Get Ready For Luxury’s Results Superweek

Welcome back to The Week Ahead. This is Eric Sylvers, BoF’s Milan correspondent, with an overview of what to look out for next week during luxury’s earnings super week.

Topping off a critical earnings season for luxury, the biggest players roll out their financial reports this week. The half-year update comes at a key moment for the industry - with tentative signs of a rebound emerging, as projected to take place this year in the BoF Insights and McKinsey’s latest report “Face to Face With Luxury Clients.” However, the environment will likely remain choppy and brands will have to work harder to spark shopper interest in a challenging “new normal.”

This week’s earnings reports will offer a snapshot of what’s working – and what’s not – in the battle to reignite sales.

The week’s first-half earnings bonanza:

• Monday: LVMH
• Tuesday: Kering
• Wednesday: Hermès
• Thursday: Prada

The reports will give a better understanding of how key designer revamps are landing, the extent to which the Middle East war has weighed on results and tourist traffic in Europe, whether China’s luxury slowdown is finally stabilising, how much the US market is underpinning growth and whether the sector’s long-sought recovery is on track for this year.

We’ve had financial updates so far this month from Richemont, Burberry, Mulberry, Moncler and Zegna:

• Richemont opened the season with a strong beat, as Cartier and Van Cleef & Arpels further consolidated their dominant positions in the industry’s main bright spot – jewellery.
• British turnaround stories Burberry and Mulberry showed they are building sales momentum — and gave initial evidence that their strategies are working.
• Moncler’s underwhelming report indicated the brand has work to do in reducing the seasonal nature of its outerwear focus, while a robust performance from Zegna showed warm-weather innovations including luxe linens are resonating as heat waves hit.

A cheat-sheet for next week:

LVMH

Dior remains the focus, as one of the industry’s highest profile design reboots. While the group does not break down sales by brand, the performance of the fashion and leather goods division, which also includes larger stablemate Louis Vuitton, will offer some indication of how Jonathan Anderson’s creative reset is landing with shoppers. Analysts forecast the division bounced back to 1-percent growth in the second quarter — an improvement from last quarter’s 2 percent decline, year-on-year. LVMH typically gives a rough indication of where Vuitton and Dior sit compared to the overall division. There may be updates on smaller houses Celine, Loewe and Givenchy, which are also undergoing design revamps and have all drawn positive initial feedback from industry insiders — especially Michael Rider’s menswear runway debut for Celine in June. Overall group sales are expected to have grown 2 percent, led by the US. Tiffany and Bulgari will also be eyed for signs the houses are tapping into booming demand for jewellery.

Kering

For the first earnings update since new CEO Luca de Meo’s big capital markets strategy reveal in April, Gucci will hold the spotlight. Not only as the group’s biggest profit maker but also as another prominent creative reboot for the sector. Group sales are expected to return to growth, up 2 percent, with Gucci improving, but still down 3 percent despite hefty investments, including a blockbuster Times Square runway show in New York. Though it’s still early to expect signs of momentum building, management will likely offer an update on how the group is ramping up change, with Saint Laurent emphasising menswear, while Bottega Veneta and Balenciaga also are undergoing design reboots. Jewellery and eyewear are expected to continue growing. Also, any update on plans to purchase Valentino will be closely monitored.

Hermès

While Hermès has strongly outpaced the rest of the industry during much of the downturn, thanks to sustained demand for its high end handbags, growth has slowed, showing it is not immune — particularly as rivals work to renew buzz around their products.Still, leather goods at Hermès are expected to continue leading growth, accelerating to a rate of around 11 percent. Overall sales should rise around 6 percent, slightly faster than the previous quarter.

Prada

At Prada, how smooth of a landing the group can engineer for Miu Miu remains the key focus as growth at the brand normalises after strongly outpacing the industry for several years. Expectations are for low single-digit growth, with high exposure to the Middle East likely being a drag. Versace remains in a holding pattern ahead of Pieter Mulier’s design debut for the label, expected in February.

The Week Ahead wants to hear from you! Send tips, suggestions, complaints and compliments to eric.sylvers@businessoffashion.com.