The Bifurcation of Fashion Is Back With a Vengeance

As fashion month comes to a close, there is little doubt that luxury is thriving. In Milan, Bottega Veneta’s eclectic — and prolific — collection under Matthieu Blazy demonstrated the power of merchandising. In Paris, Miu Miu struck social media gold once again with sequined hotpants and cardigans tucked underneath stockings.

Meanwhile, Prada Group scored an off-the-runway triumph: it announced Thursday that it hit record sales of €4.2 billion euros ($4.4 billion) in 2022. In February, LVMH reported double-digit growth last year, as did Kering, despite troubles at Gucci and Balenciaga.

These are good times for brands at the opposite end of the pricing spectrum, too. Fast fashion chain Mango generated record sales last year, the company said Thursday, while Primark-owner Associated British Foods raised its 2023 outlook after seeing higher-than-expected sales growth.

In the US, off-price giants too are expecting a knockout year as shoppers begin to shift from post-pandemic splurging to bargain hunting. Traffic to stores like TJMaxx, Ross, Burlington Coat Factory and Marshalls spiked in the month of January, according to Placer.ai. Capitalising on this trend, Ross Stores announced this week it would open 100 new locations in 2023.

Where does this leave brands in the middle? Many are finding themselves left out in the cold. Gap Inc., Nordstrom and Macy’s are among the companies that now expect a sales decline in 2023.

In other words, a clear pattern has emerged — one that will define the fashion industry in the months to come. While the middle hollows out, the lower- and upper-end of fashion will flourish.

This is nothing new – the polarisation of fashion has been happening off and on for the better part of two decades, ever since fast fashion brands exploded onto the market. The 2008 recession ignited dramatic growth for off-price players, including TJMaxx- and Marshalls-owner TJX, as well as for upscale labels that played into the “quiet luxury” trend. It also set the stage for the decline for department stores, culminating in the bankruptcies of Sears and JCPenney.

In the last few years, the middle market was able to rally a bit. Department stores like Nordstrom introduced new store formats — such as its Nordstrom Local concept that allows for picking up online orders — that better serve modern shopping habits. Following the pandemic, brands began to open new stores again, reversing the so-called retail apocalypse during which thousands of brick-and-mortar locations shuttered.

But if history is any indication, then the picture may be more bleak for the middle-level retailers than currently projected. Already, in the first two months of 2023, bankruptcy filings among US corporations overall hit the highest volume for any comparable period since 2011, according to S&P Global Market Intelligence.

At the same time, the Great Recession spawned a new mode of off-price consumption: flash sales. Even though the popularity of sites like Gilt Groupe and Rue La La have since receded, they’re proof that times of economic uncertainty are ripe for disruption.

Today, newcomers like Shein and Temu, for instance, are gaining market share. Rental and resale for luxury fashion, too, are slated to grow as price-conscious shoppers begin to trade down, analysts say.

As the post-pandemic spending surge has all but expired, fashion now enters a new era — one defined by growing extremes, austerity for some, and hopefully, fresh innovation.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Prada surpasses 2013 sales peak. The Milanese group, which also owns Miu Miu and Church’s, leveraged a partnership between Miuccia Prada and Raf Simons to generate record sales. Annual revenue rose 21 percent to €4.2 billion ($4.4 billion) in 2022.

Adidas lays out options for unsold Yeezy products. CEO Bjørn Gulden hinted the German sportswear giant could try to sell already-produced sneakers from the collaboration, but may still destroy the shoes. Adidas projects a €700 million ($738 million) operating loss for 2023 — its first negative income in 31 years — should it write off the unsold sneakers from former collaborator Ye.

Allbirds stock plummets after shoe brand ‘deteriorated quickly’. Allbirds Inc. sold investors on a growth story when the sneaker brand went public less than 18 months ago. Those sales gains disappeared in the fourth quarter, tanking its stock.

