BUSINESS OF FASHION: WHAT'S NEXT FOR DKNY

BUSINESS OF FASHION: WHAT'S NEXT FOR DKNY

BUSINESS OF FASHION | LIMEI HOANG

After acquiring DKNY for $650 million, apparel firm G-III has cut a series of deals that could initially raise brand awareness and sales, but ultimately damage the label's premium image.

When G-III announced in July 2016 that it would acquire Donna Karan International from LVMH for $650 million, industry insiders wondered what the old-school apparel company — best known for licensing big-name brands — would do with DKNY, the diffusion line that became the core of the fashion house when Karan stepped down and closed her high-end label in 2015.

Since G-III closed the deal in December 2016, it has unveiled a wholesale-focused strategy that flies in the face of current retail trends favouring the direct-to-consumer model, raising the question of whether its approach is a long-term solution or a short-term fix.

Just this week, the company announced a licensing agreement with Calvin Klein and Tommy Hilfiger owner PVH, which will develop a new DKNY brand, DKNY Sport for Men. The first collection will debut in Spring 2018 and be sold in department stores across the United States and Canada.

At first blush, the partnership appears to be downright sensible. “There are a lot of synergies with DKNY and Calvin Klein and Tommy Hilfiger,” says Robert Burke, chief executive of advisory firm Robert Burke Associates. “PVH knows those businesses really well and G-III knows how to produce the product.”

But according to analysts, the move is just a short-term solution to raise DKNY’s brand awareness, and could limit brand control in the long term.

“When you have these kind of partnerships, neither side has perfect control,” says Neil Saunders, managing director of research firm GlobalData Retail. “For some middle-of-the-road kind of brands, that’s fine. But I always think for high-end brands, or more expensive brands, the whole point is that there is a sense of creative direction and brand story behind them that needs close control.”

The new licensing deal follows G-III’s partnership with Macy’s, announced in March, to exclusively sell DKNY women’s apparel, handbags and shoes. “The biggest push from department stores is to have exclusive product,” says Burke. “It’s the only way they are going to be able to compete against each other and all the other online competitors like Amazon and Shopbop.”

A spokesperson for G-III could not be immediately reached for comment, although the company has expressed plenty of confidence in its approach in recent months. “We believe that Macy’s is the ideal partner as we implement our strategy for DKNY to be the premier brand in the world for women’s apparel and accessories,” Morris Goldfarb, chairman and chief executive of G-III, said in a statement announcing the Macy’s deal.

But G-III’s Macy’s deal could actually prove counterproductive, argues Saunders. “I don’t think DKNY has the pulling power of other brands in the market among large swathes of customers so I think that exclusive deal has really limited their exposure,” he says. “[This is] good from the point of view they are not driving ubiquity, but it’s not great from the point of view of driving sales.”

Saunders believes G-III needs a much tighter distribution strategy that is built around the DKNY brand and its own stores, as seen with Coach and Ralph Lauren, which have pulled back from wholesale. “It is more complicated and slightly more expensive but I think in the long run it's likely more successful,” he explains. “The fact that they haven’t done that, signifies to me that what they really want is a kind of a quick win.”

The wholesale strategy could even be described as “dangerous” for a premium brand like DKNY, Saunders warns. “I think you get into devaluing the brand. DKNY actually is not that strong. Overall, they are probably going to get more sales out of [this strategy]. But for the long-term of the brand, I’m not sure it’s quite so sensible.”

NEW YORK TIMES: From Pantene to Polo: The New Man at Ralph Lauren

NEW YORK TIMES: From Pantene to Polo: The New Man at Ralph Lauren

NEW YORK TIMES | VANESSA FRIEDMAN

Can a man with deep experience in razors, fragrance, deodorant and shampoo help turn around the glossy narrative of Ralph Lauren, the brand, which has been troubled lately by store closings, less-than-stellar results and a chief executive’s departure?

Ralph Lauren, the man, seems to believe so, and on Wednesday he named Patrice Louvet, a former president of the global beauty division at Procter & Gamble and onetime leader of Gillette, as president and chief executive of the Ralph Lauren Corporation.

“He’s an enormously skilled business leader with a deep passion for the consumer and a sophisticated understanding of building global brands,” Mr. Lauren, executive chairman and chief creative officer, said in a statement, citing Mr. Louvet’s “collaborative working style, transformation experience and intense focus on results.”

He becomes the most recent example of a trend in luxury brands: looking to the world of consumer products to fill leadership ranks.

 “Every few years, there are certain places that are seen as good training grounds,” said William S. Susman, founder of the investment firm Threadstone Advisors. “For a while it was Bloomingdale’s, then Neiman Marcus. Now it’s the consumer products firms. They teach branding and direct-to-consumer sales, especially direct-to-millennial-consumers, and that is what everyone wants.”

They also may have more in common with billion-dollar global brands such as Ralph Lauren than smaller luxury houses do, said Robert Burke, founder of the luxury-sector consultancy Robert Burke Associates, especially in terms of managing an organization of global scale.

It arguably began in 2001, when LVMH Moët Hennessy Louis Vuitton hired Antonio Belloni, also a former Procter & Gamble executive, as group managing director, a job he still holds. But it didn’t cause much disruption in the industry until 2004, when François Pinault, then chief executive of the conglomerate Pinault-Printemps-Redoute (later PPR, and now Kering), chose Robert Polet, a frozen-foods executive from Unilever, to run the luxury division Gucci Group.

Mr. Polet was replacing Domenico De Sole, a widely respected fashion executive who, with Tom Ford, had revived Gucci and turned it into a global power. The industry scoffed at the idea of an “ice cream salesman” managing brands such as Gucci, Yves Saint Laurent and Balenciaga. The idea being, apparently, that someone with experience in selling such commoditized pleasures could not possibly understand the mysteries and creativity involved in luxury.

That turned out not to be true, and Mr. Polet did just fine until 2011, when François-Henri Pinault took over at PPR.

Since then, other executives have crossed the consumer-luxury barrier without much resistance, notably Fabrizio Freda, chief executive of Estée Lauder, who also previously worked at Procter & Gamble. Though the transitions have generally worked, a notable exception was Grita Loebsack, former executive vice president of skin care at Unilever, who briefly joined Kering as chief executive of its luxury, couture and leather goods emerging brands division in 2015, and quietly departed less than a year later.

“Well, nothing is foolproof,” Mr. Burke said. Especially when the job transition involves moving to what is effectively still a family-run company, like Ralph Lauren.

The risk, of course, is that, as Michael Boroian, president of the executive search firm Sterling International, said, the consumer products groups’ “more analytical, quantitative, rational and marketing-driven approach” is not always compatible with the more “intuitive, qualitative, heritage and high-touch bespoke client-centric approach” of a brand still run by its founder.

Whether this will prove to be a stumbling block for Mr. Louvet, as it was for his predecessor, Stefan Larsson, remains to be seen (Ralph Lauren shares fell slightly on Wednesday). But in the case of Ralph Lauren and its new chief executive, there’s another factor to consider, one that was not, as it happens, mentioned in the announcement.

“The brand has the veneer of luxury, but it’s also a consumer products company,” said Mr. Susman, referring to Ralph Lauren licenses, fragrances, housewares such as towels and sheets, and outlet basics like the Polo shirt. Under the dream, the commodities lie.

