edition vi market update
By Maryem Manseur & Ava Wildstein
State of the Economy:
The pandemic has undoubtedly presented challenges to companies across all industries and throughout each country. After nearly 2 years of pandemic distress, companies have adapted their supply chains and business models to accommodate the unpredictable nature of COVID-19. Still, full recovery is difficult under ever-changing circumstances. The fashion industry specifically saw a 20% decline in revenues in 2019–20, as earnings before interest, taxes, depreciation and amortization (EBITDA) margins declined by 3.4 percentage points to 6.8%. Discount and luxury fashion have demonstrated the strongest performance during this period, with McKinsey noting that, “The prominence of luxury brands among the top performers was attributable to the economic resilience of wealthier demographics, leading to a continuing demand for bags, luxury jewelry and ready-to-wear.” This trend is echoed across industries, as wealthier consumers have maintained a high proportion of disposable income despite the economic consequences of the pandemic. Aside from the discount and luxury fashion boom, e-commerce brands have also seen tremendous success during this time. The success of e-commerce demonstrates a longer term trend favoring online business models, and brands that continue to capitalize on a younger digital consumer demographic can expect to see continued growth in 2022.
The fast spreading Omicron variant of the coronavirus presents the latest challenge to an already complex recovery in the US and global economies. The recent acceleration of Omicron has hampered operations and slowed sales at some companies in a matter of days, but business owners remain hopeful that they will be able to stay afloat given the precautionary measures they have adopted from previous coronavirus surges. Businesses of all kinds have been contending with pandemic related setbacks for nearly two years. Fortunately, the myriad forms of government stimulus and strong consumer demand have enabled these businesses to successfully navigate the pandemic, and in some cases even improve profits. Omicron presents just the latest test of strength for markets worldwide.
Samsonite:
Market Cap: $2.67B
Samsonite is an American luggage manufacturer and retailer, with products ranging from large suitcases to toiletries bags. The company was founded in Denver, Colorado, however its registered office is in Luxembourg and it is listed on the Hong Kong Stock Exchange. Due to travel related restrictions and overall consumer preferences to stay home, Samsonite experienced a significant decline in revenue in 2020, contracting by almost 60%. Similarly, earnings over the same period swung to a significant loss as the business was unable to absorb its fixed costs based on the declines in revenue due to the pandemic. Samsonite has experienced a modest recovery during 2021, with revenues up almost 15% off of the depressed base in 2020. Earnings, however, remain in a loss position, albeit the loss has been reduced. The company is hopeful with a continued increase in the global travel market for a sustained recovery in 2022. But, there is added uncertainty due to the recent surge in the Omicron variant.
Skims:
Skims is a shapewear and loungewear brand founded by Kim Kardashian. Launched in 2019 right before the pandemic, Skims has shown impressive resilience despite the overall decline in demand for shapewear. Their loungewear and sleepwear lines kept revenue pouring in during the pandemic, racking up over 2 million people on the waitlist for products after only 9 weeks in business. Kim, along with co-founder Emma Grede, have worked to differentiate the Skims brand with an emphasis on inclusivity, offering nine sizes, up to 5X, in a wide range of skin-tone shades. Skims has sold more than four million units to date, with a customer retention rate of over 30 percent. After raising $154 million in new funding, Skims reached a $1.6B valuation which shattered expectations, even for a celebrity-owned brand. As an all e-commerce company, Skims is navigating the new shapewear market that the pandemic has created, and the future of the brand is dependent on how shapewear and fashion continue to evolve as an industry, as well as the trajectory of the pandemic as new COVID variants continue to disrupt markets worldwide.
