Tension and fear grip the luxury world
As the beautiful people flock in for London Fashion Week...
The caravanserai of bosses, buyers, influencers, journalists, models and the rest has swept into town for London Fashion Week (LFW), which begins today.
This year, some designers’ shows will be staged against a contentious background. As David Bowie said, in his song Fashion, this can be a world ‘full of tension and fear’.
As usual, there will be a focus on trends that appeal to the moneyed. But there will be even more soul searching over which British and other luxury clothing, accessory and jewellery brands can thrive in the current tough climate.
The source of anxiety is the slackening of post-pandemic revenge spending on accessories and apparel, caused by higher inflation. The disinclination to splash out among China’s millions of followers of fashion is a greater concern.
Susannah Streeter, of hargreaves Lansdown, comments: ‘China, long the engine of growth for luxury names, has been misfiring. Its economy has been weighed down by sluggish growth, with the fragile property market affecting wealth perceptions and dampening the willingness to spend big.’
Streeter says the fashion industry is crucial to Britain’s economy, supporting 1.3m jobs and contributing about £53bn to GDP.
As a result, hopes will be high at LFW of a change of heart on the ‘tourist tax’ in next month’s Budget. Since 2020, visitors have not been able to reclaim VAT on purchases in the UK. This has deterred about 2m people from coming here and cost Britain £11.1bn a year, says the Centre for economics and Business Research.
Helen Brocklebank, chief executive of Walpole, which promotes Britain’s luxury goods businesses, says ending the tourist tax would earn the Treasury £1.56 in other tax for every £1 refunded in VAT to international visitors, thanks to the economic effects of visitor expenditure.
Even if the Chancellor is listening, fashion faces some unprecedented challenges, embodied by the 27pc rise over the past 12 months in the shares of hermes, the French maker of Birkin and Kelly bags.
Meanwhile, there have been falls of more than 40pc in the shares of three British houses – Burberry, as worn by Leomie Anderson, a model and TV presenter ( pictured), Mulberry and Watches of Switzerland. hermes boss Axel Dumas describes the sector as ‘polarised’ between aspirational consumers and the hugely rich.
The former opt for the catwalk copies on offer at Zara. Another beneficiary has been Uniqlo, part of the Japanese Fast Retailing group whose shares have soared. Meanwhile, among the seriously loaded, demand for hermes bags is undimmed. This week Christian McCaffrey, a San Francisco 49er American footballer, arrived at the Super Bowl with a £60,000 black Birkin. So confident is Dumas, that hermes is set to raise prices by 8pc to 9pc this year.
The luxury goods behemoth LVMH is also optimistic, thanks to its bags and its Sephora beauty stores where the aspirational reach for their wallets. But they are less willing to invest in a Burberry coat or Mulberry bag or Watches of Switzerland timepiece, reserving spare funds for holidays.
This may be good news, as Streeter points out, for essilor Luxottica, the French-Italian owner of Ray-Ban sunglasses, whose shares are 9pc up over a year.
But the altered spending patterns of the aspirational increase the pressure on Burberry whose LFW show is on Monday. Will designer Daniel Lee’s creations have sufficient ‘wow’ to drown out the last month’s profits warning?
One part of chief executive Jonathan Akeroyd’s turnaround plan is the slouchy Knight bag (yours, for about £2,500). In the coming months, investors’ attention will be on the pull of this item - and on the Chinese economy.
LMVH says that Chinese tourists are returning to europe. But inventiveness will be required to lure back these and other shoppers.
Retail consultant Jonathan De Mello says luxury brands are ‘elevating’ the retail experience in New York, London and elsewhere by creating VIP ‘salon’ areas in exclusive stores.
This can boost sales by 50pc or more, especially if there is art on the walls.
Bernard Arnault, boss of LVMH, says it sells culture not handbags.
Since he is the industry guru, perhaps we can expect lots of quirky Britishness at LFW, making shoppers fall in love again with Burberry, Mulberry and Watches of Switzerland.