 

GLOSSY: How the digital strategies of LVMH and Kering stack up

GLOSSY: How the digital strategies of LVMH and Kering stack up

GLOSSY | Hilary Milnes 

LVMH and Kering, both French conglomerates that each own robust stables of high-end fashion brands, have finally realized their customers have moved online. That realization, however, has played out into two very different approaches for digital luxury.

“Both Kering and LVMH have understood that online is the way of the future,” said Rony Zeidan, founder of the agency RO NY. “But LVMH has taken a provocative stance with flagship, multi-brand, luxury retail, while Kering is keeping its brands’ online initiatives separate.”

Kering, in its calls with investors, its announcements and its annual reports, has stated clear intent to support its brands in endeavors to build out online stores and e-commerce and cross-channel capabilities, but LVMH’s digital guidance for its brands has been vague. As a result, LVMH-owned brands like Dior and Céline have dragged their feet to launch e-commerce. On the other hand, Kering-owned Gucci and Yves Saint Laurent — which back established sites — saw their online sales grow by 22 percent and 75 percent, respectively, in 2016.

Apparently, LVMH was planning something else. On Wednesday, news officially broke that LVMH will be launching a multi-brand marketplace in June. The site, 24 Sèvres, will sell 150 luxury brands online, including Louis Vuitton and Christian Dior, which currently aren’t sold through existing online luxury marketplaces like Net-a-Porter and Matches Fashion. The launch of 24 Sèvres is the first major initiative under Ian Rogers, LVMH’s chief digital officer who was brought on from Apple in 2015.

LVMH doesn’t break out online sales, but industry analysts estimated in September that, overall, e-commerce only accounted for 5 percent of the company’s revenue. Kering said its online sales jumped by 60 percent in the first quarter of 2017, during which it posted an overall revenue increase of 31 percent, to $3.8 billion.

While the overall luxury sector is expecting a small year-over-year growth of 3 to 4 percent between now and 2020, online sales for the industry are expected to drive the bulk of that growth, rising 20 percent year-over-year in the same time frame.

Kering has recognized the opportunity for growth online, citing it as a priority across its group of brands.

“Tomorrow’s luxury isn’t based on heritage and artisanal excellence; there must be creativity,” Kering CEO Francois-Henri Pinault told investors in April. “But creativity is not good enough. The implementation must be huge. Each team has to deliver to our customers, and organic growth will be amplified by the growing role of e-commerce in a cross-channel approach.”

The behind-the-scenes support of a parent company has proven critical for luxury brands looking to modernize. Customers can’t tell this guidance is taking place, and that’s part of the appeal.

“Kering has moved faster to drive its brands. It’s going to remain brand-specific and continue to put its support there,” said Rachel Spiegelman, CEO of the agency Pirch. “It’s an overarching ‘master plan’ message that then plays out on the brand level, where the power ultimately lies.”

The approach has seen major payoff for Kering’s biggest brands, Gucci and Yves Saint Laurent. Gucci sales hit 20-year record highs in the first quarter of 2017, with organic sales jumping 48 percent to $1.44 billion. Yves Saint Laurent revenue jumped 35 percent.

“Supporting your individual brands to succeed digitally is a strong strategy because the customer today is educated and will go to a brand directly when they want to shop it,” said Robert Burke, CEO of Robert Burke Associates. “The Gucci and YSL brands are extremely strong right now, so having robust websites for these brands is critical, because the brand awareness is there. People are searching for it.”

Kering is also driving a group-wide effort to funnel marketing dollars online. Pinault announced in February that 40 percent of the company’s marketing spend would go to digital efforts. While Gucci is nearly there, at 35 percent, other brands have had to do heavier lifting to get on board. Balenciaga is tripling its digital marketing spend, while Bottega Veneta is focusing on digital under its recently appointed CMO, Lisa Pomerantz.

The digital push is part of Kering’s effort to drive more millennial customers to its brands. Gucci’s efforts, having done Instagram and meme-driven campaigns, have resulted in a spike in millennial customers by 70 percent.

“Gucci and YSL have demonstrated how a luxury company can be relevant online,” said Jian DeLeon, editorial director at Highsnobiety. “On the LVMH side, as a company, they lack that digital relevance.”

Digital isn’t off the radar for LVMH, however. LVMH hired Rogers as its chief digital officer in 2015, but so far, his work has been focused on the launch of 24 Sèvres, a holistic, marketplace approach, rather than an impetus on digitizing individual brands.

“Having a chief digital officer focuses the online strategies, and ensures that an online venture is done the right way and is taking into consideration the 360-degree online approach,” said Zeidan. “It’s just like having a CEO for a company that keeps it focused and ensures all touch points are met.”

Both Rogers and LVMH president Bernard Arnault have acknowledged that LVMH’s emergence in the world of luxury online marketplaces is late to the game. But it’s not its first venture in the space: eLuxury.com, a similarly formatted online marketplace owned by LVMH, shuttered in 2009.

“LVMH is taking a massive risk, but they didn’t give up on this strategy,” said Spiegelman. “They just didn’t get on when the time was right, at first. But if they get the curation and the experience down, I think we’ll see that customers will respond to that.”

For LVMH, which is currently scaling back its brands’ presence in department stores, a driving factor is a control over unified distribution, according to Burke.
“LVMH has the capital to invest in this, and brands want to control distribution and not be reliant on another wholesale business,” said Burke. “It’s not really an either-or when it comes to which strategy will win, Kering’s individual brand strategy or LVMH’s marketplace. They’re different. But what drove them here is a move to rely on their own distribution, not department stores.”

FOOTWEAR NEWS: Why Ready-to-Wear Labels Like Attico and Friends Have Designs on Your Shoes

FOOTWEAR NEWS: Why Ready-to-Wear Labels Like Attico and Friends Have Designs on Your Shoes

FOOTWEAR NEWS I STEPHANIE HIRSCHMILLER

When street-style stars turned designers Gilda Ambrosio and Giorgia Tordini launched shoes under their Milan-based Attico label for spring ’17, the collection was an instant hit for top retailers.

“The fashion message is clear, the price structure is on point and, most importantly, I felt strongly that the product would resonate with our customer,” said Ida Petersson, nonapparel buying manager at London-based Browns Fashion. “We definitely saw this happen as soon as the product hit the store and our website, with certain items selling out within hours.”

But it’s not just new launches consumers are coveting. “There is a wave of brands that have renewed interest in shoes,” said Robert Burke, founder of an eponymous firm specializing in retail and fashion. He cited such established fashion houses as Chloé and Balmain.

For Attico, its 17 SKUs for spring included satin mules with flared heels and crystal-palm-tree embellishments, treading the line between kitsch and sophisticated. For fall, candy-wrapper metallics and opulent velvets were incorporated into sandals, pumps, ballerinas and mules.

The shoes are crafted in a small town in the Marche region of Italy. The whole idea, said the founders, is for Attico to be a complete wardrobe. Following the label’s Milan presentation, Net-a-Porter senior shoe buyer Thalia Tserevegou dubbed it “our favorite newcomer.” Price points for the shoes start at $550, making them more accessible than Attico dresses, which hover between $1,000 and $2,000. “They talk to a wider audience,” Petersson said.

The smart pricing strategy is an advantage for Attico as the brand navigates a competitive high-end shoe market and weak retail climate. The obstacles aren’t deterring more established players from targeting the shoe market, either. In fact, they see shoes as a growth opportunity.

