The most valuable and dynamic fashion and beauty companies in the world are either one or the other.
That is one of the key takeaways of the WWD Global Stock Tracker, which launched on WWD.com Wednesday and puts 100 of the most important fashion, retail, luxury and beauty stocks in one place and — after a currency translation — on the same playing field.
Millions of investors vote every day — from New York to Hong Kong to Paris — collectively deciding who’s on their way up and who’s on their way down. It’s a never-ending distillation of everything that makes up a business, from branding and distribution to management and marketing.
The verdict? Competition is fierce and sheer size offers efficiencies of scale and market might that helps the big stay big and grow bigger — albeit at a slower pace than some of their scrappier competitors. There are a host of companies that still have speed and momentum on their side, from Michael Kors Holdings Ltd. to Under Armour Inc., that are being richly rewarded by investors.
By market capitalization — the value of all of a firm’s outstanding shares at the current price — Wal-Mart Stores Inc. is the most valuable company playing in the fashion sphere, weighing in at $247.09 billion. Beauty giant Procter & Gamble Co., a big Wal-Mart supplier, ranks as number two, with a market cap of $217.99 billion. Then there’s a big fall-off in terms of size. L’Oréal SA comes in at number three at $104.33 billion. (Market caps of companies trading on foreign exchanges are listed in current U.S. dollars for comparison sake.)
As the rankings move from the truly gigantic to the intensely large, a clear divide in customer base emerges — reflecting the squeeze felt by the middle class.
Fashion’s largest and therefore most successful players are going after the two ends of the price spectrum. The tendency is for these companies to zero in on the luxe consumer or remain laser focused on the low-income shopper.
“The hollowed-out middle class is an important part of this story,” said Jonathan Low, founding partner at Predictiv Consulting, noting that household incomes for many have been stagnant for decades.
The trend is made most visible by LVMH Moët Hennessy Louis Vuitton and Zara parent Inditex, which are vastly different companies playing in vastly different markets, but when it comes to overall value, investors view them as nearly identical.
They round out the top-five most valuable companies in the Tracker with LVMH at $96.54 billion, and Inditex at $95.12 billion.
It’s no accident that these companies find themselves on top of the heap. To be that big, a firm needs to do many things and be fairly good at all of them: It needs to be global and focused on the nuts and bolts of operations to reliably get product into the hands of consumers.
“These are all companies that have been around for a long time, for the most part, and they’ve established a huge base business, which has a bunch of assets that are going to generate value,” said Todd Hooper, partner in the private equity practice of A.T. Kearney.
Those assets include stores, brands and product development capabilities, he said.
“Broadly speaking, these valuations are a fair long-term assessment of…the neighborhood that these businesses should be valued in,” Hooper said. “The market is pretty smart at understanding what’s driving growth and what’s driving margins.”
While market cap is not the same as market share, with the former referring to a company’s value and the latter referring to how strong its positioning is in a particular area, overall stock market value does tend to hew closer to a company’s sales or sales trend than to its earnings.
Kate Spade & Co., for instance, logged net earnings of just $73 million last year. But investors chose to focus on the 61 percent sales growth at the company’s namesake brand, while pushing it to a market cap of $4.7 billion.
Growth is the story most companies sell to investors, but often it’s just a different spin on the story the company is selling consumers.
The top and quickly growing companies in the Tracker have clear brand positioning — which analysts said is perhaps the most important variable for investors.
People putting their money to work in the markets are looking for growth and security and that’s what they get in a brand, said Christine Chen, senior investment analyst at Ashfield Capital Partners.
“You’re selling the brand and the brand is selling the dream — that creates the moat [around a business],” Chen said. “Wall Street wants that moat. Wall Street values brand and growth and the two are intertwined. You can’t have growth if you don’t have a story to tell. Look at those that have fallen the hardest, it’s ones who don’t have a moat or didn’t protect that moat.”
This impulse to protect a brand has caused many companies to branch out and emphasize their own stores.
In honor the @CFDA’s announcement of @iamnaomicampbell receiving the Fashion Icon Award at the 2018 #CFDAAwards, which will take place on June 4, here’s a #tbt of the supermodel on @michaelkors’ runway in 1991. #wwdfashion #wwdarchive (📷: George Chinsee)
“I was making the guacamole when my scout saw me,” says model @stuckinteenage on being discovered just six months ago while working at @chipotlemexicangrill. Since then Williams has signed with @dnamodels, walked in her first show at @calvinklein and landed on the cover of @vogueitalia – a high point of any model’s career. To read @lisajlockwood’s full interview with the model on her experiences thus far, head to WWD.com – link in bio. (📷: George Chinsee)
“I love the idea of dialogue, period. It’s where I’ve always gotten my inspiration from: hearing other women speak, their journeys and their paths,” said @hereisgina, who delivered the keynote speech during @sxsw for @createcultivate in partnership with @fossil. For her two panels, Rodriguez chose female empowering, female-led and female entrepreneurs to focus on. Head to WWD.com to read more about her thoughts on Time’s Up, growing up in a family of women and why we “need a girls’ club.” #wwdeye #sxsw (📷: @jgreenery)
Leading luxury brand are shaking things up to keep up with streetwear. Case in point: the arrival of @mrkimjones as artistic director of @diorhomme. Jones, who succeeds @Kris_Van_Assche, is seen as one of the handful of designers who can actually straddle the luxury and streetwear worlds — which could lead to even more changes at established brands. What could this mean for the rest of the menswear landscape? Head to WWD.com to find out what experts predict #wwdfashion (📷: @franckmura)
“It’s like buying groceries. You’re going to buy the best mango, the best mozzarella, the best things. You have to, or others are going to take it all,” said @gabrielahearst on why she uses only the finest fabrics. Last week, Hearst received her first @cfda nomination for Womenswear Designer of the Year, and earlier this month she opened a permanent showroom in Paris. To read @jessiredale’s interview with the designer and find out why this is shaping up to be a big year for her, head to WWD.com. #wwdfashion (📷: @francoisgoize)
“It’s an interesting thing, playing a younger version of your mother. It’s an interesting concept. I adore my mom and love her in every capacity, but it was just something that had never crossed my mind,” says @anniemstarke on playing a young Joan Castleman in “The Wife.” The same role will be played by her mother Glenn Close. Read more about her growing up in the film industry as the daughter of producer John H. Starke and Close and what she has planned for the future #wwdeye (📷: @nataliamantini)
@asics is launching a new streetwear sneaker inspired by its latest ambassador, @steveaoki. The Hyper-Kenzen x Aoki, which will launch at @footlocker stores exclusively tomorrow, is a slip-on style that incorporates the brand’s proprietary Gel technology through beads integrated into the midsole for comfort and endurance. Read the full story on WWD.com.