Changes have been coming fast to Italian shoemaker Sergio Rossi since it was acquired by Lanvin Group last year.

Since the sale closed in July 2021, the brand has hired a new artistic director (influencer Evangelie Smyrniotaki); launched e-commerce in the key US market; and opened four new stores in China. Its factory in Italy’s San Mauro Pascoli has undergone an upgrade, converting operations to run on renewable energy. This autumn the brand invested in a marketing push in Paris and Milan during fashion month, a signal to both customers and the industry that it was entering a new chapter.

Sales are now growing strongly and the brand is “very close” to profitability, according to chief executive Riccardo Sciutto, who joined the brand from Tod’s in 2016. “I always look at innovation as the best way for an Italian company to grow without losing your DNA,” he said.

Sergio Rossi is the latest luxury brand where Lanvin Group — controlled by China’s Fosun conglomerate — is racing to put in place a turnaround: from its largest, namesake brand in Paris (still on the mend from years of turbulence following the ouster of Alber Elbaz) to Austrian tights-maker Wolford, Italian suiting house Caruso and American knitwear brand St. John, the Shanghai-based outfit is seeking to seize on the surging luxury demand since the pandemic to nurture a rebound at its portfolio of flagging heritage brands.

The turnaround plans have become more urgent as the group plans for a public listing on the New York Stock Exchange before the end of the year, and as concern mounts that a deteriorating macro-economic environment could cut short luxury’s stellar post-Covid growth spurt.

So far, the fashion group’s efforts have been managed to restore top line growth, even if profitability remains elusive (the group says its on track to be EBITDA positive by 2024). In the first half of the year, group revenue was up 73 percent on the same period in 2021. The planned listing via a SPAC deal aims to build a financial war chest to continue investing in turning around its brands, as well as funding future acquisitions. Lanvin Group is still small, with annual revenues expected to hit around €400 million this year, a sliver of the billions European groups like LVMH and Kering rake in.

“We are in the investment phase, we know that [with] luxury we need to build a… very solid infrastructure for future growth,” Lanvin Group chairman Joann Cheng said.

A new fashion group

Lanvin Group was first formed in 2017 under the name Fosun Fashion Group, as the Chinese conglomerate Fosun International was preparing to acquire France’s oldest couture house Lanvin, which was on the brink of bankruptcy. Last year, the group rebranded, adopting the name of its flagship brand in a bid to highlight its focus on the lucrative and resilient luxury sector in contrast to its parent company’s historic focus on industries like pharmaceuticals, real estate and insurance.

In addition to Lanvin, the group acquired several other companies with a similar profile — fashion players with a strong heritage that had fallen into disrepair, and were too small to attract interest from luxury’s more established conglomerates. The group snapped up assets spanning a range of categories, including hosiery (Wolford), knitwear (St John), suiting (Caruso) and footwear (Sergio Rossi).

While the group’s purchases weren’t the buzziest brands in the market, Lanvin Group saw potential in their legacy narratives and valuable specialist expertise (Caruso a historic tailoring supplier for top brands like Dior and Balenciaga, while Sergio Rossi manufactures shoes for hot names like Amina Muaddi.) The strategy was to build a diversified stable of smaller, specialist names that could complement each other and support category expansion at flagship Lanvin.

“They [each] have their vertical,” Cheng said of the group’s collection of brands. “There are multiple brands working together to create the synergies, not fighting with each other on the same customer.”

A brand revival playbook

While turnaround plans vary at each label, three common strategies underpin the group’s approach: ramping up physical retail, boosting digital exposure, and refreshing each brand’s product offer to appeal to a younger demographic.

Geographically, the focus is on scaling outside Europe, where Lanvin Group’s brands are still primarily exposed. China currently accounts for 15 percent of group revenues, and while North America is 33 percent of sales, over half of this is driven by California-based St John; for the group’s other brands, its 15 percent. The goal is for sales in China and the US to make up more than half of sales by the end of 2025, Cheng said, accelerating the group’s geographic diversification.

Lanvin Group sees its Shanghai-based perspective as key to supporting growth by helping its brands navigate the all-important Asia market. Sales in Greater China grew 32 percent year-on-year in the first half, despite continued strict Covid-19 restrictions, while sales in other Asian markets nearly tripled.

For North America, the decision to list in New York could boost visibility and attract local talent by signaling the group’s ambitions there, Cheng said.

“We are two different cultural minds, but we have the same global vision,” Rossi’s Sciutto said of the brand’s new owner. “One side is respectful of the DNA and the heritage, but on the other side, we have the common vision for dynamic growth in the modern era.”