For pre-fall ’17, Balmain’s creative director, Olivier Rousteing, relaunched the Parisian house’s accessories collection. For Balmain’s fall runway show, the label showed soaring stretch boots in snakeskin, modeled by Kendall Jenner.

“It’s important that every Balmain design — whether it be in our newly relaunched accessories line, our men’s collection or women’s collection — forms part of one coherent whole,” Rousteing told Footwear News“When you look at the pre-fall shoe collection, that unique Balmain attitude can’t be missed. The leathers, skins and construction all rely on the type of sourcing, expertise and craftsmanship that one expects from an historic Paris house. The spirit, though, is modern.”

Cassie Smart, buying manager for footwear and handbags at MatchesFashion.com, is confident the new product can complement the current offerings. “Balmain has a strong brand DNA already,” she noted, “but footwear is a great category with variable price brackets, attracting a wider audience than ready-to-wear.”

London-based Victoria Beckham is also placing more emphasis on the market, offering up 24 SKUs across five key shapes for fall ’17. “I’ve been designing my own show shoes for the past few seasons, and I’ve dipped my toe into wholesale,”she said. “The response was so strong that I decided to develop the collection. I’ve worked hard with my team to create a more substantial offering that sits on its own outside of the runway.”

Key styles include gently slouched boots and pointed V-vamp brogues with chrome buckles. They come in a heritage-inspired “gentlemen’s club” color palette of red, white and black.

Chloé CEO Geoffroy de la Bourdonnaye, too, has his eye on the footwear market. Following the appointment of new designer Natacha Ramsay-Levi, the brand is set to up its shoe game and is taking its manufacturing and design in-house. (It was previously done under license.) “Chloé’s footwear already offers strong categories and price points. While the classic Lauren ballet flat remains a strong volume driver, desirable runway styles also sell out fast on MatchesFashion.com,” said Smart. “There is strong potential.”

Paris’ new guard has also expanded into footwear. Glenn Martens’ Y-Project and Christelle Kocher’s Koché, both finalists for last year’s LVMH Prize, debuted shoe collections in February.

Martens, a Rihanna favorite, showed exaggerated ruched python-skin boots and crystallized spiral sandals snaking right up the leg. Coming in at over six feet long, the boots hold their shape via the same metal wire Martens uses to mold his denim. “Footwear offers the customer an easier way to own the identity of a brand,” the designer said. For his show, Martens also chose an offbeat way to spotlight the category. Dresses and skirts came with a slit-like hole at the front, through which one leg protruded. “The clothes were almost decoration around the shoe,” he explained.

Kocher, who has been artistic director at the Chanel-owned Maison Lemarié for seven years, launched Koché — all streetwear silhouettes and couture detailing — for spring ’16. Until now, she’s presented her collections with sneakers and flats. The designer’s intricate heels for fall ’17 were created with the help of jewelry specialist Goossens Paris and French house Massaro. They’re plated in white gold, molded into organic shapes and set with gray Swarovski pearls. “Accessories really drive a brand,” Kocher said. The designer’s styles have attracted buyer attention, including such retailers as Barneys, Style.com and MatchesFashion.com.

Finally, Simon Porte Jacquemus launched footwear for resort ’15 and has found success with the signature Rond Carré style — one heel is round and the other square. The designer has been gradually growing the category, and footwear now makes up 10 percent of his business. “There is more opportunity for expansion in shoes than with ready-to-wear, especially as we propose something different with a real signature,” Jacquemus said.

FALL INSPIRATIONS FROM FOOTWEAR’S NEW GUARD

Gilda Ambrosio and Giorgia Tordini, Attico “We stole some disco vibes from the extravagant ’80s, where ‘more’ was just perfect. We imagined a sort of gentlewomen’s club of passionate, playful, witty women whose attire combines feminine seduction with a hint of masculinity.”

Glenn Martens, Y-Project “The spiral shoes were inspired by cheap models I saw last year in New York’s Chinatown. I wanted to make them into real shoes. I always like to take things I know and develop them and exaggerate them and give them a twist.”

Christelle Kocher, Koché “I chose colors that were positive and happy, like little bonbons, and used a graphic logo on the insole. The look is bold but also refined and sophisticated, to continue the story with the amazing houses I’ve been working with since the start.”

Simon Porte Jacquemus, Jacquemus “My inspiration for fall was a couture girl who has fallen in love with a Gypsy. She’s trying to be more like him by wearing Gypsy-style accessories, but she still looks very Parisian.”

WSJ: Neiman Marcus Finds Even Wealthy Shoppers Want Better Deals

WSJ: Neiman Marcus Finds Even Wealthy Shoppers Want Better Deals

Wall Street Journal | Suzanne Kapner and Ryan Dezember

Lysa Heslov used to be a loyal Neiman Marcus shopper. Now, she buys most of her clothes, shoes and handbags at websites that carry the same designer brands, often at cheaper prices. 

“I price compare now much more than I ever did before,” said Ms. Heslov, a 52-year-old documentary film director who lives in Los Angeles. 

Neiman Marcus and other luxury retailers were long thought immune to the troubles of mass-market chains—falling foot traffic and the constant price wars that have triggered widespread closure of brick-and-mortar stores. 

But high-end chains, which raised prices incessantly over the past decade, are learning the hard way that even wealthy customers are hunting for better deals and selection, whether online or at shops run by individual brands. 

“Even a very rich person can say, ‘Enough is enough,’ when it comes to price,” said Matthew Singer, Neiman’s former men’s fashion director, now with his own clothing line. 

Sales of personal luxury goods, such as designer apparel and handbags, fell 1% last year, the first decline since 2009, according to Bain & Co. The slowdown contrasts with 4% growth in the global luxury market, which reached $1.16 trillion when including expenditures on pricey cars, travel, restaurants and such. 

“In the past, women had loyalty to a particular department store, and they would come in with a page torn from the retailer’s catalog and say, ‘I want that look,’ ” said Robert Burke, the former fashion director of Bergdorf Goodman who now runs his own consulting firm. 

The shift in consumer tastes has put pressure on several storied brands, including  Tiffany & Co. and Ralph Lauren Corp. , which both recently ousted their chief executives. 

“Consumers no longer prefer a one-stop approach to shopping,” said Deborah Weinswig of Fung Global Retail & Technology, a think tank. “This coincides with the current sentiment that big is the opposite of cool, making it very difficult for major retailers and brands to maintain a high level of cachet.” 

Few are feeling the heat as much as Neiman Marcus Group Ltd., which holds nearly $5 billion in debt that has grown through more than a decade of private-equity ownership. The company, which lost $406 million on sales of nearly $5 billion in the year that ended in July, recently abandoned plans to go public; credit-rating firms have warned there is a high risk it will default on its obligations. 

With their equity practically wiped out, Neiman’s owners, Ares Management LP and the Canada Pension Plan Investment Board, are looking for an exit. They recently approached Saks Fifth Avenue parent Hudson’s Bay Co. , about buying the retailer, according to people familiar with the situation. The continuing talks, first reported by The Wall Street Journal, are aimed at combining Neiman with its chief rival to cut costs and boost clout with suppliers. 

The company is “well-positioned to deal with both the secular and cyclical changes taking place in the luxury market,” said Neiman board member and Ares co-founder David Kaplan. “The brand remains a preferred destination for customers who value the expertise of the store associates and a differentiated product offering as well as for the design community.” 

