PARIS — Forget about the numbers.
This story first appeared in the December 9, 2002 issue of WWD. Subscribe Today.
Luxury shares have been in the news a lot lately, both because of their underperformance and LVMH Moët Hennessy Louis Vuitton’s $100 million lawsuit against Morgan Stanley. But industry executives claimed, at least for the record, that they don’t sweat their share valuations on a day-to-day basis.
Ralph Lauren says he can only take so much finance talk — even if going public might have helped him grow Polo Ralph Lauren into a multibillion-dollar global fashion powerhouse.
“I don’t even look at the stock market every day — unless someone points out to me that I should look — because I’m here for the long term,” Lauren told an audience of about 400 industry professionals at the International Herald Tribune fashion conference here, which closed Friday. “[The stock price] has nothing to do with how good your company is.”
The sentiment was echoed repeatedly at the conference.
“I agree with him,” Burberry chief executive Rose Marie Bravo told WWD. “I don’t look at the stock market every day, either. You want to focus on the business, and revenues and profits are not necessarily the whole picture. You’ve got to keep your eye on running the business, rather than something you may or may not have any control over.”
At a time when stock ratings provoked a major luxury player, LVMH, to take legal action against a major bank, others are saying an inordinate focus on financial matters is leading the industry astray.
“I don’t change the strategy of my group for the market,” Diego Della Valle, chairman and chief executive officer of Tod’s SpA, said in an interview. He described analysts’ ratings and equity research as “important,” but warned they can lead companies in the wrong direction. For example, he suggested brand extensions, while fueling sales, can be a dangerous path.
“Today, there is much confusion in the market,” he said during his presentation. “Everyone makes sunglasses, perfumes, chairs, even light fixtures.…But what if the light is not the best and the watch is not number one? I think this is a wrong strategy.
“We speak too much about the volume of business, money and acquisitions,” he continued. “At Tod’s, what we put at the center of our strategy is the production. At the end of the day, we are our product and that’s where we are focused 100 percent of the time.”
Sir Paul Smith, who has resisted the urge to go public or sell his privately owned, $300 million firm to a larger group, couldn’t agree more.
“In many ways, we are a lot closer to the market than a lot of the public companies are allowed to be,” he said in an interview. “They’re under constant pressure to expand.…Now it’s almost like the business comes first — to heck with the products. I literally work in my shop on a Saturday. If I want to paint my walls white, pink or green, I can.”
Smith characterized the LVMH suit against Morgan Stanley as a symptom of the problem. “It looks like it’s a nervousness,” he said, “sort of bully tactics.”
By contrast, Smith said he does not read luxury analysts’ regular reports on the health of the sector so as to not be influenced. “When you’re allowed to be yourself and work on your instincts, the results can be better,” he said.
During his presentation, Smith backed up his claim by noting that his sales in 2002 are up about 20 percent in Britain and 5 percent for the world.
Even Patrizio Bertelli, chief executive of Prada Group, referred to a “lack of trust” between the financial system and luxury companies, which is “unsettling” for the industry.
The meaning of luxury during tough times was another overriding theme at the conference, with many speakers calling for a return to a more hands-on, passionate approach to the business. They also said luxury products must offer more than quality, exclusivity and status — and also appeal to consumers’ practical, emotional and aspirational needs.
Lauren recalled that one of his early splurges was on a secondhand Morgan, a British sports car with a strap on the hood. “I felt like a king. I didn’t need a Rolls-Royce. I didn’t need glove-leather interior. I liked the strap on the hood,” he said. “Luxury has to do with your taste.
“My product is not about my name. I don’t believe it’s the name that sells the product.”
Della Valle, whose Tod’s brand is famous for its driving moccasins and other footwear styles, said high-quality products that are also “useful” make for a compelling consumer proposition — especially in tough times when people don’t want to spend a lot of money.
With stirring Diamond Trading Company commercials from around the world as his backdrop, executive director Stephen Lussier underscored how tapping into the emotional incentives for buying diamond jewelry helps fuel the $56 billion global trade. Identifying emotional needs and linking them with an innovative product makes for a powerful combination other luxury marketers could co-opt, he said.
Customized and ultraexclusive luxury products — like Gucci shoes and Burberry trenches — was one new tactic frequently mentioned at the conference. But Della Valle argued putting exclusive merchandise in each city represents a more “modern” solution to the worrisome sameness creeping into luxury streets around the world. He said his goal is to have roughly half of the merchandise in each Tod’s store be special to that location.
Even conference host Suzy Menkes, fashion editor of the IHT, recounted her delight upon learning that a pair of gold shoes she bought at Prada’s SoHo flagship were only available at that location.
In a thought-provoking and comic presentation, Smith derided such realities as “the corporate rollout” for contributing to what he called “luxury overload.” He said fashion products and brands are simply too ubiquitous and available and “it’s pretty obvious the trade is going to slow down for some people.”
Smith said manufacturers, and even fashion magazines, are guilty of treading threadbare formulas, which feeds sameness and boredom.
He underscored his point with a slide show of how vegetable vendors in London “merchandised” their tomatoes. One had them tossed carelessly in a bin. Another had them artfully arranged, stems and all, on crumpled tissue paper. “Isn’t that lovely,” he said, praising the latter presentation. “If you can do it with tomatoes, imagine what you can do with the posh stuff.”