Remainers cover your ears. One of the world’s strongest fashion brands is moving its headquarters to London despite Brexit. Yes, Brexit hasn’t put them off. Chanel has decided to close its global headquarters in New York and move it to London.
Until now, Chanel did not have a single holding company for its operations and functions were located in a number of cities. In a statement from the French company, they said, “We wanted to simplify the structure of the business and London is the appropriate place to do that for an international company. London is the most central location to our markets, uses the English language and has strong corporate governance standards with its regulatory and legal requirements.”
Left - Even London's lampposts are Chanel!
‘Chanel Limited’ became the holding company of most Chanel entities in the summer of 2017 and this is why the majority of the global functions are now located in London.
“Brexit's economic and geopolitical impacts remains a challenge for the London economy. London is still dealing with a hangover from Brexit.” says Brandon Rael, Operations Strategy & Innovations Leader & Retail Digital Strategist. “We should expect that London will experience an upswing when the economy stabilises. Moving the Chanel HQ to London is very much a long-term strategy.” he says.
Chanel could have chosen Paris, but instead chose London, and this goes against the anti-Brexit rhetoric of companies leaving in their droves. In July, Chanel revealed its financials for the first time in its 108 history. It generated nearly $10 billion in global sales in 2017, making it one of the world’s biggest luxury fashion brands. This new openness is Chanel positioning itself and facing up to the dominance of the likes of Kering and LVMH. This is for the next, digital chapter in Chanel’s history.
Brexit is so close, now, it is time to start looking beyond it and, Chanel’s decision would have been a long term decision from this globally revered company. While one company moving its headquarters to London doesn’t prove anything. In the same vein, one company moving out, doesn’t either. The major reasons companies move or stay in London won’t change post Brexit. They move to London because of geography, language, law and talent pool. This is about London competing with New York or Hong Kong and it is the only truly world city within Europe.
“London remains the world‘s most promising city for luxury retail growth, despite troubles faced by the Brexit vote,” says Rael. “A new report conducted by CBRE and Walpole has found that compared to other major luxury destinations across the globe, London still holds the greatest long-term potential,” he says.
The newly christened Capri Holdings - formerly Michael Kors - has its principal executive office in London and Condé Nast International recently choose London to cope with the new demands of its digital future. Everything catwalk related: photography, video, social media and features will be lead by Vogue International, an editorial hub established last year to lead content for the 25 editions of the magazine.
In an interview in the New York Times with Wolfgang Blau, Chief Digital Officer of Condé Nast International, he said two-hundred editorial and engineering staff members had been hired, and next year, he wants to have a Vogue presence at about 900 runway shows all feeding back to London. This is Condé Nast cutting costs and becoming more efficient while focussing its global fashion content in London. This will only get bigger. Its travel magazine, Condé Nast Traveler has moved onto a new single platform, and it too would be overseen not from its birthplace of New York, but from London.
Right - London, not New York, is the global centre for all digital content
We were told that "Brexit would make us poorer”, but since the vote, and with a background of caution and underinvestment, Britain has a joint record high employment rate of 75.6% with 32.39 million people now in work according to the latest official statistics. (June 2018). There were 488,000 unemployed people aged from 16 to 24 for May to July 2018, the lowest figure since records began for youth unemployment in 1992. Overall, unemployment fell by another 55,000 between May and July to 1.36 million. Wages saw faster than expected growth in the three months to July. Excluding bonuses, wages grew by 2.9%, according to figures from the Office for National Statistics (ONS), well above the inflation rate.
Business is doing well. UK Trade benefitted from a goods export boom in July. Official figures showed the deficit in goods dropped to £10 billion in July from £10.7 billion the previous month. Including service, the overall trade gap fell to just £111 million, one of the best monthly results in the past 20 years. In the three months to July overall goods exports grew by £4.3 billion while imports rose by £3.7 billion. This came largely from trading with countries outside the EU.
“It looks like Brexit is going to be a good thing for luxury fashion as people in the US and China take advantage on preferential tariffs coming from the UK.” says Fleur Hicks, Managing Director of onefourzero, a data analytics and digital research agency.
Eurotunnel recorded its best ever August for freight traffic and the number of passengers passing through Heathrow’s terminals jumped to 7.5 million last month, boosted by new services to China. Europe’s biggest airport, said August customer numbers were up 2.6% from a year earlier and cargo volumes were up 1.2%. Asia saw the biggest increase in passenger numbers, up 6.3%, with new services from Hainan Airlines, Tianjin Airlines and Beijing Capital. Gatwick also saw a 0.4% rise in passenger numbers to 4.9 million and its cargo traffic soared a whopping 22.3%.
