COVER STORY
10 hot stories, including Victoria Beckham’s finances and Davina talks fitness and mental health
WHEN VICTORIA BECKHAM opened her September runway show with Stella Tennant in a slouchy white suit, it was hailed as a highlight of London Fashion Week. The designer, who marked a decade in business by showing at home for the first time, won universal praise for her easy-to-wear tailoring and luxurious separates. Her designer credibility was then cemented when she was nominated for British Womenswear Designer of the Year at The Fashion Awards last month.
But the company’s latest earnings report reveals it lost £10.2m in operating costs in 2017 – and continues to lose £28,000 a day. In short, the company is yet to turn a profit. On the surface, this looks bad – certainly, headlines were quick to point out Victoria’s ‘failure’ when figures broke – but anyone familiar with the challenges of building a luxury brand knows that it takes a lot of time and investment to start turning a profit.
Some of the biggest designers have found themselves running at a loss. Their tactic has been to sell out to luxury goods conglomerates: JW Anderson sold a minority stake to LVMH to grow his business, Christopher Kane sold a majority stake to Kering, while Proenza Schouler reportedly lost the chance to be acquired by LVMH because it just wasn’t profitable enough. Erdem, which launched in 2005 and has never taken investment, only opened its first store in 2015.
So what’s Victoria’s plan? She’s had to plough money into retail spaces, staff and manufacturing. And because she has just two stores – in London and Hong Kong – she’s reliant on a wholesale network of 400 boutiques and department stores. But that isn’t enough; she has spent the past 12 months arming herself with the tools to scale her business, with a goal of making it profitable within the next two years. This shifted into high gear in December 2017, when she secured a £30m boost from Neo Investment Partners, which has also backed leather goods brand Valextra, menswear brand Ami and interiors firm Tom Dixon.
This funding allowed Victoria to make two significant new appointments: a CEO, Paolo Riva, who joined in September from Diane von Furstenberg, and a chairman, Ralph Toledano, also president of France’s
Fédération de la Haute Couture et de la Mode, and was previously CEO at Chloé. ‘ These are challenging times for British luxury brands, such as Victoria Beckham, who have the added pressure of currency fluctuations and losses on the back of the weak pound versus the strong US dollar,’ says Fflur Roberts, head of luxury goods at market research company Euromonitor International. ‘ This will have impacted sales. While wealthy tourists flocked to London to benefit from the favourable exchange rates in 2017, numbers started to dwindle in 2018. Rents are at an all-time high and operational costs are on the rise.’
Still, Victoria’s business model is unusual in that she is the brand’s best ambassador. She has shied away from ad campaigns; instead relying on the power of her own brand to promote her designs. These days she’s only seen wearing her own label; when she attended Prince Harry and Meghan Markle’s wedding, she wore one of her dresses (£1,495), prompting it to sell out.
Last year, Victoria’s e-commerce site was also redesigned and fans can now have her designs shipped to 120 countries. She also entered into a partnership with Reebok and, most recently, the brand announced a new eyewear licensing deal with Marchon. There are also rumours that Victoria is planning a beauty line, after the success of her Estée Lauder collaboration. But that’s not all. Sources say Victoria will continue to nurture department store relationships, but will also invest in more standalone boutiques of her own.
Despite the global retail climate, Victoria will take comfort from the fact that sales increased by an impressive 17% in 2017, thanks in part to collaborations with US chain Target and the Estée Lauder make-up collection. That figure will have likely grown last year too as the company’s profits begin to outweigh the losses.
Still, reducing losses remain important to VB and her senior management team, who say their long-term strategy involves ‘rationalisation of costs’. But for his part, CEO Riva remains optimistic. ‘I’ve been excited by what I have seen since joining,’ he told Grazia in a statement. ‘It has a powerful, unique brand with a great team and great international potential. We will continue to invest in growth markets such as the US and Asia while also ensuring we have the right strategy to ensure profitability over the medium term.’
As Victoria herself said in September, ‘I’ve got my foot on the gas.’