The revival of the group’s namesake Lanvin house is starting to gain steam, with consumers responding to new collections by creative director Bruno Sialelli and a leather-goods push fronted by supermodel Naomi Campbell. In the first half, sales more than doubled year-on-year to reach €64 million. Last December, the brand tapped a new managing director, Siddhartha Shukla, an industry insider who has held key marketing roles at Theory, Gucci and Saint Laurent.

A challenging market

Still, while Lanvin Group’s brands have been seeing rapid growth, the surge is coming on top of a depressed base and at a time when luxury sales have been surging across the board.

Looking ahead, the group’s fortunes are far less certain amid slowing GDP growth, rapid inflation and a global energy crisis. Consumer confidence has plummeted to its lowest level in decades, according to recent OEDC data.

“In a market that is polarised more and more between winners that are ‘take it all’ and other brands, it’s not an easy task for a group with many brands that have got a lot of heritage, but probably don’t score as ‘top-of-mind,’” said Mario Ortelli, founding partner at advisory firm Ortelli&Co. “It’s an effort to gain market share.”

Already, Lanvin Group trimmed its valuation to $1 billion last month, down from a $1.25 billion estimate in March, to reflect a “significantly altered market environment” compared to when the group first announced its plans to go public, according to the company.

“Luxury companies have a distinct advantage in a challenging economic environment because their consumers are more affluent, and therefore less affected,” said Brian Ehrig, partner at consulting firm Kearney.

Still, “it’s not a very attractive market right now, especially for companies that are not yet profitable,” Ehrig said.

The company’s future prosperity rests heavily on the increasingly challenging listing, as the group needs to secure ample capital to keep investing in its brands’ reboots. It’s also touted ambitions to acquire new targets as early as next year.

Cheng says she remains optimistic.

“Even with a lot of challenges in the market, we [are] still raising quite significant proceeds to prepare for the future position and to grow the current brands,” Cheng said. “[The] IPO is not our purpose, it’s just a one milestone during our long run to build up Lanvin Group as a true luxury group.”

LONDON - Under the leadership of two Brits—chief executive Jonathan Akeroyd and designer Daniel Lee—Burberry hopes to accelerate sales by boosting accessories and leaning into the brand’s unique British identity, growing annual revenues to £4 billion ($4.75 billion) mid-term.

In a presentation at the brand’s headquarters Thursday, CEO Akeroyd laid out his much-anticipated plan for the heritage house, which will include introducing cooler, more relatable products and clarifying the brand’s message — refocusing on Britishness — to build on the strategy of brand elevation undertaken by his predecessor Marco Gobbetti.

Akeroyd joined Burberry in April, tasked with fuelling growth after revenues had continued to stagnate during a years-long plan to reposition the brand more firmly in the luxury segment. While Burberry had made progress adopting a more modern, luxurious identity and investing in its burgeoning leather goods business, the brand has struggled to deliver top-line growth during a period when rivals including LVMH, Kering, and Hermès soared.

Pivotal to revitalising sales will be Daniel Lee, the 36-year-old Yorkshire native named to succeed former design chief Riccardo Tisci last month. The house is betting that Lee, best known for reinvigorating Kering-owed Bottega Veneta, will refresh Burberry’s offer leveraging his knack for creating upscale accessories that are both fashion-forward and commercial.

Under Gobbetti and Tisci (both Italians), Burberry explored a more diverse, contemporary take on Britishness than its previously more conservative, preppy focus. But the brand often got weighed down talking about Britishness, rather than actually using Britishness as a platform to talk about something else. Burberry now plans to “strengthen its connection with British craft, design, and art,” the brand said. The aim is to make Burberry a cooler, more desirable name that better leverages its British identity to stand out in a crowded market.

“The next phase is about realising our potential as the modern British luxury brand,” Akeroyd told investors. “We have an opportunity to really harness the power of the brand, which will drive growth.”

Akeroyd said he aims to grow annual sales from £2.3 billion to £5 billion, hitting the £4 billion mark within three to five years—roughly in line with the brand’s pre-existing target for achieving high-single-digit annual growth.

Burberry announced its new strategy while reporting first-half financial results. Sales rose 5 percent year-on-year excluding currency shifts, to £1.3 billion, slightly above analyst expectations. Adjusted operating profit rose 6 percent to £238 million.

Akeroyd said the brand would continue to focus on growing sales in the high-margin leather goods category, where Burberry has made progress in recent years but still trails industry leaders. Accessories made up 37 percent of sales last year, while shoes remain just a sliver—meaning the brand still depends far more heavily on the complex, less-profitable business of apparel than top luxury rivals. Burberry now hopes to double sales of accessories mid-term, eventually crossing the threshold of more than half the company’s revenues.

