwear collection parking a truck near Hilton Hotel shooting film named as “a birth of a shoe company”, having sold 40K pair of shoes in two days. The company ended with $5M sales in 1982.
1985: Kenneth Cole opened his first store on Columbus Avenue in Manhattan. Kenneth Cole won Cutty Sark Men's Fashion Award for Outstanding Accessory Design in Men's Footwear.
1986: Topical advertising of Imelda Marcos‘s shoe fetish.
1987: Kenneth Cole and father sold family’s shoe import business.
Late 1987‐Early 1990s: KC shoe lines developed into 3 lines: Kenneth Cole, the most expensive priced at approximately $100 a pair (in 1996); the Reaction brand, priced around $60 to $80; and Unlisted, considered a "utility" product selling at $30 to $50.
1994: Kenneth Cole made IPO, opened its Bloomingdale's Manhattan flagship concept shop.
1996: Kenneth Cole made extensive international expansion.
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Industry – Women Footwear: TODS
Expansion into Hong Kong, Japan and Korea, IPO with acquisition of Hogan and Fay brands
Launch leather goods and travel articles. TDO’S brand cooperated with Ferrari.
Acquired Roger Vivier brand and decreasing margin due to labor cost and more debt servicing for expansion. Major Asia growth (40%+) , accounts for 14% of total revenue.
Sales stagnant due to general economics and strengthening of EURO
Restructuring for better focus on Asia penetration
Continuing expansion in Asia, Hogan accounts for more than 30% of total revenue. Substantial drop of tax rate(42%‐
>35%) as change made by Italian government
With continuing growth of Hogan, Tod’s line first time below 50%
Major push in China and India. Global recession led small SSSG but still growth.
Product: Classic style and emotional, brand loyalty, repeated buying.
Moat: The classic casual yet comfortable style makes a unique positioning for TODS brand.
Strategy: Concentration on development of classic lines, to avoid competition on volatile fashion.
Structure: Ride on Italian Chic particularly in leather goods to export to all the world.
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Industry – Sports Footwear: TODS History
Early 1920s: Diego Della Valle's grandfather, Filippo founded a small shoe factory in Italy.
1978: Diego dropped out of college and started JP Tod’s with his father’s backing, later Diego entered family company and led the business.
Late 1970s: Gommino casual loafer (‘Rubber’) was introduced which was very comfortable, quietly stylish and became one of the company's best‐sellers.
Early 1980s: Diego used old Hollywood stars such as Audrey Hepburn in advertising to make it seem as if it had been around forever, and encouraged sales by giving shoes to Italian celebrities.
1984: Opened the first retail store in Italy dedicated to sales of TOD’S and Hogan products.
Late 1980s: Gradually outsourced manufacturing, focused on design, marketing and distribution.
1986: Expansion to US with retail store opening.
1989: Began producing and distributing apparel line.
1991: JP Tod’s acquired by family business “EMA S. r. l” and changed the business name to TOD’S.
1994: Expansion to France with retail store opening.
1997: The first collection of handbags was launched from simple to elegant lines. Princess Dinna became a big fan of the D bag, which made wide following around the world. Expansion to Germany with retail store opening.
2000: Hogan and Fay, which were once controlled by the Diego Della Valle family, were acquired by TOD’S. Opened directly‐owned store in Hong Kong, franchise stores in Japan and Korea.
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Industry – Sports Footwear: TODS History
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Industry – Functional Footwear: GEOX
Flagship store with future interior design opened in Madison Avenue, New York
Expansion of retail stores worldwide, though multi‐brand channel dominates. New NET technology developed to make sport footwear breathable
Mono‐brand shops passed 1000, but margin continued to erode due to high SG&A and R&D
Sales slid, specially in multi‐brand cha‐
nel as competition in the non‐owned channels
Revenue growth at CAGR 35%+ while net income only at CAGR 15% due to compressing margins
Product: Both functional and fashionable, repeated buying for fashion elements but not for functional ones.
Strategy: To put the function of “breathable” feature in tandem with fashion elements, using mostly multi-brand
channel for distribution though this strategy decreased the brand image and gave away control to 3-party
operators.