Hugo Boss sees slowing sales in 2023. The German fashion house faces tougher comparisons figures in 2023 after it rode the wave of its recent brand revamp last year, with sales rising 27 percent to €3.65 billion ($3.85 billion), as pre-announced in January.

Report: Shein set to raise $2 billion, eyes US IPO later this year. UAE’s sovereign wealth fund Mubadala is a major investor in this round as are existing investors, the private equity firm General Atlantic (GA) and venture capital group Sequoia Capital China, people familiar with the matter told Reuters.

Gap sees weak annual sales as inflation-hit consumers rein in spending. Gap Inc on Thursday forecast full-year sales below Wall Street estimates, signaling a slowdown in demand as inflation-weary consumers curb discretionary spending.

Rolex, Patek investment beats S&P gains over five years. Prices for Rolex, Patek Philippe and Audemars Piguet watches appreciated by an average of 20 percent a year since mid-2018, outpacing the S&P 500 Index, as values for pre-owned luxury timepieces surged, a new report shows.

Mango’s sales hit record as Zara’s rival expands in US, India. Revenue at Mango, which is a rival of Spanish Inditex-owned label Zara, rose 20 percent from a year earlier, with both in-store and online sales benefitting from consumers’ post-pandemic appetite for clothes, despite tough competition in the apparel business.

Superdry hires turnaround specialist in cash-saving push. In a statement Superdry, which is led by founder Julian Dunkerton, said Interpath will advise on its turnaround and “ensure we have the right cost base and structure in place for future success.”

Report: Trussardi sought creditor protection in turnaround drive. The latest crisis comes after a missed payment to a distribution partner led to a halt in deliveries of Trussardi products, a source familiar with the matter told Reuters.

Aquazzura launches handbag line at Paris event. Bags have long been the key driver of luxury brands’ profitability, but the category can be notoriously difficult to crack. The brand’s push into purses included a logo-free selection of day-to-night crossbodies and evening bags priced between €1,000 and €2,000 ($1,060 and $2,121).

THE BUSINESS OF BEAUTY

Stéphane Rinderknech named chairman, CEO of LVMH beauty division. Rinderknech joined the luxury goods conglomerate from L’Oréal USA, where he was president and chief executive officer, in May 2022 as chairman and CEO of LVMH Hospitality Excellence.

Sephora opens first UK store. The store, located inside West London’s Westfield shopping centre, is the LVMH-owned beauty company’s first UK location since pulling out of the country almost two decades ago. The retailer has been hyping its return for months, and launched digitally there in October.

Fragrance firms hit in Europe suspected of scent supply cartel. Fragrance firms across Europe risk potentially hefty fines after prosecutor raids over concerns companies including Givaudan SA and Symrise AG colluded over price to supply scents and ingredients.

Revlon faces hair relaxer cancer claims as bankruptcy nears end. On Tuesday, Revlon’s bankruptcy judge extended the deadline by which customers with certain types of cancer can file claims against the company.

PEOPLE

Tiffany & Co. names Lauren Santo Domingo artistic director of Tiffany Home. The LVMH-owned New York jewellery house has tapped the Moda Operandi co-founder and chief brand officer to revamp its homewares division, naming her the jewellery house’s first artistic director for home.

Craig Green awarded MBE for services to fashion. Green’s prior accolades include British Menswear Designer at the Fashion Awards 2016, 2017 and 2018, the BFC/GQ Designer Menswear Fund prize 2016 and Emerging Menswear Designer at the British Fashion Awards 2014.

MEDIA AND TECHNOLOGY

China’s JD.com misses estimates for quarterly revenue. Revenue rose 7.1 percent to 295.4 billion yuan ($42.8 billion) in the three months ended December, missing analysts’ estimates of 296.17 billion yuan, according to Refinitiv data.

Zalando’s 2022 earnings beat estimates in profitability push. The Berlin-based e-commerce platform reported adjusted earnings before interest and taxes of €184.6 million ($197 million) last year, it said in a statement Tuesday.

Compiled by Joan Kennedy.