The brand also said it would double its business in shoes (Lee’s brightly-coloured rain-boots and square-toed Lilo pumps were hits at Bottega Veneta), as well as women’s ready-to-wear by creating a “relatable and wearable wardrobe.” Where Tisci’s streetwear-inflected menswear saw traction in recent years, the designer’s S&M-meets-officewear propositions for women were a tougher sell. The outdoors—natural territory for an outerwear brand—will also become a focus, in both communications and brand’s product offer.

Burberry’s product refresh will be accompanied by increased investments in publicity—with marketing spend forecast at high single-digit levels in the coming years.

Burberry said it would also continue to invest in converting boutiques to an updated store concept put in place under Gobbetti. That more luxurious platform for the company’s products, which highlights its accessories offer, will be implemented in all locations by 2026, Akeroyd said.

The personal luxury goods market is set to surge to €353 billion ($368.2 billion) this year, rising 22 percent at current exchange rates, according to a joint report from consultancy Bain & Co. and Italian trade group Fondazione Altagamma. The consultancy had previously estimated sales would grow between 5 and 15 percent year-on-year.

Sales are expected to grow at a fraction of that rate in 2023, however, with growth slowing to between 3 and 8 percent depending on how resilient consumers in Europe and the US prove in the face of rising macroeconomic headwinds, as well as the speed of recovery in mainland China.

Following a stellar pandemic rebound, concern has mounted regarding how long luxury’s winning streak can last in the face of slowing GDP growth, rapid inflation and a global energy crisis. Consumer confidence has plummeted to its lowest level in decades, according to recent OEDC data.

In China, luxury sales are not expected to bounce back to 2021 levels until mid-2023, Bain said. Intermittent strict lockdowns resulting from president Xi Jinping’s zero-Covid policy continue to dampen luxury sales, and while the government announced a slight easing of some Covid restrictions last week, the short-term outlook remains bumpy.

Still, this year the industry has been buoyed by a “YOLO” (You Only Live Once) attitude among consumers as the world emerges from the pandemic. Consumers also increasingly view luxury goods as an asset class with resale opportunities, Bain said.

“Despite all the macroeconomic KPIs that we analyse [being] down — at the lowest level ever — [the] luxury market is being very resilient and responding positively,” said Federica Levato, partner at Bain & Co.

Brands’ efforts to court top-spending clients with unique experiences and exclusive products have paid off, Levato said. This year, about 2 percent of luxury customers will drive 40 percent of sales.

Demand in emerging luxury markets like South Korea and India has boomed in addition to continued growth in the US and Europe. While US growth slowed in the second half of the year, that’s partly a result of Americans shifting spending to Europe to take advantage of the strong dollar, Levato said.

More than 95 percent of luxury companies saw growth this year, in contrast with recent years marked by strong polarisation, during which only the strongest brands managed to grow.

“There has been a [luxury] renaissance,” Levato said. “Even with the big brands… gaining share, we don’t believe that this is cutting out other players.”

By 2030, the personal luxury goods market is expected to be worth between €550 and €570 million, roughly a two and a half fold increase in value over the decade, Bain forecasts.

Following the announcement of Richemont’s deal to spin off YNAP in a joint venture with Farfetch, Loehnis will take up the role of interim chief executive of the loss-making e-commerce group on Oct. 31.

Loehnis, currently president of Net-a-Porter, Mr Porter and The Outnet, will lead the company until parent Richemont completes the sale of a 50.7 percent stake to Farfetch and real estate mogul Mohamed Alabbar. On completion of the deal, which is expected to close before the end of the year, a new CEO will be appointed.

Loehnis will succeed Geoffroy Lefebvre, who is leaving to pursue entrepreneurial opportunities outside of Richemont Group.

Learn more:

Richemont, Farfetch and YNAP: Understanding a Transformational E-Commerce Deal

The Swiss luxury group is spinning off Yoox Net-a-Porter in a joint venture with Farfetch. What does it mean for Richemont, Farfetch, YNAP and the luxury industry at large? BoF dissects the deal.

BoF can exclusively reveal that Cartier has tapped Indian actress Deepika Padukone as its newest brand ambassador.

Padukone, who is one of Bollywood’s biggest stars, has been named twice on Time magazine’s annual list of the 100 most influential people in the world. Over the weekend she attended the BoF 500 gala in Paris wearing an Indomptables de Cartier Panther and Zebra necklace — made of yellow gold and black lacquer and set with tsavorite garnet, moonstone and onyx — wrapped around her wrist.