Once upon a time, all Neiman needed to do to lift profits was raise prices. That model has since fallen out of fashion. 

Neiman Marcus opened its first store 110 years ago in Dallas, catering to those who made their wealth in Texas oil. One tycoon asked for all the items in a store window display delivered to his home for Christmas morning. Stanley Marcus, chief executive from 1950 to 1972, made it happen. 

The company, which now includes two Bergdorf Goodman stores in Manhattan, opened outposts in Beverly Hills, Palm Beach, Fla., and other high-net ZIP Codes amenable to $5,000 gowns and $2,500 handbags. Its annual Christmas catalog displayed such gifts as a $1.5 million Valkyrie-X private plane. That kind of extravagance earned it the nickname Needless Markup. 

“Our mantra had always been, ‘There is nothing too expensive for our customer,’ ” one former executive said. 

Burt Tansky, chief executive for nine years until 2010, was fond of saying, “I’d rather have one customer spending $5 million, than five million customers spending $1,” other executives said. Mr. Tansky declined to comment. 

The strategy allowed Neiman to increase average prices 7% to 9% annually until 2015, executives said. Some didn’t believe it was sustainable. “Every time Burt would say that I would cringe,” said Steven Dennis, who was Neiman’s senior vice president of strategy and marketing from 2004 to 2008. 

Price-hike profits, though, were common among Neiman’s peers. A 2015 Bain study found the entire luxury industry benefited from “relentless price increases over the past five to 10 years.” 

Consumers had little choice but to pay up because high-end brands tightly controlled distribution of their goods, usually keeping supplies limited to avoid end-of-season markdowns. And, until recently, few luxury goods were sold online, which gave brands a tighter rein on prices. 

“One of the tricks to luxury is price discipline,” said Aaron Cheris, the head of Bain’s retail practice for the Americas. Shoppers pay full price, he said, when they can’t “get stuff for less.” 

But competition from startups like Farfetch.com and Matchesfashion.com are forcing more discounts. Over a recent 24 hours, Farfetch’s prices averaged 2% lower and Matchesfashion’s 15% lower than Neimanmarcus.com’s prices on 32 identical items, according to price-tracking firm Market Track LLC. 

A Neiman spokeswoman said the comparison didn’t take into account a promotion at the time that offered a gift card worth 25% off a purchase. 

While brands still exert control, particularly over the newest and most popular items, it is harder for them to police prices that change rapidly across websites and fluctuate with shifting exchange rates, industry executives said. 

The explosion of discount chains, led by T.J. Maxx , that sell designer brands at cut-rate prices also made consumers rethink the need to pay full price. To compete, high-end department stores rushed in with their own off-price chains—Neiman’s Last Call, Saks Off 5th and Nordstrom Rack. 

Market forces have “started to commoditize products that were once extremely exclusive,” said Jenna Giannelli, a Citigroup Inc . analyst. About 37% of luxury goods sold at less than full price last year, Bain estimated, up from 32% two years ago. 

Anais Assoun, a faithful Neiman customer, said she was never a sale shopper: “If I wanted something, I would buy it at full retail.” 

These days, the Dallas resident shops sales, she said, because “regular retail doesn’t feel like a good value. You can easily spend $2,000 on shoes, which not that long ago would have been insane.” 

Neiman’s Chief Executive Karen Katz has tried to make her stores more accessible to younger, less affluent consumers. “You have to constantly be looking for the next generation,” she said. 

Ms. Katz championed a line of specialty stores called Cusp, which Neiman opened a decade ago, that feature lower-priced clothing and accessories. Neiman stores also have added relatively less expensive goods, such as $700 Prada handbags, about a quarter the price of the brand’s high-end satchels. In November, Neiman struck a deal with Rent the Runway, a startup that will rent expensive apparel at shops located in Neiman stores this year. 

A year after becoming chief executive in 2010, Ms. Katz reduced snob appeal by allowing Neiman shoppers to use Visa and Mastercard . Previously, the stores only acceptedAmerican Express or Neiman credit cards. 

Neiman has invested heavily in e-commerce, drawing roughly 31% of its sales from digital operations. That compares with an 8% online penetration for the luxury-goods market, according to Bain. 

Not all the moves have worked. After building six Cusp stores, Neiman closed two and stopped development of the chain in 2012. “As we came through the recession, we had to re-prioritize,” Ms. Katz said. The experiment continues at Neiman stores, where departments that carry lower-priced items are called Cusp. 

Neiman has suffered from the fall in energy prices that has sapped demand among wealthy Texan shoppers. And like other luxury retailers, it is grappling with a strong dollar that has chased off some foreign tourists. 

The retailer appears to be drawing more youthful shoppers, with a bit more than half of its customers age 50 or younger as of last July, compared with slightly less than half a year earlier, according to securities filings. 

Ms. Katz recently told analysts that Neiman is simply replacing aging baby boomers with “the next generation.” 

While younger shoppers are important to help brands stay relevant, they aren’t buying luxury goods the way they once did. 

“Back in 2007, there were young women who would skip meals to save money to buy the latest Marc Jacobs bag,” said Michael Crotty, a marketing executive who has worked at Nordstrom and Neiman Marcus. “Having the right bag, the right shoe, meant so much.” 

To celebrate her 29th birthday last month, Veronica Kamenjarin, a Chicago attorney, splurged on a wine-tasting trip to Napa Valley, where she and her husband dined at the exclusive French Laundry. The last time she bought a designer handbag was four years ago. 

Ms. Kamenjarin said she chose a classic Louis Vuitton style that wouldn’t go out of fashion: “I didn’t want to worry about having to buy the latest bag every year.” 

Neiman has less of a cushion than rivals because of its debt, which dates to its 2005 sale to Warburg Pincus LLC and TPG for about $5.1 billion. 

To boost returns, Warburg and TPG paid mostly with borrowed money. The owners, along with bankers at Credit Suisse Group AG , came up with a new type of debt—called pay-in-kind, or PIK, toggle bonds—to protect against a downturn. These instruments allow the issuer to make interest payments by issuing new bonds rather than paying in cash. 

Investors were drawn by a better yield, and PIK toggle bonds became a feature of many of the era’s corporate buyouts. To celebrate their Neiman purchase, the buyout firms hung plaques fitted with replicas of old-fashioned factory switches. 

When the financial crisis hit in 2008, and sales fell, Neiman’s owners didn’t want to spook suppliers by drawing on a credit line to make interest payments, said people familiar with the matter. Instead, they issued new debt to cover payments for nine months through October 2009. In Warburg’s New York offices, employees flipped the wall-mounted switches from “cash” to “bonds,” some of these people said. 

When Neiman resumed cash payments in mid-2010, Warburg employees celebrated by switching the toggle back, they said. 

By then, Neiman was generating enough cash to pay down debt, and the owners plotted their exit. They took nearly $450 million out of the company as a dividend a year before selling it for about $6 billion in 2013 to Ares and the CPPIB. The sellers more than doubled their cash investment in the deal. 

The new owners, meanwhile, loaded Neiman with more debt. By 2014, Neiman owed $4.7 billion, up from $250 million in 2005. 

Ms. Katz got this advice after the 2013 deal by one of the sellers: Pursue a public stock offering as soon as possible and use the proceeds to pay down debt, according to a person familiar with the matter. 