YOOX Net-a-Porter:
Market Cap: $5.81B
YOOX Net-a-Porter Group is an Italian online fashion retailer. Before merging in 2015, Net-a-Porter was based in London and YOOX in Milan. Now, their combined operations under the YOOX Net-a-Porter Group (YNAP) reach over 180 countries and show strong net revenue growth of 17-20% annually, making them a global e-commerce giant. YOOX distributes discounted luxury items from over 800 highly coveted designers. As a fully online business, they have gained a competitive advantage over brick and mortar department stores which may carry similar merchandise due to the trend toward online shopping during the pandemic. They also leverage data collection in a highly effective way, creating AI technologies to personalize recommendations for their site visitors and optimize their customer experience. Their investments in technology will differentiate them from competitors like Farfetch as online luxury shopping continues to grow. YNAP is currently in a strategic growth position, as e-commerce currently accounts for around 10% of the growing global luxury goods market, and is expected to rise to 20-25% in the next decade. They are currently listed on the Italian Stock Exchange, Borsa Italiana, where they are currently trading at around €38 per share with a Market Capitalization of 5.13B Euros, or roughly 5.81B USD.
Adidas:
Market Cap: $54.3B
Adidas is a German international corporation, founded and headquartered in Germany. The company designs and manufactures shoes, clothing and accessories, and is the largest sportswear manufacturer in Europe. Adidas’ “Own The Game”' five year strategic plan presented in March 2021 will help improve the company’s product offering across all brands and distribution channels, as well as support accelerated revenue growth and operating margin expansion. During the pandemic, revenue contracted by 16%, however, for the calendar year ending 2021 revenues are projected to grow 9% with an attractive revenue growth profile for 2022 and 2023. Earnings throughout the pandemic declined by over 78%, but quickly snapped back in 2021 with net income projected to increase by over 250%. In addition to strengthening the credibility of the Adidas brand, the new strategic focus “Own The Game” is designed to create a unique consumer experience and to continue to expand the company’s activity in the area of sustainability. More than 95% of sales growth is expected to come from five categories: football, running, training, outdoor and lifestyle. Adidas also intends to focus its operating model to connect with consumers more directly. As a result, the company’s direct to consumer business is projected to account for approximately half of the company’s total sales growth by 2025.
https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion
https://www.nytimes.com/2021/04/09/business/dealbook/kardashian-skims.html
https://www.voguebusiness.com/companies/yoox-net-a-porter-ceo-federico-marchetti-ynap
https://www.investing.com/equities/yoox-spa
The pandemic has undoubtedly presented challenges to companies across all industries and throughout each country. After nearly 2 years of pandemic distress, companies have adapted their supply chains and business models to accommodate the unpredictable nature of COVID-19. Still, full recovery is difficult under ever-changing circumstances. The fashion industry specifically saw a 20% decline in revenues in 2019–20, as earnings before interest, taxes, depreciation and amortization (EBITDA) margins declined by 3.4 percentage points to 6.8%. Discount and luxury fashion have demonstrated the strongest performance during this period, with McKinsey noting that, “The prominence of luxury brands among the top performers was attributable to the economic resilience of wealthier demographics, leading to a continuing demand for bags, luxury jewelry and ready-to-wear.” This trend is echoed across industries, as wealthier consumers have maintained a high proportion of disposable income despite the economic consequences of the pandemic. Aside from the discount and luxury fashion boom, e-commerce brands have also seen tremendous success during this time. The success of e-commerce demonstrates a longer term trend favoring online business models, and brands that continue to capitalize on a younger digital consumer demographic can expect to see continued growth in 2022.
The fast spreading Omicron variant of the coronavirus presents the latest challenge to an already complex recovery in the US and global economies. The recent acceleration of Omicron has hampered operations and slowed sales at some companies in a matter of days, but business owners remain hopeful that they will be able to stay afloat given the precautionary measures they have adopted from previous coronavirus surges. Businesses of all kinds have been contending with pandemic related setbacks for nearly two years. Fortunately, the myriad forms of government stimulus and strong consumer demand have enabled these businesses to successfully navigate the pandemic, and in some cases even improve profits. Omicron presents just the latest test of strength for markets worldwide.