“As an inspiring actress and committed philanthropist, Deepika embodies the Maison’s spirit and values of celebrating creativity, universality and open-mindedness,” Arnaud Carrez, Cartier’s chief marketing officer, said in a statement.

The move signals ambitions for Cartier to broaden its reach among Indian consumers, both domestically and abroad. The size of the the country’s gems and jewellery sector was valued at $79 billion last year, according to the India Brand Equity Foundation, a development trust backed by the Indian government. Meanwhile, the populous country’s aspiring middle class is growing fast.

Cartier is a jewellery behemoth and the star in parent company Richemont’s portfolio. The Swiss group does not break out sales for individual brands, but HSBC analysts estimate that Cartier generated €7.4 billion in revenue in 2021, up 29 percent year-on-year.

Today, as much as 80 percent of global jewellery sales remain unbranded, according to McKinsey — and competition is heating up among brands seeking to capture more of that market. Cartier’s peers are also investing heavily in securing top talent to broaden their reach. Following its acquisition by LVMH, rival Tiffany brought on Beyoncé and Jay-Z in a bid to reposition the brand as more modern and culturally relevant.

Beyond her star power, Cartier said it was drawn to Padukone’s values of philanthropy and female empowerment. In addition to acting and producing, Padukone is the founder of the Live Love Laugh Foundation, an organisation that has sought to raise awareness of and destigmatise mental health issues in India since 2015.

After six years at the British house, Brown will step down from her roles as Burberry’s chief financial and chief operating officer at the end of the financial year on 1 April 2023.

Brown is leaving to pursue opportunities “outside of the luxury industry,” Burberry said in a statement, adding that a search for her successor is underway.

Brown helped steer the luxury house during a push to move its positioning more upmarket, as well as through a turbulent pandemic period, which hammered sales.

New chief executive Jonathan Akeroyd joined the company this year amid a multi-year attempt to reposition as a leather-goods driven luxury brand, which remains incomplete five years into the strategy put in place by predecessor Marco Gobbetti. Growth continues to trail sector leaders like LVMH, Chanel and Hermes.

”The CFO departure at this point seems like an outright setback,” Bernstein analyst Luca Sola wrote in a note to clients. Burberry shares fell 4 percent in early trading.

Akeroyd is expected to lay out his plans to boost sales when the house reports interim financial results in November. “Julie has played a key role in positioning Burberry for growth,” he said.

Learn more:

Burberry Chief Sticks to Strategy Amid Fresh Challenges

New CEO Jonathan Akeroyd intends to pursue the brand elevation strategy put in place by his predecessor, as Covid lockdowns hammer sales in the critical China market.

David Pemsel, CEO of communications agency ScienceMagic.Inc, has been appointed the new chairman of the British Fashion Council, effective immediately.

Pemsel, who already sits on BFC’s board as a non-executive director, succeeds Farfetch executive Stephanie Phair, who stepped down earlier this month after a four and a half year tenure.

Pemsel has a background in media, having worked as ITV’s group marketing director before serving in various senior roles at the Guardian Media Group, concluding with a four year stint as CEO. There, he drove a digital transformation and led the publishing group to its first operating profit in 25 years.

He is currently CEO of ScienceMagic.Inc, a communications agency he co-founded in 2020, as well as leading the company’s new digital assets venture, ScienceMagic.Studios, which supports brands with web3 projects like NFTs, social tokens.

As chairman of the BFC, Pemsel will work closely with chief executive Caroline Rush to steer the industry group as it enters the post-pandemic era.

Strategic priorities for the coming years will include raising awareness of British fashion more broadly, Pemsel said, in the hopes that both the government and British people a large will better recognise the industry’s soft power and influence. The coronavirus crisis and Brexit both pushed the UK government to evolve its relationship with the fashion industry, but there’s still work to be done, Pemsel says.

The fashion industry “creates culture, it employs a huge number of people, it makes a massive impact to the economic value of our country,” Pemsel told BoF. “We are part of the creative industries; we do sit alongside the power of our television industry, our music industry,” he said, adding that he plans to advocate for fashion to seen as equally significant.

Establishing best practices and shared benchmarks for progress on issues like sustainability and diversity and inclusion are also high on the agenda. Elsewhere, the BFC will continue its tradition of nurturing emerging design talent, as well as working to hasten digital innovation in the industry by exploring how brands can use technologies like web3, blockchain and the metaverse in their business.

“We’ve got to convene the industry to work together around making the biggest impact,” Pemsel said. “As soon as you get alignment with the BFC and what matters to the industry, that’s one plus one equals three.”

David hopes his experiences outside of fashion will bring a fresh perspective to the BFC.