The owners have largely eschewed debt reduction, instead spending more than $900 million to refurbish stores, open new ones and beef up Neiman’s online business, according to securities filings and a person familiar with the matter. The company had about $4.6 billion of debt as of January. 

Neiman filed for an IPO in 2015, but withdrew the offering earlier this year as its business faltered. 

With Neiman’s bonds trading at around 60 cents on the dollar, the company could have trouble accessing the capital markets to refinance notes coming due in 2020 and 2021, according to Ms. Giannelli, the Citi analyst, with investors skeptical it can repay the debt. 

On Friday, Neiman’s owners once again chose to issue new debt to cover interest payments through October 14, according to a securities filing. 

New management and cost cuts follow many corporate buyouts. But Neiman’s owners have left Ms. Katz and her team alone. “Each of them has allowed us to do what we’ve needed to do to grow the business,” she said. 

Yet, it is hard to ignore the rationale for combining Neiman and Saks, said Stephen Sadove, former Saks chief executive. “It’s a tougher luxury environment,” he said, “and you need more scale.” 

FINANCIAL TIMES: Luxury retailers beat a retreat from ‘vanity’ real estate

FINANCIAL TIMES: Luxury retailers beat a retreat from ‘vanity’ real estate

FINANCIAL TIMES | ANNA NICOLAU AND JUDITH EVANS 

Manhattan’s Bleecker Street has seen better days. Boosted by a frothy investment market and booming tourism as New York recovered from the Lehman crisis, retail rents on the main drag of Greenwich Village had soared over the past five years. But in recent months upmarket retailers, facing steeper losses to online shopping and ever pricier rents, have shut their stores.

The departure of luxury brands including Marc Jacobs, Jimmy Choo and Ralph Lauren, which helped transform Bleecker Street from a bohemian centre to a high-end shopping paradise, has left two or three vacant shops on each block. 

“The pioneers that made that street are pulling back . . . it really casts a shadow,” says Faith Consolo, chairwoman of the retail leasing and sales division at real estate firm Douglas Elliman. “I haven’t seen a cycle like this before.” 

Similar trends are emerging along the priciest shopping corridors in the US, including Robertson Boulevard in Los Angeles and the design district in Miami, as retailers pull back from “vanity” real estate. They have been deterred partly by what had been runaway rental growth — as much as 50 per cent in five years, according to Cushman & Wakefield, the property consultancy.

But beyond the cyclical patterns of real estate, there is also a structural shift, analysts say, as online sales draw retailers’ focus away from prestigious store sites. While before a presence on a glitzy street was deemed a necessary marketing expense, some luxury retailers are now rethinking their footprint to adapt to a new kind of shopper that prefers browsing the internet from the sofa. 

The Amazon factor is hurting retailers’ margins “so they are spending more on their own ecommerce platforms rather than bricks-and-mortar divisions”, says Ihor Dusaniwsky, head of research at S3 Partners, a financial analytics firm. 

Meanwhile, although consumer confidence surveys appear positive, sales growth overall has dropped. The signs of weakness are leading some landlords to offload properties. 

On New York’s Fifth Avenue, the world’s most expensive shopping street, vacancy rates have jumped from 10 per cent a year ago to 16 per cent, according to Cushman & Wakefield. Rents there have fallen for the first time since the recession “and the trend is not over”, the consultancy warns. Vacancy rates across SoHo have climbed to 18 per cent, from 12 per cent a year ago, according to Jones Lang LaSalle. 

The newfound caution among retailers has had a “very significant and fast” negative impact on retail property, says Chris Conlon, chief executive of Acadia Realty, a real estate investment trust. 

It is not just prestigious streets that have been hit. Malls are also hurting, as chains from Sears to Macy’s shut hundreds of stores. Analysts at Green Street Advisors argue that “low growth is the new normal”, while market rents are becoming decoupled from tenants’ revenue growth as more sales move online. 

“[Rents] are at a price point now that exceeds what retail sales can perform,” says Spencer Levy, global head of research for CBRE. He notes that a stronger US dollar also hurts sales in New York, where deep-pocketed foreigners historically flock for deals. 

Investors have caught the gloomy mood: shares in US retail Reits have tumbled by almost 25 per cent since their peak last August, according to Dow Jones, compared with an 11 per cent decline across all Reits. Capital values in the private markets have yet to mirror that shift, but listed shares often act as a bellwether. 

Meanwhile, hedge funds are building up significant short positions against retail players. Short interest against international retail Reits has more than doubled to $12.5bn since November, according to data from S3 Partners.

Of this, $1.5bn of short positions are held against Simon Properties, the US’s largest retail Reit. “Looking back over several years, this is the first time I have seen [short interest] at over $10bn in aggregate,” says Mr Dusaniwsky of S3 Partners. 

The nervousness is also affecting non-listed groups. Thor Equities, the private equity real estate firm, is seeking to sell three Fifth Avenue properties bought between 2007 and 2011 after failing to find tenants for much of the space, risking an inability to generate income to pay off loans attached to the properties. “If you want big tenants . . . there aren’t that many that want that size footprint any more,” says Jedd Nero, principal at real estate broker Avison Young. 

Thor “did not get the numbers they wanted” and is now looking to lease out the spaces, says someone familiar with the company’s thinking. “Landlords take a little while to face reality,” the person adds. 

Bleecker Street in Greenwich Village, c1965 © Getty One of the properties, a 19-storey office and retail building at 590 Fifth Avenue, has had its asking price cut from $170m last year to $150m, according to Bill Shanahan, a broker at CBRE who is selling the property. Plans to convert it into a flagship retail space failed to tempt a tenant. 

Analysts and brokers say that landlords have been slow to adapt their leasing strategies despite an overhang of supply, leading to “very lengthy” deal negotiations, according to Cushman & Wakefield. 

Mr Conlon of Acadia Realty says: “If you bought in SoHo or Fifth Avenue in 2015 and you underwrote that real estate to capture that kind of growth, then it’s kind of like musical chairs: the music stops and you’re probably disappointed today.”

As rents continue to slip, some landlords and tenants are beginning to meet in the middle, says Patrick Smith, vice-chairman of JLL’s retail brokerage, who predicts that “by the end of this year you’re going to see more transactions”. 

However, most retailers are staying on the sidelines for now, says Mr Nero: “No one wants to catch a falling knife.” 

While there are some pockets of excessive lending in the market — Green Street says, for example, that Reits owning less desirable “B” and “C” grade malls are “carrying too much debt and are ill-equipped for a sizeable decline in asset values” — more prudent lending since the 2008 crisis should help to limit potential distress. 

However, the structural shift towards ecommerce looks likely to have some way to run. Green Street estimates that about 20 per cent of sales for “mall-like products” such as clothing have shifted online; that is forecast to rise above 30 per cent in the next five years. 

Other prime retail sites may also have to confront this shift. Rents in Hong Kong’s Causeway Bay are weakening and on Paris’s Champs-Élysées they were flat over the past year, according to Cushman & Wakefield, though downturns in tourism were bigger factors than online sales. 

In New York, it is difficult to gauge how long the current correction will last because there have been few deals to draw upon, says Mr Conlon. For spaces in SoHo that were renting for $1,000 per square foot at the peak, rents have dropped by as much as 20 per cent. “We’re in the middle [of the correction]. Retailers are saying: I’m not sure what I should pay, so I’m going to wait.” He says Acadia is preparing to buy in these markets because he predicts they will be distressed. 