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Industry – Sports Footwear: GEOX History
1990s: Mario Moretti Polegato while jogging in Nevada's hot desert, found an idea to cut holes in the soles of his shoes with a Swiss Army knife to leat heat go, thus created “breathable shoes”.
1995: GEOX founded by Mario Moretti Polegato, the brand was created from a mixture between the Greek word “geo” (earth), and “x”, a letter‐element symbolizing technology.
1999: GEOX patented the idea to apparel. Applying the technology to jackets of all kinds, thus created “breathable apparels”.
2000: GEOX invented and patented another novelty waterproof leather for heather footwear.
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Industry – Women Footwear: Himiko (in JPY)
Focus on ladies below Competition from multi‐
27 with 5 brands. Affected by internet bubble side: 1) low price shoes Network mainly in and price pressure by import, from Asia; 2) Apparel department with sales decrease and inv maker entry; 3) Int. brand only 4 self‐owned impairment increase.
entry; 4) Dept ‐> Outlet
stores.
Outsourcing push after Kobe Sale‐off real‐estate Continuing decrease of sales earthquake. Increasing sales investment and one due to competition and also as dept sales rebound. Also time gain of 2Bn. Low due to the shrinking youth improving margin due to price shoes from population in Japan versus Depression after the better MIS/Inv management.
overseas (particularly Himiko’s positioning at bubble made China after WTO) put young consumers. Outdated general pressure on pricing.
design also contribute to the consumption shrink decllne.
and underperforming results
Japan stock market bubble bursted, but Himiko managed to post good result due to improving GPM and SG&A cost cut
Product: Classic style and health-style , repeated buying.
Strategy: Failure in 1) correct positioning brands with changing demographics and market competition dynamics;
2) slow response to fashion trend change and low-cost competition.
Structure: Economic integration particularly China’s WTO entry and International brands’ global expansion put
great pressure on the mid-price level local brands. The mis-match of brands positioning and Japan’s
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Industry – Sports Footwear: Himiko History
1973: Chibata Ichi (柴田一) founded a shoe wholesale business in Tokyo.
1976: The wholesale business is transferred to a joint stock company known as Himiko Co Ltd.
1980: The first retail store in Harajuku, Tokyo was openned.
1988: Himiko expanded its business to Osaka.
1990: Himiko made its IPO, all 6of its brand (Himiko, Elegance Himiko, PRESSEE Himiko, WANO NANO Himiko, C.M.C, mon avis) are aiming at young girls between 18 ‐ 27.
1991: Himiko established a new brand “Camui”, targeting heath conscious women consumers, stopped underperforming men’s line.
1992: Himiko established new management system with store support scheme, shop owner, shop master, responsible for shop management and profit sharing.
1996: Adopted a one‐brand shop approach for expansion. Elected as 3rd place favorite brand of lady shoes in Japan, only after Prada and Ferragamo.
2006: Queen’s Himiko (specialty store for large size) store was opened in Harajuku, Tokyo.
2007: Introduced mixed‐brand shop the first time into the retail network.
2008: Introduced a new brand “Popotoe‐co”.
2011: Introduced a new brand “TAKERU water massage” and “UMASHI water massage” to aim at consumers conscious at health.
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Industry – Functional Footwear: CROX (in USD)
Continuing reposition with Fast expansion of models Crocs Work/Rx /Ocean to 270 in 2009. Also Minded/You by Crocs to licensing with Disney and attach niche market Warner with popular suitable for Crocs relevance.
characters. Introduced more design team and fashion elements.
Declining demand (more Initial results achieved Sales trend slowed down in so in US and EU) with from turnaround action the Q108 and turned in the lower ASP/margin due to in 2008 to 2010: reivse Q208 due to 1) competition Inv cost marked down. production plan, work from similar products with Major cost reduction force cut, inv marked lower price; 2) less demand plan and old inv disposal down etc. Rebound of as product reached plan. Decline in margins and improved maturity stage; 3) general wholesale deeper than sales.
econmics
retail.
Fast international expansion (7% to 48% from 2005 to 2007 as of total sales) mainly through wholesalers. Introduction of apparel line.
High demand for novel crocs shoes made the sales skyrocketing from 2004 to 2006. High margin due to relative high demand and outsourcing
Expanded the product line from 11 to 25
Product: Classic style and emotional, brand loyalty, repeated buying.