“One could say, look, David, you’re an outsider, you don’t work for Burberry or you don’t work for Farfetch,” he said. “Hopefully, that’s described as a good thing, to bring a degree of objectivity to what I think needs to happen.”

Nina Ricci, the 90-year-old French fashion house owned by Spanish fragrance conglomerate Puig, has named a new creative director and business chief.

Harris Reed — known for his fantastical, historical, gender-fluid creations — will join the company as creative director, effective immediately. His first collection will be shown in Paris in early 2023. Edwin Bodson, most recently global commercial director at JW Anderson, is taking the helm of the business as general director.

Los Angeles-born, London-based Reed is the latest in a string of designers to try and re-energise the fashion house, known for its apple-shaped perfume bottles, retro cloche hats and ladylike silhouettes.

As an outspoken LGBTQI+ advocate who is passionate about pushing gender-fluid fashion into the mainstream, Reed is likely to shake up the brand, whose traditional French take on femininity is increasingly out of step with today’s consumers. At the same time, Reed is a dedicated researcher whose interest in historical costume could lead him to leverage the brand’s decades-long archive.

“I am truly excited to challenge the landscape of what femininity means across fashion and beauty in such an iconic house,” Reed said in a statement.

“As a gender-fluid designer rejecting norms in a quest for freedom, Harris’ singular vision of magnified femininity will span across Nina Ricci,” added Bodson.

The 26-year-old Reed replaces Rushemy Botter and Lisi Herrebrugh, the Antwerp-educated, Andam prize-winning duo behind Botter, who exited the brand in January after three years.

Botter and Herrebrugh landed on a recognisable signature for Nina Ricci with their oversized, neon update on the brand’s felt hats. But its Avenue Montaigne flagship in Paris was shuttered (replaced by a shop for Puig-stablemate Paco Rabanne) after sales struggled to take off, then collapsed during the pandemic, causing the brand to go “digital first.” Other past creative directors at Nina Ricci include Patou’s current designer Guillaume Henry, Peter Copping and Olivier Theyskens.

Nina Ricci’s “Air du Temps” scent was a top-10 fragrance in Europe until at least the late 1990s, when Puig acquired the brand, but the brand’s market share has since slipped.

One of the industry’s brightest rising stars, Reed has garnered buzz and attention for elaborate and eye-catching creations worn by A-List names like Harry Styles, Beyoncé and Adele, catapulting gender-fluid fashion into the spotlight.

Interest in his viral designs (including ones worn by Harry Styles in U.S. Vogue) has helped market popular tie-ups with accessible brands like MAC make-up and jewellery label Missoma. It’s the sort of halo effect that would be one definition of success at Nina Ricci for fragrance-focused Puig, and could support potential moves like expansion into colour-cosmetics.

Puig made headlines in recent months with its $1 billion acquisition of niche fragrance label Byredo, as well as reportedly entering talks to launch beauty for the hot French brand Jacquemus.

Recent years have also seen Puig experiment with different models for its apparel businesses.

Acquiring Dries Van Noten in 2018 gave the group exposure to a significant ready-to-wear business, offering the company more inroads into the supply chain for designer apparel and accessories. Jean Paul Gaultier, on the other hand, replaced its seasonal fashion business with one-off collaborations with a rotating casts of designers. Carolina Herrera — one of the group’s most successful fragrance businesses — continues to produce a ready-to-wear and custom line in New York, as well as a diffusion line “CH” which is produced via license.

Additional reporting by Robert Williams.

Mytheresa said the value of goods sold on its platform rose 18 percent year-on-year to €196.7 million ($196.7 million) in the quarter ending June 30, as shoppers rushed to outfit themselves ahead of their first mask-free summer vacations in years. Revenues rose 7.7 percent to €174 million, the Munich-based luxury e-tailer said.

Full-year revenues of €690 million were in line with estimates. Shares rose 4 percent in early trading as the company lifted guidance for the coming year’s profitability, forecasting an adjusted EBITDA margin of around 9 to 10 percent for the fiscal year ending June 2023.

Net losses narrowed to €7.9 million, less than one-fourth the previous year’s €32.6 million loss. Earnings before interest, taxes, depreciation and amortisation were €66.3 million.

“There was a lot of preparation for vacationing,” CEO Michael Kliger said in an interview by phone. “People had double or triple vacations, so they need to double or triple wardrobes.”

Rebounding travel has driven surging luxury fashion sales since the pandemic, but many online and multi-brand players have struggled to scoop up the demand. Last month, Richemont announced it would take a €2.7 billion write-down for its Yoox Net-a-Porter unit, after the Swiss group cut a deal to spin off the e-tailer in a joint venture with rival platform Farfetch at a valuation that was just a fraction of what it had paid in 2018.