Samsonite:
Market Cap: $2.67B
Samsonite is an American luggage manufacturer and retailer, with products ranging from large suitcases to toiletries bags. The company was founded in Denver, Colorado, however its registered office is in Luxembourg and it is listed on the Hong Kong Stock Exchange. Due to travel related restrictions and overall consumer preferences to stay home, Samsonite experienced a significant decline in revenue in 2020, contracting by almost 60%. Similarly, earnings over the same period swung to a significant loss as the business was unable to absorb its fixed costs based on the declines in revenue due to the pandemic. Samsonite has experienced a modest recovery during 2021, with revenues up almost 15% off of the depressed base in 2020. Earnings, however, remain in a loss position, albeit the loss has been reduced. The company is hopeful with a continued increase in the global travel market for a sustained recovery in 2022. But, there is added uncertainty due to the recent surge in the Omicron variant.
Skims:
Skims is a shapewear and loungewear brand founded by Kim Kardashian. Launched in 2019 right before the pandemic, Skims has shown impressive resilience despite the overall decline in demand for shapewear. Their loungewear and sleepwear lines kept revenue pouring in during the pandemic, racking up over 2 million people on the waitlist for products after only 9 weeks in business. Kim, along with co-founder Emma Grede, have worked to differentiate the Skims brand with an emphasis on inclusivity, offering nine sizes, up to 5X, in a wide range of skin-tone shades. Skims has sold more than four million units to date, with a customer retention rate of over 30 percent. After raising $154 million in new funding, Skims reached a $1.6B valuation which shattered expectations, even for a celebrity-owned brand. As an all e-commerce company, Skims is navigating the new shapewear market that the pandemic has created, and the future of the brand is dependent on how shapewear and fashion continue to evolve as an industry, as well as the trajectory of the pandemic as new COVID variants continue to disrupt markets worldwide.
YOOX Net-a-Porter:
Market Cap: $5.81B
YOOX Net-a-Porter Group is an Italian online fashion retailer. Before merging in 2015, Net-a-Porter was based in London and YOOX in Milan. Now, their combined operations under the YOOX Net-a-Porter Group (YNAP) reach over 180 countries and show strong net revenue growth of 17-20% annually, making them a global e-commerce giant. YOOX distributes discounted luxury items from over 800 highly coveted designers. As a fully online business, they have gained a competitive advantage over brick and mortar department stores which may carry similar merchandise due to the trend toward online shopping during the pandemic. They also leverage data collection in a highly effective way, creating AI technologies to personalize recommendations for their site visitors and optimize their customer experience. Their investments in technology will differentiate them from competitors like Farfetch as online luxury shopping continues to grow. YNAP is currently in a strategic growth position, as e-commerce currently accounts for around 10% of the growing global luxury goods market, and is expected to rise to 20-25% in the next decade. They are currently listed on the Italian Stock Exchange, Borsa Italiana, where they are currently trading at around €38 per share with a Market Capitalization of 5.13B Euros, or roughly 5.81B USD.
Adidas:
Market Cap: $54.3B
Adidas is a German international corporation, founded and headquartered in Germany. The company designs and manufactures shoes, clothing and accessories, and is the largest sportswear manufacturer in Europe. Adidas’ “Own The Game”' five year strategic plan presented in March 2021 will help improve the company’s product offering across all brands and distribution channels, as well as support accelerated revenue growth and operating margin expansion. During the pandemic, revenue contracted by 16%, however, for the calendar year ending 2021 revenues are projected to grow 9% with an attractive revenue growth profile for 2022 and 2023. Earnings throughout the pandemic declined by over 78%, but quickly snapped back in 2021 with net income projected to increase by over 250%. In addition to strengthening the credibility of the Adidas brand, the new strategic focus “Own The Game” is designed to create a unique consumer experience and to continue to expand the company’s activity in the area of sustainability. More than 95% of sales growth is expected to come from five categories: football, running, training, outdoor and lifestyle. Adidas also intends to focus its operating model to connect with consumers more directly. As a result, the company’s direct to consumer business is projected to account for approximately half of the company’s total sales growth by 2025.
https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion
https://www.nytimes.com/2021/04/09/business/dealbook/kardashian-skims.html
https://www.voguebusiness.com/companies/yoox-net-a-porter-ceo-federico-marchetti-ynap
https://www.investing.com/equities/yoox-spa