Irina Bragin, from Made of Carpet, who specialises is making luxury carpet bags, says “I think I have one advantage of Brexit in mind. Today selling to the EU as retailer (to the end buyer) we pay VAT, same as we sell in UK. After Brexit, it will be the same as selling to US, or Canada, or Australia - no VAT to pay.”
I know it’s fashionable not to be positive about Brexit, but, it’s 6 months away and it’s time to turn the negativity into optimism. Global businesses are looking past Brexit, for the longer term, and what makes London great to do business in hasn’t really changed. Brexit is something new and unknown, but, in Britain’s true entrepreneurial spirit, we can do this!
Versace is a trophy brand and I can imagine many a green eye coming from the offices of LVMH, Kering and other fashion conglomerates asking why they hadn’t claimed this prize themselves. While the price isn’t a snip - approximately US$2.12 billion - and nobody knows the details of Donatella’s contract - it would have be something special in order to entice her to sell the family’s 80% stake - it is one of the few brands which resonates on to the lips and minds of everyday consumers. This happens for very few brands and is very hard to achieve.
Left - In Donatella's image? Versace advertising
Versace has a strong identity and tropes which are continually referenced - you only have to look at the continual ‘baroque’ collections from ASOS, Boohoo and River Island to see that - yet it never seems to fully capitalise on them itself. It can’t turn that into money. The profits are small - 15 million euro in 2017 - and it was always a brand which seemed to play musical chairs with its store portfolio; continually opening and closing stores.
On the other hand, Michael Kors is a well run accessorises company. The minute they knew their mid-market brand had peaked, and their market was saturated, they started closing stores - between 100 and 125 over two years. They knew the landscape changed, the brand was fatigued, and you need to make hay while the sun shines, which they’ve done. It’s knowing when to start putting your money into new areas and elevating. Everything is about ‘elevating’ ATM!
The confidence of buying Jimmy Choo, and that seems to be doing well, has maintained the momentum of this spending spree. While not likely partners, many groups have disparate brands and, if Michael Kors knows one thing, it’s how to grow.
John D. Idol, Chairman and Chief Executive Officer of Michael Kors Holdings Limited, said, “With the full resources of our group, we believe that Versace will grow to over US$2.0 billion in revenues (from 668 million euro currently). We believe that the strength of the Michael Kors and Jimmy Choo brands, and the acquisition of Versace, position us to deliver multiple years of revenue and earnings growth.”
“Donatella’s iconic style is at the heart of the design aesthetic of Versace. She will continue to lead the company’s creative vision.” he says.
It’s interesting to remember LVMH used to own a third of Michael Kors before he went for the masstige market and the company blew up and he was also the Creative Director of the LVMH owned Celine in the late 1990s.
The new group will be called ‘Capri Holdings Limited’. (Didn’t Michael Kors once do a mink beach towel with ‘CAPRI’ on it?) The new group says there is an opportunity to grow the group’s revenues to US$8.0 billion in the long-term, which would make it one of the largest fashion companies.
Right - Vintage Versace advertising - Gianni Versace is forever associated with the Supermodels
Donatella Versace says, “Santo (brother), Allegra (daughter) and I will become shareholders in Capri Holdings Limited. This demonstrates our belief in the long-term success of Versace and commitment to this new global fashion luxury group.”
Michael Kors’ expertise is accessorises. They say they want to expand Versace men’s and women’s accessories and footwear from 35% to 60% of revenues. Versace has never really resonated in these areas, often looking more tacky than desirable. Jimmy Choo will also offer synergies in luxury footwear and bags.
There’s also going to be a filip back to dressing up at some point and Versace is well placed, particularly in a sexually charged, Italian way.
As for more affordable products, they could expand underwear, home, sunglasses and perfume. The perfumes, since the very beginning, have never matched the quality and branding of the rest of the brand. Versace needs to choose areas and do them well, rather than the light licensing it has often achieved since its inception in 1978. Versace was one of those brands that had such disparate product - from cheap looking tins of perfume to the most luxurious Italian printed silk.
Capri Holdings say they want to “build on Versace’s luxury runway momentum”, - *books Supermodels* - and want to be less reliant on its home market of the US, grow in Asia and become more global.
Versace must have had numerous takeover offers through the years and it would be interesting to know the reasons of, why now? Why Michael Kors? The brand is 40 this year, so maybe the family want to fully maximise its potential, maybe it was pressure from the private equity investors to get out, or maybe it’s the realisation that you have to turn into a billion dollar brand to survive. Grow or die.
Below - The Versace ladies by Steven Meisel