Smaller rival Mytheresa has kept growing sales while keeping its operating profitability above that of rivals. Still, shares in the company tumbled 45 percent this year amid a broader sell-off for internet stocks.

Following a post-pandemic surge, the outlook for luxury is looking increasingly uncertain as high rates of inflation, a global energy crisis and concerns of an economic recession are expected to dent demand, particularly in Mytheresa’s European home market, which still accounts for the majority of sales. The luxury sector is facing “a deceleration of growth in Q4 this year and into next year as comparisons toughen and economic slowdown starts to affect even the higher end consumers,” analysts at HSBC wrote.

Despite those headwinds, Mytheresa said it expected the value of goods sold on its platform to grow between 16 and 22 percent in the fiscal year ending June 2023. The company’s base of high-income consumers tend more insulated from the current economic challenges than middle class shoppers, Kliger said.

“We fully recognise it’s a very fickle world out there. There are many challenges and uncertainties...But we have continuously seen that our customer rebounds the fastest,” Kliger said.

The pending consolidation between YNAP and Farfetch is set to solidify those sites’ dominant position in luxury e-commerce by reducing back-end costs, adding over $3 billion in gross merchandise value to Farfetch’s marketplace, and revamping tech and logistics for YNAP’s trusted online brands like Mr. Porter.

But Kliger said their rivals’ newfound scale wouldn’t challenge Mytheresa’s growth. He says the company will maintain a laser-focus on courting wealthy fashion lovers who are cash-rich, time-poor and value curation and convenience.

“It’s not big against small,” Kliger said. What matters most is a unique positioning in the market, “otherwise there is no need for you.”

“The differentiating factor should never be price but brand and service — this is how you maintain profitability and top line momentum,” Jefferies analyst Flavio Cereda wrote in a note to clients. “Mytheresa do that well.”

Gigi Hadid wants to introduce cashmere to a new generation.

With her new direct-to-consumer line, called Guest In Residence, the 27-year-old model hopes to reposition the material with pieces that are fashionable, fun and relatively affordable compared to the options currently proposed by luxury brands.

“I would love for people to save up for one piece, have it for a long time, love it and pass it down,” Hadid, who is creative director of her brand, told BoF in an interview by phone.

The brand is launching online Wednesday with a collection of 100 percent cashmere basics — including hoodies and sweats, polo shirts, beanies and socks — mostly priced under $400. That permanent line will be refreshed with new colourways throughout the year and is set to be sold alongside smaller, seasonal capsule collections of “funky cashmere” — pieces that are more design-driven and directional, Hadid said.

The brand also plans to release limited-edition, higher-priced drops created in collaboration with other brands or artists.

Guest in Residence hopes that through its various segments it can propose something for everyone, regardless of age, gender or personal style, Hadid said. That ambition is underscored in a debut campaign featuring 100 portraits dubbed “The Yearbook,” shot by Pablo Di Prima. The models, a mix of faces from street casting and Hadid’s own circle, range in age from one to 100 years old.

To execute Hadid’s vision, Guest In Residence built a team including a head designer hired from The Row, Sijeo Kim; fashion editor Gabriella Karefa Johnson helping with styling; and Julia Wagner heading up art direction.

The brand’s first collection includes pieces in traditional, muted tones like camel and grey alongside bright, pop colours like bubblegum pink, lime green and sunshine yellow.

“There’s kind of a mix between this core collection and then also what I think is the heart of our company, which is funky cashmere,” Hadid said. “We have very classical pieces and colours, but we also go there and make it young and fresh and something that I think people can really find their personality in.”

In addition to the e-commerce rollout, the brand plans to mark its launch with a week-long pop-up shop in New York’s SoHo neighbourhood, opening Sunday during New York Fashion Week.

The popularity of cashmere has boomed in recent years, as players ranging from contemporary brands like Theory to fast fashion’s Uniqlo pushed to democratise the material. Still, high-quality cashmere items, particularly from luxury specialists like Loro Piana and Brunello Cucinelli, can easily set shoppers back four figures.

Even Hadid, a top model with an ample wardrobe budget, says she found herself turning to hand-me-downs from her parents. “I was not drawn to spending these insane amounts,” she said. Hadid sensed an opportunity.

“This was a space where I could take a material I see as having a lot of sustainable qualities — in terms of it being natural, something that if you take care of it can last a long time,” she said, and make it more relevant and accessible to her young and global audience.

Hadid’s venture will need to work to prove its value to consumers in a crowded fashion market that’s become increasingly saturated with celebrity-driven brands. The label is launching as high inflation and concerns of an economic recession are expected to see shoppers become more discerning in their purchases.