“You’re seeing a seismic shift in retail, and you’ll continue to see consolidation as tenants that can’t figure it out go out of business,” says Mr Nero of Avison Young. “It’s not the way it was in the past 100 years, where you put a product on the shelf and everyone comes in.”

Food eats up bigger share of US shopping centres While upmarket names are cutting back, one bright spot for landlords has been a different type of shopping experience: food.

Food halls featuring trendy restaurants and fast casual outlets have become a staple of New York’s new retail property developments. “Le District”, a 30,000 sq ft food market, is the centrepiece of Brookfield Place, a luxury shopping centre that opened two years ago in Manhattan’s financial district. Eataly, an Italian food emporium, has leased 48,000 sq ft at the World Trade Center’s new Oculus shopping mall.

Landlords have been keen to lure food tenants, which usually take on longer leases than other retailers, to meet demand from on-the-go urban shoppers, says Faith Consolo, chairwoman of Douglas Elliman's retail leasing and sales division. “It’s like we spit them out,” she says. “The food experience is what made these new developments . . . it is a creative time in retailing.”

Food now takes up about 9 per cent of space in US shopping centres, nearly double that of a decade ago, and is projected to rise to 20 per cent in some markets by 2025, according to a report by JLL. The brokerage expects the number of food halls in the US to increase from 140 this year to 200 by 2019.

Food “can now act as an anchor”, according to the International Council of Shopping Centers. “As demand for traditional merchandise space abates, demand for food service space appears insatiable.” A well-stocked food hall can draw shoppers, particularly millennials, who look to spend money on experiences; food has the added benefit of being “internet resistant”, according to analysts at Green Street Advisors.

“Convenience used to be a bad word. Today it’s a much better word, and a big part of that is food,” says Robert Burke, founder of luxury brand consultancy Robert Burke Associates. “The right food and the right entertainment are now the key components of a shopping centre.”

Manhattan’s Bleecker Street has seen better days. Boosted by a frothy investment market and booming tourism as New York recovered from the Lehman crisis, retail rents on the main drag of Greenwich Village had soared over the past five years. But in recent months upmarket retailers, facing steeper losses to online shopping and ever pricier rents, have shut their stores.

The departure of luxury brands including Marc Jacobs, Jimmy Choo and Ralph Lauren, which helped transform Bleecker Street from a bohemian centre to a high-end shopping paradise, has left two or three vacant shops on each block. 

“The pioneers that made that street are pulling back . . . it really casts a shadow,” says Faith Consolo, chairwoman of the retail leasing and sales division at real estate firm Douglas Elliman. “I haven’t seen a cycle like this before.” 

Similar trends are emerging along the priciest shopping corridors in the US, including Robertson Boulevard in Los Angeles and the design district in Miami, as retailers pull back from “vanity” real estate. They have been deterred partly by what had been runaway rental growth — as much as 50 per cent in five years, according to Cushman & Wakefield, the property consultancy.

But beyond the cyclical patterns of real estate, there is also a structural shift, analysts say, as online sales draw retailers’ focus away from prestigious store sites. While before a presence on a glitzy street was deemed a necessary marketing expense, some luxury retailers are now rethinking their footprint to adapt to a new kind of shopper that prefers browsing the internet from the sofa. 

The Amazon factor is hurting retailers’ margins “so they are spending more on their own ecommerce platforms rather than bricks-and-mortar divisions”, says Ihor Dusaniwsky, head of research at S3 Partners, a financial analytics firm. 

Meanwhile, although consumer confidence surveys appear positive, sales growth overall has dropped. The signs of weakness are leading some landlords to offload properties. 

On New York’s Fifth Avenue, the world’s most expensive shopping street, vacancy rates have jumped from 10 per cent a year ago to 16 per cent, according to Cushman & Wakefield. Rents there have fallen for the first time since the recession “and the trend is not over”, the consultancy warns. Vacancy rates across SoHo have climbed to 18 per cent, from 12 per cent a year ago, according to Jones Lang LaSalle. 

The newfound caution among retailers has had a “very significant and fast” negative impact on retail property, says Chris Conlon, chief executive of Acadia Realty, a real estate investment trust. 

It is not just prestigious streets that have been hit. Malls are also hurting, as chains from Sears to Macy’s shut hundreds of stores. Analysts at Green Street Advisors argue that “low growth is the new normal”, while market rents are becoming decoupled from tenants’ revenue growth as more sales move online. 

“[Rents] are at a price point now that exceeds what retail sales can perform,” says Spencer Levy, global head of research for CBRE. He notes that a stronger US dollar also hurts sales in New York, where deep-pocketed foreigners historically flock for deals. 

Investors have caught the gloomy mood: shares in US retail Reits have tumbled by almost 25 per cent since their peak last August, according to Dow Jones, compared with an 11 per cent decline across all Reits. Capital values in the private markets have yet to mirror that shift, but listed shares often act as a bellwether. 

Meanwhile, hedge funds are building up significant short positions against retail players. Short interest against international retail Reits has more than doubled to $12.5bn since November, according to data from S3 Partners.

Of this, $1.5bn of short positions are held against Simon Properties, the US’s largest retail Reit. “Looking back over several years, this is the first time I have seen [short interest] at over $10bn in aggregate,” says Mr Dusaniwsky of S3 Partners. 

The nervousness is also affecting non-listed groups. Thor Equities, the private equity real estate firm, is seeking to sell three Fifth Avenue properties bought between 2007 and 2011 after failing to find tenants for much of the space, risking an inability to generate income to pay off loans attached to the properties. “If you want big tenants . . . there aren’t that many that want that size footprint any more,” says Jedd Nero, principal at real estate broker Avison Young. 

Thor “did not get the numbers they wanted” and is now looking to lease out the spaces, says someone familiar with the company’s thinking. “Landlords take a little while to face reality,” the person adds. 

Bleecker Street in Greenwich Village, c1965 © Getty One of the properties, a 19-storey office and retail building at 590 Fifth Avenue, has had its asking price cut from $170m last year to $150m, according to Bill Shanahan, a broker at CBRE who is selling the property. Plans to convert it into a flagship retail space failed to tempt a tenant. 

Analysts and brokers say that landlords have been slow to adapt their leasing strategies despite an overhang of supply, leading to “very lengthy” deal negotiations, according to Cushman & Wakefield. 

Mr Conlon of Acadia Realty says: “If you bought in SoHo or Fifth Avenue in 2015 and you underwrote that real estate to capture that kind of growth, then it’s kind of like musical chairs: the music stops and you’re probably disappointed today.”

As rents continue to slip, some landlords and tenants are beginning to meet in the middle, says Patrick Smith, vice-chairman of JLL’s retail brokerage, who predicts that “by the end of this year you’re going to see more transactions”. 

However, most retailers are staying on the sidelines for now, says Mr Nero: “No one wants to catch a falling knife.” 

While there are some pockets of excessive lending in the market — Green Street says, for example, that Reits owning less desirable “B” and “C” grade malls are “carrying too much debt and are ill-equipped for a sizeable decline in asset values” — more prudent lending since the 2008 crisis should help to limit potential distress. 

However, the structural shift towards ecommerce looks likely to have some way to run. Green Street estimates that about 20 per cent of sales for “mall-like products” such as clothing have shifted online; that is forecast to rise above 30 per cent in the next five years. 