Strategy: Functional, yet not accepted in fashion world,
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Industry – Sports Footwear: CROX History
1999: Crocs was founded by 3 friends in Florida.
2002: Crocs began marketing and distributing footwear products in the U.S. under the crocs brand, while completing modification and improvement of a shoe produced by Foam Creations, which originally was developed as a spa shoe.
2003‐2004: Crocs to capitalize on consumer interest, expanded sales force, strengthened relationships with a range of retailers in the U.S.
2004: Crocs acquired Foam Creations, including its manufacturing operations, product lines and rights to the proprietary closed‐cell resin used in our products.
2004: Crocs made international expansion, broadened production capacity, outsourced overseas.
2006: Crocs filed complaints against fake Crocs shoes manufactured worldwide.
2006: Crocs acquired Jibbitz, a manufacturer of popular accessories that snap into the holes in Crocs shoes, for $10 million.
2007‐: Received continious critics from fashion industry for its unappealing look.
2009: Crocs changed marketing direction, away from fashion and towards comfort, betting that their long‐term prospects would be appealing to workers who spend a lot of time on their feet. 2010: Time Magazine listed Crocs as one of the world's 50 Worst Inventions.
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Industry – The Luxury Industry: Growth
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Industry – The Luxury Industry: Structure
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Industry – The Luxury Industry: Structure
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Business – The Luxury Industry: Activity
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Business – Ferragamo
Focus on the Classic niche which is less impacted by volatile fashion trends and act as
more of fashion setter rather than trend follower.
1)This position implies Ferragamo competes on quality and brand rather on supply chain mgmt
2)Inventory day shall be longer than those operate as fashion follower (SPA model)
Priceless reputation as Best quality shoes demonstrated by consumers’ perception
1)This gives Ferragamo the most important Moat shrugging off competition
2)Ferragamo still faces nascent designers’ challenges, though too early to tell and the scale is small
Concentration on footwear and leather goods which has frequent repeated buying and
highest growth potential among luxury items.
1)Ferragamo has one of the best positions among luxury houses in terms of products
2)Its footwear line grows faster than other lines, reconfirming its core competences
Diverse channel built around the world, good presence in travel-retail and well-balanced
revenue composition.
1)Well positioned for Asian consumers, strong presence in travel-retail capture more opportunities
2)Buying back franchisees is both sign of confidence and source of revenue recognition/Buying back
minority interest in subsidiaries implies more EPS attributed to shareholders.
Still large room to improve its results given current conservative operation.
1)Cost base (particularly sales and distribution cost) has very large room to depress
2)Sub-brand and branching into other lines have great potential
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Business – Operation According to Positioning
Business – Operation According to Positioning
Classic Luxury (Fashion Setter)
SPA Model (Trend Follower)
Classic Luxury Houses Set the fashion in fashion weeks (runway shows) and those shows are 6 ~ 9 months earlier than the target seasons, production only commence after the show therefore much longer inventory days (generally above 180 days) for luxury houses. In contrast, SPAs don’t run fashion shows and produce according their perceived trends and consumer preferences, therefore saving the 6 months of season lag.
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Business –Operation Contrast (Luxury v.s. SPA)
Classic Luxury (Fashion Setter)
Zara: Continuous Trend Following and Production/Distribution
SPA Model (Trend Follower)
Identify Trend Purchase Production
Distribution
& Sales
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Business – Consumers’ Evaluation (US)
Source: Yelp.com, consumer reviews are analyzed only for self‐operated store
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Business – Consumers’ Evaluation (Europe)
Source: Qype.com/Yelp.com, consumer reviews are analyzed only for self‐operated store
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Business – Consumers’ Evaluation (China)
Source: Dianping.com, consumer reviews are analyzed only for self‐operated store
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Business – Consumers’ Evaluation (Reviews)
When Compared with Gucci and Prada for shoes: A: I've owned all 3 brands you mentioned. I hate Gucci shoes....but I hate Prada even more. You’re just paying for a name on these....very average quality. Ferragamos happen to be my favorite brand of shoe.....I’ve never owned a pair that were less than terrific.
B: Ferragamo by far has the best of the three. I can't speak to as much Gucci, but Prada has been nice but probably not the same level of quality CONSTRUCTION I find with SF. Gucci seems to be excellent to my eye, but the price point is likely inflated.