Guest in Residence says its sweaters, which start at $225, use high-quality long fibres as opposed to short ones that pill easily. The brand opted for a tight tension rather a loosely woven look in part so that the items would hold up better, it said. And the brand’s direct-to-consumer model aims to keep prices down, Hadid said, limiting customers’ exposure to the hefty markups charged by retailers.

“This is about encouraging the generation that follows me to do something I don’t think they’re encouraged to a lot, which is really to buy less and invest in your wardrobe, invest in pieces that can be styled 100 ways,” Hadid said.

Richemont is finally offloading Yoox Net-a-Porter. Or at least taking a big step in that direction.

After months of negotiations, the Swiss luxury conglomerate announced Wednesday that it had reached a deal to spin off the loss-making e-commerce group in a joint venture with Farfetch, which is acquiring a 47.5 percent stake in YNAP as part of a complex agreement that contains provisions for a full acquisition within a few years.

Investors and analysts welcomed the news, hailing the transaction as a win for both companies: Richemont shares closed up almost 3 percent, while Farfetch’s stock price jumped 21 percent, lifting the platform’s market capitalisation to $3.6 billion.

What does the deal mean for Richemont, Farfetch, YNAP and the wider luxury e-commerce sector? BoF makes sense of the deal and what it signals.

Why is Richemont Selling YNAP?

Yoox Net-a-Porter, which operates e-tail sites Yoox, Net-a-Porter, Mr Porter and The Outnet, has been the problem child of Richemont’s portfolio for a while now.

Richemont first purchased Net-a-Porter in 2010 for about $550 million, spinning it out in a merger with Yoox only to buy back the combined entity at a €5 billion valuation in 2018.

But rising competition, legacy technology and the cost of running a luxury e-commerce player at scale proved too much to manage for the Swiss group, whose expertise lay in watches and jewellery rather than digital technology. A bungled tech and logistics upgrade was hugely expensive for Richemont, and hastened the departure of key clients using Yoox’s white-label e-commerce solution, including Kering and Moncler.

In recent years, what was once one of the hottest players in e-commerce has generated steep losses, dragging down Richemont’s valuation even as its brands like Cartier and Van Cleef & Arpels soared.

Richemont doesn’t break out financials for YNAP, but its Online Distributors Division, which also includes smaller pre-owned watch platform Watchfinder&Co, made an operating loss of €210 million for the fiscal year ending March 2022, 6 percent narrower than the year previous. (Sales for the division hit €2.8 billion, up 27 percent year-on-year.)

With little internal expertise to turn around the unit, Richemont has been itching to get the loss-making company off its balance sheet instead. Talks between Richemont and Farfetch over a YNAP deal were first reported in October last year.

Pressure to announce progress on the deal has ratcheted up as LVMH invests heavily in its recent acquisition, Tiffany & Co. — potentially challenging Richemont’s dominant position in watches and jewellery — as well as by the arrival of an activist investor, Bluebell Capital Partners, which has demanded changes to the company’s governance as well as recommending the group divest from non-core activities like e-commerce.

The arrangement with Farfetch “enables the Richemont portfolio to return to a pure play luxury group,” RBC analyst Piral Dadhania said.

How Is the Deal Structured?

The deal is broken down into two phases. The first phase will see Farfetch acquire a 47.5 percent stake in YNAP from Richemont, while the Emirati business mogul Mohamed Alabbar will acquire a 3.2 percent stake, helping to bring Richemont’s stake below 50 percent so it can deconsolidate the unit in its financial reporting.

Rather than cash, Richemont will receive shares in Farfetch, valued at around $440 million at the time of the deal, which it has agreed to hold as an investment; in five years, it will receive another $250 million in Farfetch shares.

An implied valuation of €1 billion for YNAP — far lower than what Richemont paid, as well as below recent estimates — means the group will claim a €2.7 billion write-down on the asset.

The transaction, which is expected to be completed before the end of 2023, leaves YNAP without a controlling shareholder. But the tie-up lays a path for Farfetch to acquire the rest of YNAP, with options in place for Richemont to sell Farfetch the remaining shares if YNAP achieves profitability (measured by adjusted EBITDA) within three to five years.

The deal was structured this way to ensure all shareholders are invested in a successful turnaround, Neves said on a call with investors Wednesday. If the full acquisition doesn’t happen, YNAP could be sold to a third party or put up for an IPO, Neves said.

What’s in It for Farfetch?

First and foremost, Farfetch is set to solidify a dominant position in luxury e-commerce as a result of the deal, increasing its market share in the space and adding over $3 billion in gross merchandise volume to its marketplace.