Other prime retail sites may also have to confront this shift. Rents in Hong Kong’s Causeway Bay are weakening and on Paris’s Champs-Élysées they were flat over the past year, according to Cushman & Wakefield, though downturns in tourism were bigger factors than online sales. 

In New York, it is difficult to gauge how long the current correction will last because there have been few deals to draw upon, says Mr Conlon. For spaces in SoHo that were renting for $1,000 per square foot at the peak, rents have dropped by as much as 20 per cent. “We’re in the middle [of the correction]. Retailers are saying: I’m not sure what I should pay, so I’m going to wait.” He says Acadia is preparing to buy in these markets because he predicts they will be distressed. 

“You’re seeing a seismic shift in retail, and you’ll continue to see consolidation as tenants that can’t figure it out go out of business,” says Mr Nero of Avison Young. “It’s not the way it was in the past 100 years, where you put a product on the shelf and everyone comes in.”

Food eats up bigger share of US shopping centres While upmarket names are cutting back, one bright spot for landlords has been a different type of shopping experience: food.

Food halls featuring trendy restaurants and fast casual outlets have become a staple of New York’s new retail property developments. “Le District”, a 30,000 sq ft food market, is the centrepiece of Brookfield Place, a luxury shopping centre that opened two years ago in Manhattan’s financial district. Eataly, an Italian food emporium, has leased 48,000 sq ft at the World Trade Center’s new Oculus shopping mall.

Landlords have been keen to lure food tenants, which usually take on longer leases than other retailers, to meet demand from on-the-go urban shoppers, says Faith Consolo, chairwoman of Douglas Elliman's retail leasing and sales division. “It’s like we spit them out,” she says. “The food experience is what made these new developments . . . it is a creative time in retailing.”

Food now takes up about 9 per cent of space in US shopping centres, nearly double that of a decade ago, and is projected to rise to 20 per cent in some markets by 2025, according to a report by JLL. The brokerage expects the number of food halls in the US to increase from 140 this year to 200 by 2019.

Food “can now act as an anchor”, according to the International Council of Shopping Centers. “As demand for traditional merchandise space abates, demand for food service space appears insatiable.” A well-stocked food hall can draw shoppers, particularly millennials, who look to spend money on experiences; food has the added benefit of being “internet resistant”, according to analysts at Green Street Advisors.

“Convenience used to be a bad word. Today it’s a much better word, and a big part of that is food,” says Robert Burke, founder of luxury brand consultancy Robert Burke Associates. “The right food and the right entertainment are now the key components of a shopping centre.”

Manhattan’s Bleecker Street has seen better days. Boosted by a frothy investment market and booming tourism as New York recovered from the Lehman crisis, retail rents on the main drag of Greenwich Village had soared over the past five years. But in recent months upmarket retailers, facing steeper losses to online shopping and ever pricier rents, have shut their stores.

The departure of luxury brands including Marc Jacobs, Jimmy Choo and Ralph Lauren, which helped transform Bleecker Street from a bohemian centre to a high-end shopping paradise, has left two or three vacant shops on each block. 

“The pioneers that made that street are pulling back . . . it really casts a shadow,” says Faith Consolo, chairwoman of the retail leasing and sales division at real estate firm Douglas Elliman. “I haven’t seen a cycle like this before.” 

Similar trends are emerging along the priciest shopping corridors in the US, including Robertson Boulevard in Los Angeles and the design district in Miami, as retailers pull back from “vanity” real estate. They have been deterred partly by what had been runaway rental growth — as much as 50 per cent in five years, according to Cushman & Wakefield, the property consultancy.

But beyond the cyclical patterns of real estate, there is also a structural shift, analysts say, as online sales draw retailers’ focus away from prestigious store sites. While before a presence on a glitzy street was deemed a necessary marketing expense, some luxury retailers are now rethinking their footprint to adapt to a new kind of shopper that prefers browsing the internet from the sofa. 

The Amazon factor is hurting retailers’ margins “so they are spending more on their own ecommerce platforms rather than bricks-and-mortar divisions”, says Ihor Dusaniwsky, head of research at S3 Partners, a financial analytics firm. 

Meanwhile, although consumer confidence surveys appear positive, sales growth overall has dropped. The signs of weakness are leading some landlords to offload properties. 

On New York’s Fifth Avenue, the world’s most expensive shopping street, vacancy rates have jumped from 10 per cent a year ago to 16 per cent, according to Cushman & Wakefield. Rents there have fallen for the first time since the recession “and the trend is not over”, the consultancy warns. Vacancy rates across SoHo have climbed to 18 per cent, from 12 per cent a year ago, according to Jones Lang LaSalle. 

The newfound caution among retailers has had a “very significant and fast” negative impact on retail property, says Chris Conlon, chief executive of Acadia Realty, a real estate investment trust. 

It is not just prestigious streets that have been hit. Malls are also hurting, as chains from Sears to Macy’s shut hundreds of stores. Analysts at Green Street Advisors argue that “low growth is the new normal”, while market rents are becoming decoupled from tenants’ revenue growth as more sales move online. 

“[Rents] are at a price point now that exceeds what retail sales can perform,” says Spencer Levy, global head of research for CBRE. He notes that a stronger US dollar also hurts sales in New York, where deep-pocketed foreigners historically flock for deals. 

Investors have caught the gloomy mood: shares in US retail Reits have tumbled by almost 25 per cent since their peak last August, according to Dow Jones, compared with an 11 per cent decline across all Reits. Capital values in the private markets have yet to mirror that shift, but listed shares often act as a bellwether. 

Meanwhile, hedge funds are building up significant short positions against retail players. Short interest against international retail Reits has more than doubled to $12.5bn since November, according to data from S3 Partners.

Of this, $1.5bn of short positions are held against Simon Properties, the US’s largest retail Reit. “Looking back over several years, this is the first time I have seen [short interest] at over $10bn in aggregate,” says Mr Dusaniwsky of S3 Partners. 

The nervousness is also affecting non-listed groups. Thor Equities, the private equity real estate firm, is seeking to sell three Fifth Avenue properties bought between 2007 and 2011 after failing to find tenants for much of the space, risking an inability to generate income to pay off loans attached to the properties. “If you want big tenants . . . there aren’t that many that want that size footprint any more,” says Jedd Nero, principal at real estate broker Avison Young. 

Thor “did not get the numbers they wanted” and is now looking to lease out the spaces, says someone familiar with the company’s thinking. “Landlords take a little while to face reality,” the person adds. 

Bleecker Street in Greenwich Village, c1965 © Getty One of the properties, a 19-storey office and retail building at 590 Fifth Avenue, has had its asking price cut from $170m last year to $150m, according to Bill Shanahan, a broker at CBRE who is selling the property. Plans to convert it into a flagship retail space failed to tempt a tenant. 

Analysts and brokers say that landlords have been slow to adapt their leasing strategies despite an overhang of supply, leading to “very lengthy” deal negotiations, according to Cushman & Wakefield. 

Mr Conlon of Acadia Realty says: “If you bought in SoHo or Fifth Avenue in 2015 and you underwrote that real estate to capture that kind of growth, then it’s kind of like musical chairs: the music stops and you’re probably disappointed today.”

As rents continue to slip, some landlords and tenants are beginning to meet in the middle, says Patrick Smith, vice-chairman of JLL’s retail brokerage, who predicts that “by the end of this year you’re going to see more transactions”. 