C: I love Ferragamo's leather and craftsmanship when it comes to making pumps, heels or leather hand bags. Surprisingly, the price has remained affordable, unlike pricey Manolo's or Gucci's (which still can hurt your feet)
D: The best is Ferragamo without question. I completely agree with Ridefar that my Prada shoes are comfortable but wear out more quickly. I have two pairs of Gucci dress shoes and they just okay. But, without hesitation, my favorite shoes are my Ferragamos. I have several pairs, dress and casual, and they are all extremely comfortable and long lasting.
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Business – Consumers’ Evaluation (Reviews)
中国消费者的评价
想买婚鞋,于是拖着朋友一起来帮我选,朋友说我很傻 这鞋子都差不多 没必要那么贵,我说
你错了 兜一圈就知道差别了,果然不出我所料 看了菲拉格慕的做工和穿,脚上的感觉,再去
试试二线商场里的鞋子,终于知道那么贵是什么原因了。
在90年代初期有一部红遍全中国的电视剧〈北京人在纽约〉,其中有一集就有一个镜头,姜
文决定自己打拼做衣服的时候,他就在曼哈顿独自走进了一间奢侈品专卖店,镜头最后就拉
到这家店的名字Salvatore Ferragamo!!!!当时我们隔壁邻居是个资本主义老华侨,就在
那边对我们说,这个牌子在国外老举老举老举老举额!!!!
就设计感,实用性,舒适度来说F的鞋子要远远高于LV Gucci等法国品牌. 在国外时听说每个幸
福的女人都该拥有一双小F的鞋子. 我是忠实粉丝啦,从在国外时就开始买. 个人觉得因其在
国内的知名度没有LV Gucci那么烧包,它在国内卖的价格也相对同国外的比较接近.
F家的忠实FANS,前后买过近30双,算是最早喜欢上的名牌了,后后
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Business – Consumers’ Evaluation (DLG Report)
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Business – Consumers’ Evaluation (DLG Report)
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Business – Consumers’ Evaluation (DLG Report)
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Business – Consumers’ Evaluation (DLG Report)
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Business – Product Mix: Strong Core Footwear, Expanding into Other Lines
Business – Product Mix: Expansion Steps
Ferragamo’s shoes have a long respected history compared to Prada’s entry in shoes in 1984.
Leather goods become also a large source of revenue and growth driver.
Fragrances are gaining more consumers’ favor.
Eyewear and Watches are licensed to Luxotica and TIMEX respectively. 施维 Email: [email protected]
Business – Geographic: Strong Growth except Japan
Business – Geographic: Major Countries
Both Greater China and US have strong growth since 2009 though the risk is also concenrated.
Japan has been flat even negative since 2007.
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Business – Network: Established Footprint and Recognition in West
There is 384 stores in developed market, compared to 196 stores in emerging market.
Ferragamo is also opening stores in less explored developed market, particularly in US.
As of H1, 2011, there is 316 DOS (Retail Channel) and 270 Third Party Operated Stores (TPOS), located in the Department Stores, Travel Retail and Duty Free Channel.
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Business – Network: Early Mover Expansion in Emerging Market
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Business – Network: Expansion in Emerging Market Using Partnership
Ferragamo has historically grew through partnerships with local distributors, mainly in Asia. In relation to these partnerships, the Shareholders Agreements contain provisions on put and call options which shareholders can exercise under certain conditions.
The subsidiaries affected by these agreements are Ferragamo Japan K.K., Ferrimag Limited, Ferragamo Moda (Shanghai) Co. Ltd., Ferragamo Korea Limited, Ferragamo (Malaysia) Sdn Bhd, Ferragamo (Singapore) Pte. Ltd., Ferragamo (Thailand) Limited, and Ferragamo Retail India Private Limited.
Ferragamo bought back Swiss partnership back in 2010, and have call option of Indian partnership till 2016. It is to call back partnership minority interest in South Korea, Singapore, Malaysia, Thailand and Indonesia (all 50%/50%) from Trinity Group from Dec, 2012.