In this highly competitive niche, Farfetch will enjoy added scale through its exposure to the deep well of clients at Net-a-Porter, Mr Porter, and Yoox, as well as gain access to those websites’ trusted, aspirational brands (something Farfetch has struggled to build) for a significant discount compared to what Richemont paid back in 2018.

Another coup for the platform will be the addition of Richemont’s portfolio of strong brands like Cartier, Van Cleef & Arpels and Jaeger-LeCoultre to its tech ecosystem, as the group announced a deal with Farfetch’s B2B unit, dubbed “Platform Solutions,” alongside the transaction.

Now, Richemont’s portfolio of brands will migrate to using Farfetch’s white-label services to power their digital capabilities, including logistics for their e-commerce websites and rolling out more robust omnichannel, the companies said. The brands will also sell their products on the Farfetch marketplace using an e-concession model.

“This seems [to be] an excellent deal for Farfetch,” said Bernstein analyst Luca Solca, noting that the addition of Richemont e-concessions to the Farfetch platform would be a “very welcome boost to traffic generation … of which Farfetch had an acute need.”

Before the deal, Farfetch counted more than 20 top brands and retailers as white-label clients, including Chanel, Harrods, and LVMH-owned JW Anderson. The tie-up with Richemont sees the first major conglomerate joining its platform, and potentially unlocks the “hard” luxury market where Farfetch is severely under penetrated (watches and jewellery account for just 3 percent of sales). The tie-up could also bolster the company’s credibility as a go-to technology platform for luxury names more broadly.

What Does This Mean for Yoox Net-a-Porter?

The deal will allow YNAP to replatform its websites to Farfetch’s technology and logistics systems, replacing legacy technology that lagged heavily behind industry peers.

Farfetch has also touted services like inventory management tools and sophisticated global logistics network, which would help YNAP to keep up with rivals while reducing its dependence on hefty investments from Richemont.

Beyond the replatforming, Farfetch is coming to the table with fresh ideas for how to take the different properties in the YNAP umbrella forward.

Net-a-Porter and Mr Porter will remain curated destinations focused on serving full-price luxury consumers. But behind the scenes, the replatforming of both sites will coincide with rolling out a hybrid wholesale-marketplace business model, with Neves pledging to make it easier for top brands to convert to operating e-concessions on the sites.

Off-price emporium Yoox will be repositioned as “an end of cycle and circular fashion destination” by adding resale to its offer, Neves said. Farfetch will also migrate end-of-season stock from its platform to the site, helping boost the portion of full-price items on the main marketplace.

Leadership of YNAP’s brands will remain united under one CEO, who is set to be appointed after the first phase of the deal is complete, the companies said, replacing current chief Geoffroy Lefebvre. A new board of directors will include three members each for Farfetch and Richemont, as well as a seat to be appointed by Alabbar.

What Does This Mean for the Luxury E-Commerce Landscape?

The deal marks a major consolidation in the hyper-competitive and challenging luxury e-commerce sector, where price competition, high customer acquisition costs and logistical challenges make it difficult to turn a profit. It also further solidifies a dominant position for Farfetch in the space.

To be sure, scale doesn’t necessarily make these challenges disappear: Farfetch, like everyone else in multi-brand e-commerce, will still need to compete with brands’ own websites and stores for both customers and inventory. But broadening its consumer base through YNAP’s sites and adding key clients to its B2B arm will help Farfetch to keep outspending rivals as it seeks to become both the dominant tech provider and marketplace for luxury brands.

Further tie-ups could occur involving remaining players such as Ssense, Matchesfashion and MyTheresa, who might look to bolster their market share and reduce back-end costs in a similar fashion.

YNAP’s sale at a reduced valuation could also be seen as yet another blow to the wholesale model, which dominated the first wave of luxury e-commerce.

The distribution system that powered the luxury industry for decades — where retailers order inventory from brands and mark it up — has been in decline as brands seek higher margins at retail while cracking down on discounting by third-party sellers. At the same time, a new generation of e-commerce players has sought solutions to the inventory risk and high working capital requirements endemic to wholesale.

Farfetch has been a champion of the e-concession set-up, where brands keep the inventory and are able to control pricing and assortment on the site themselves.

Wholesale players like Matchesfashion, Mytheresa, and Net-a-Porter recently started integrating e-concessions into their business models, too, but have mostly limited the arrangement to a handful of brands. Commissions websites can charge for e-concession are usually much lower than the typical markup for wholesale, and the arrangement also sees the sites ceding some control over curation.

Farfetch’s plan for YNAP will push the industry’s shift to e-concessions forward — the latest sign that these days it’s big brands, not retailers, who hold the power in luxury.