There are plenty of worries in fashion — but an economic slowdown is not one right now, according to a straw poll of chief executive officers, conducted by WWD as fashion, retail and beauty companies revealed generally encouraging quarterly reports over the past month.
The economy has been growing at its fastest pace in almost four years, driven in particular by a strong rebound in consumer spending. Economists don’t expect that bright picture to dim anytime soon, especially with the August employment report, released Friday, showing 201,000 new jobs and an unemployment rate of just 3.9 percent.
But there are risks on the horizon — one of the biggest being a Donald Trump-sized game of chicken with the international trading system.
Trump’s protectionist leanings have grown into a trade war between the U.S. and China that so far has seen tariff increases and repeated threats of more to come. If the dispute worsens and other fights with trading partners such as Canada and Europe come to a head, Fitch Ratings predicted the overall battle would knock 0.8 percent off U.S. growth next year.
Then there’s also father time.
The economy has been growing since the Great Recession ended in mid-2009 — a nine-year run that can go for only so long, and has already lasted longer than many dared to hope.
For now, most ceo’s are keeping the prospects of a recession way in the back of their mind and trying to get what they can out of the continuing boom. And they claim that, when the economy does slow, they’ll be ready.
WWD asked each ceo, “How worried are you that a recession is around the corner?” This is what they said.
Fabrizio Freda, ceo, The Estée Lauder Cos.
“I’m not worried that we’re going to see a recession. I personally don’t believe there are the extreme economic numbers to create a recession in this moment around the world, let alone in the U.S. The risks are more the risk of a trade war and potential disruption driven by economic disputes or political issues around the world. Or the political consequences of things like Brexit…or political issues in various countries.…There is a risk [that] those kinds of things reduce the economic growth globally in certain countries. We have worked hard to mitigate the risk of a potential slowdown of the global economy and to create the financial flexibility to continue investing, even in the countries that had to go to a less exciting cycle for a short period of time.”
Victor Luis, ceo, Tapestry Inc.
“We know that the markets will occasionally correct. Would that be 2019 or 2021? I don’t know. At some time that will happen, so we are being prudent in our planning to be prepared for that event.”
Alessandro Bogliolo, ceo, Tiffany & Co.
“Recession is a big word. We have macro economists looking at it, counting out the days of the cycle. I leave it to them to do the forecasting. Our [job is to] do whatever we can to delight our customers [and] have great products.”
Jeff Gennette, chairman and ceo, Macy’s Inc.
“We are preparing for what could potentially happen in the macro environment and that includes tariffs and gas prices. We are always looking at that, but we know what we can control is our strategy. We are a leaner organization so in order for us to respond it’s all about our structure and ability to act with speed. We have a much less layered organization now.”
Morris Goldfarb, chairman and ceo, G-III Apparel Group
“I am not [worried]. We’ve been doing this since 1956. We’ve seen different economies, we’ve seen changes in fashion, we’ve seen unemployment rates at very high levels versus where they are today and we seem to come out OK. If you’re looking at cost of apparel, the area of business that we serve, which is the moderate department store, the product that we produce is probably cheaper today than it was 15, 20 years ago. We believe that we wind up doing OK even in a recession.”
Camillo Pane, ceo, Coty
“Right now, I don’t want to speculate because the only things I can tell you are that we have a global business and you normally don’t have a complete global recession, you have pockets or markets that go in different directions. So by focusing on emerging markets in China in particular, but also the Middle East and some other Asian countries, we have the ability to accept any negative trends that might happen in some of the developed markets. What is important for us is the ability to upset these headwinds with some of the high pockets of growth that we have.”
Fran Horowitz, ceo, Abercrombie & Fitch Co.
“We think the environment is improving out there. We had a solid first half and we’re excited about the back half. We have momentum heading into the back half. We continue to closely monitor the customer for both brands and that is paying off.”
Tarang Amin, ceo, E.l.f. Cosmetics
“I am less worried about a recession coming from a standpoint of our value proposition to the consumer. We’re well positioned, if there was a recession, in terms of the high quality and extraordinary value. I am more worried about tariffs and trade wars and things that get in the way of commerce and people doing business. That’s a huge distraction and all it results in is higher prices for consumers.”
Gary Friedman, chairman and ceo, RH (Restoration Hardware)
“We are in the late stages of an economic expansion, I thought there could have been a recession three years ago and I was wrong. I’m not a financial forecaster. I don’t know. We have a new tax system that has changed what’s happening. You’ve got tax savings and companies with more capital and companies generally allocate capital much better than the government does, to create value and prosperity. That’s why you are seeing unemployment at an all-time low, you’ve got more companies with more capital to invest in growth, that’s something that is very different and can really affect the economy for a while. The other thing that’s very different from the last recession is that you have technology companies with more than $500 billion in market cap. You only had one at the last recession which was General Electric. You’ve got Facebook, Google and Apple, which hit a trillion, and Amazon — all these big companies creating a whole other level of growth and economic expansion and how technology is driving that. If you think about previous economic expansions, whether it was railroads, autos, computers and PCs. This is kind of unlike anything we have seen. [A recession] always comes when nobody knows. You’d think they would have designated someone in the world by now who could tell us what is going to happen, but there is no one. No one knows. Everyone is guessing. Everyone is speculating. All I’m saying is, it’s never like that last time. You have to pray for peace and plan for war.”