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Business – Network: Expansion in Emerging Market Using Partnership
Ferragamo Japan Third parties stake: 29% Contribution to FY 2010: €0.704m income to minorities Contractual agreement: Put option held by minorities subject to non‐restrictive exercise conditions Recognition of the option on balance sheet: YES P/value: €3,050k on Dec 31, 2010, as the result of a contractual formula Ferragamo Retail India Third parties stake: 49% Contribution to FY 2010 : ‐€0.087m income to minorities & ‐€0.087m minority interest Contractual agreement: Unconditional call option held by the Group Recognition of the option on balance sheet: YES P/value: € 567k on Dec 31, 2010, as the result of a contractual formula Ferrimag Third parties stake: 50% (Partner ‐ Imaginex (Mr. Peter Woo) Contribution to FY 2010: €8.401m income to minorities & €25.617m minority interest Contractual agreement: On Feb 28, 2011 the parties agreed that on Jan 1, 2013 the Group will acquire a 25% stake of Ferrimag at the price of € 36.8m Recognition of the option on balance sheet: From Mar 31, 2011 (exclusively regards the 25% stake) P/value: €36.8m on Jan 1, 2013 for 25% Ferragamo Moda Shangai (FMS) Third parties stake: 50% (Partner ‐ Imaginex (Mr. Peter Woo) Contribution to FY 2010: €0.539m income to minorities & €1.276m minority interest Contractual agreement: On Feb 28, 2011 the parties agreed that on Jan 1, 2013 the Group will acquire a 25% stake of FMS at the price of € 3.2m Recognition of the option on balance sheet: From Mar 31, 2011 (exclusively regards the 25% stake) 施维 Email: [email protected]
P/value: €3.2m on Jan 1, 2013 for 25% Business – Network: Expansion in Emerging Market Using Partnership
Ferragamo Korea
Third parties stake: 50% (Partner ‐ Li&Fung Group)
Contribution to FY 2010: €3.744m income to minorities & €16.596m minority interest
Contractual agreement: Cross put/call option agreement on the whole stake of Li&Fung; the exercise
is conditioned to the occurring of one of several events, mainly: change of control, contractual nonfulfilment,
expiration of the distribution agreements fixed on Dec 31, 2012
Recognition of the option on balance sheet: NO
P/value: Net depreciated asset value
Ferragamo Singapore
Third parties stake: 50% (Partner ‐ Li&Fung Group)
Contribution to FY 2010: ‐€0.413m income to minorities & €1.816m minority interest
Contractual agreement: Cross put/call option agreement on the whole stake of Li&Fung; the exercise is conditioned to the occurring of one of several events, mainly: change of control, contractual non‐fulfilment, expiration of the distribution agreements fixed on Dec 31, 2012 Recognition of the option on balance sheet: NO P/value: Net depreciated asset value 施维 Email: [email protected]
Business – Network: Expansion in Emerging Market Using Partnership
Ferragamo Malaysia Third parties stake: 50% (Partner ‐ Li&Fung Group) Contribution to FY 2010: €0.190m income to minorities & €1.992m minority interest Contractual agreement: Cross put/call option agreement on the whole stake of Li&Fung; the exercise is conditioned to the occurring of one of several events, mainly: change of control, contractual non‐fulfilment, expiration of the distribution agreements fixed on Dec 31, 2012 Recognition of the option on balance sheet: NO P/value: Net depreciated asset value Ferragamo Thailand Third parties stake: 50% (Partner ‐ Li&Fung Group) Contribution to FY 2010: ‐€0.073m income to minorities & ‐€0.023m minority interest Contractual agreement: Cross put/call option agreement on the whole stake of Li&Fung; the exercise is conditioned to the occurring of one of several events, mainly: change of control, contractual non‐fulfilment, expiration of the distribution agreements fixed on Dec 31, 2012 Recognition of the option on balance sheet: NO P/value: Net depreciated asset value
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Business – Network: Expansion in Emerging Market Using Partnership
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Business – Network: Department Stores
Partnered with the most prestigious department stores around the world:
US: Neiman Marcus, SAKS fifth Avenue, Nordstrom; UK: Harrods
France: Lafayette, Printemps;Germany: Kaufhaus des Westens; Italy: la Rinascente, Russia: GUM China: Lane Crawford; Australia: David Jones; Japan: Isetan, SOGO, Seibu
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Business – Network: Travel-Retail Stores
Ferragamo’s sizeable presence (a total of 147 POS in major airports worldwide, with 6 are directly operated) in travel‐retail, located in the major airports around the world is poised to benefit from the fast growing air‐travellers. According to UNWTO estimates, international travel is expected to grow significantly in the next few years, reaching 1.6bn travelers in 2020, from the current figure of some 1bn. 施维 Email: [email protected]
Business –Ferragamo Logistic
Raw materials are stocked in Osmannoro (Florence), all finished products are placed in the Prato warehouse (for RTW) and Osmannoro (for all other product categories), from where delivery to the final destination.
Seven main regional warehouses/distribution centres,1 in US (Secaucus, New Jersey), 1 in Mexico City (Mexico) and 5 in the Asian Pacific areas (i.e. Shanghai, Seoul, Hong Kong, Tokyo and Singapore). Delivery Time: 1‐4 days to Europe by land transport, 3 weeks/3‐4 days to the US by ship or air, 5‐6 days to Asia by air. 施维 Email: [email protected]
Business – Competing with Other Footwear Makers and Luxury Names
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Business – Operating Comparison with Competitors
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Financials: Sales Projection
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Financials: Sales Projection
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Financials: Cost Structure
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Financials: Cost Structure Compared with Peers
Ferragamo “squeezed” consumers’ wallet the least with lowest gross margin, which is not to say it has not comparable pricing power as indicated by favorable reviews of consumers.
The biggest operating cost component is the selling and distribution cost which shall be compressed (so is Prada) when more efficient management comes in after IPO.
Ferragamo has a relatively high portion of minority interest to share the earning power of the group, compared to peers, which is to be gradually (expected till 2013) bought back and shall be accretive to shareholders’ EPS.
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Financial: Room to Improve
Top Line Growth
‐ Leverage on name to develop secondary line (less expensive or targeted younger consumers) ‐ Selective expansion in non‐present regions/cities with potentials (US, Asia, particularly)
‐ Optimization of the product mix with leverage on competitive shoes
‐ E‐commerce : already in place in US and EU, will launch in Korea, Japan, other Asia and LatAm
Margin Improvement
‐ Compress operating expense particularly the selling and distribution cost (6~8% of sales) ‐ Move some of the non‐core production process to regions of lower labor
‐ Better product offer/mix to improve the gross margin
Return Shareholders
‐ Buying back minority interest will boost the shareholders’ EPS by around a 25% increase if all bought back.
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Finanial: Room to Improve - From Family to Public Company
Since IPO in 1993, Hermes improved its margins significantly – the net profit margin tripled during 17 years while operating margin also doubled.
Company’s motivation under family control compared with public investors is different. Outside investor create more push for financial returns thus operation improvement. Family is concerned with name and ownership.
Hermes also went through turbulent times when revenue growth became sluggish and profit might turn to loss.
However, when Hermes only grew the top line 657.4% during 1991 to 2010, its net profit grew 2288.0%. That is to say a CAGR of sales at only 9.9% turns into a CAGR of net profit at 16.9%.
The irreplaceable brand in the niche contributes to this long‐last revenue growth and better management generates leverage on bottom line.
Valuation
All Valuation as of 5th, Jan, 2012.
Considering historical PE of comparable peers (Hermes, Christian Dior, TODS), any price below 18xEPS 2012 (below 10 EUR) can be reasonable for entry though pending EU debt crisis might create even lower entry opportunities.
If at historical lowest PE for comparable peers around 13~16x, then a price of 7~8.5 might be possible. However, even if one pays a little more for the initial entry price say around 10~12 EUR to accumulate, Ferragamo should pays buy‐and‐hold investors well off in the long term.
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Recent Update
• Fashion Shows and Glamorous Events across the globe: New York, Moscow, Beijing, Seoul, Hong‐Kong and Singapore
•Launch of Fine Jewelry collection in a very limited number of key locations
•E‐commerce extension to Turkey, Ukraine, Korea (direct) and China (thru’ partnership)
•Marlin Project (SAP Integration) startup in Hong Kong and Taiwan
•New Hong Kong warehouse to serve as hub for Asia Pacific markets
•End of in‐direct sales through Trinity’s partnership from 2012.
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