However, most retailers are staying on the sidelines for now, says Mr Nero: “No one wants to catch a falling knife.” 

While there are some pockets of excessive lending in the market — Green Street says, for example, that Reits owning less desirable “B” and “C” grade malls are “carrying too much debt and are ill-equipped for a sizeable decline in asset values” — more prudent lending since the 2008 crisis should help to limit potential distress. 

However, the structural shift towards ecommerce looks likely to have some way to run. Green Street estimates that about 20 per cent of sales for “mall-like products” such as clothing have shifted online; that is forecast to rise above 30 per cent in the next five years. 

Other prime retail sites may also have to confront this shift. Rents in Hong Kong’s Causeway Bay are weakening and on Paris’s Champs-Élysées they were flat over the past year, according to Cushman & Wakefield, though downturns in tourism were bigger factors than online sales. 

In New York, it is difficult to gauge how long the current correction will last because there have been few deals to draw upon, says Mr Conlon. For spaces in SoHo that were renting for $1,000 per square foot at the peak, rents have dropped by as much as 20 per cent. “We’re in the middle [of the correction]. Retailers are saying: I’m not sure what I should pay, so I’m going to wait.” He says Acadia is preparing to buy in these markets because he predicts they will be distressed. 

“You’re seeing a seismic shift in retail, and you’ll continue to see consolidation as tenants that can’t figure it out go out of business,” says Mr Nero of Avison Young. “It’s not the way it was in the past 100 years, where you put a product on the shelf and everyone comes in.”

Food eats up bigger share of US shopping centres While upmarket names are cutting back, one bright spot for landlords has been a different type of shopping experience: food.

Food halls featuring trendy restaurants and fast casual outlets have become a staple of New York’s new retail property developments. “Le District”, a 30,000 sq ft food market, is the centrepiece of Brookfield Place, a luxury shopping centre that opened two years ago in Manhattan’s financial district. Eataly, an Italian food emporium, has leased 48,000 sq ft at the World Trade Center’s new Oculus shopping mall.

Landlords have been keen to lure food tenants, which usually take on longer leases than other retailers, to meet demand from on-the-go urban shoppers, says Faith Consolo, chairwoman of Douglas Elliman's retail leasing and sales division. “It’s like we spit them out,” she says. “The food experience is what made these new developments . . . it is a creative time in retailing.”

Food now takes up about 9 per cent of space in US shopping centres, nearly double that of a decade ago, and is projected to rise to 20 per cent in some markets by 2025, according to a report by JLL. The brokerage expects the number of food halls in the US to increase from 140 this year to 200 by 2019.

Food “can now act as an anchor”, according to the International Council of Shopping Centers. “As demand for traditional merchandise space abates, demand for food service space appears insatiable.” A well-stocked food hall can draw shoppers, particularly millennials, who look to spend money on experiences; food has the added benefit of being “internet resistant”, according to analysts at Green Street Advisors.

“Convenience used to be a bad word. Today it’s a much better word, and a big part of that is food,” says Robert Burke, founder of luxury brand consultancy Robert Burke Associates. “The right food and the right entertainment are now the key components of a shopping centre.”

 

NEW YORK TIMES: Stores Take Flight From Fifth Avenue in Manhattan

NEW YORK TIMES: Stores Take Flight From Fifth Avenue in Manhattan

NEW YORK TIMES | RACHEL ABRAMS

Bergdorf Goodman. Tiffany & Company. Louis Vuitton. Fifth Avenue in Manhattan is to shopping what Broadway is to theater, defined by the marquee names that for decades have occupied some of New York City’s most prized real estate.

But lately, the avenue’s glittery window displays have been changing more quickly, as retailers have streamed in and out. Tourism has slowed while online shopping has sped up, making it harder for companies to justify the cavernous spaces and sky-high rents along the shopping strip.

On Tuesday, Ralph Lauren became the latest retailer to pull up stakes, announcing that it would close its flagship Polo store at Fifth Avenue and 55th Street as part of a previously announced effort to reorganize the company.

The move highlights how higher-end brands are not immune to the broader troubles facing brick-and-mortar retailers from online shopping and other competitors. Companies must often choose whether to invest in their online or physical stores — including showcase locations like those on Fifth Avenue.

“The Fifth Avenue model seemed to work for a while, and then it got to a point where it just doesn’t work at this price anymore,” said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. “It got to the point where I think landlords were jacking up each new lease with higher and higher rent, and at some point, something had to give.”

Stores still line the avenue. But in recent years, a record number of brands along the upper part of the shopping strip have shuttered or relocated, including Kenneth Cole, Juicy Couture and H&M, according to an analysis from the brokerage firm Cushman & Wakefield. From 49th to 60th Streets, the availability rate of leases — one gauge of turnover — reached 15.9 percent at the end of last year, up from 6.1 percent five years earlier.

“I think brands are becoming more focused on driving sales and being realistic with what they need as far as the store size,” said Robert Burke, a luxury consultant who worked as an executive at Ralph Lauren in the 1990s. “I think you can still set a brand image without having a huge store.”

Across the country, once-mighty chains like Macy’s and Sears have had to re-evaluate their physical locations. While the majority of shopping is still done in person, e-commerce has grown faster than brick-and-mortar sales. Department and big-box stores across the country have closed locations. Others have filed for bankruptcy, including American Apparel, Radio Shack and, on Tuesday, Payless.

Since the middle of 2015, major brands have shut down at least 470 locations at an accelerating pace, according to Ms. Denham. Those locations, represented in large part by Sports Authority, Macy’s, J. C. Penney and Kmart, add up to about 28.9 million square feet of retail space, she said.

What’s happening on Fifth Avenue reflects “the rebalancing of brick-and-mortar and e-commerce that we’re experiencing,” said Gene Spiegelman, a vice chairman at Cushman & Wakefield.

“Retail sales are still growing,” he said. “The question is, where do those sales originate?”

Fifth Avenue’s Evolution

The retail industry faces turmoil, and not even Fifth Avenue from 49th to 60th Streets, one of the premier shopping strips in the city, has been immune.

Ralph Lauren, a brand that helped define American fashion for much of the past half-century, has struggled to reinvent itself for the modern era. It has long subsisted on core products like Gatsby gowns and polo shirts.

It opened its Polo location on Fifth Avenue toward the end of 2014. The next year, it appointed a chief executive, Stefan Larsson, for the first time, an acknowledgment that the brand’s eponymous founder needed help to compete with fast fashion and other challenges. Last year, Mr. Larsson announced a plan to trim Ralph Lauren’s many labels and focus more on creative designs and a quicker production timetable.

His path toward reinventing Ralph Lauren, however, was short-lived. Citing creative differences with Mr. Lauren, Mr. Larsson said in February that he would depart the company on May 1, an abrupt shake-up that sent the stock price tumbling.

In its most recent quarter, which ended on Dec. 31, revenue fell more than 12 percent to $1.7 billion, and the company said that it was on track to close 50 stores by the end of this fiscal year. On Tuesday, Jane Nielsen, the chief financial officer, said in a statement that the Polo closing helped “ensure we have the right distribution and customer experience in place.”

The company declined to comment further about the decision. Shares of Ralph Lauren fell 4.5 percent to close at $77.74 on Tuesday.

Landlords along Fifth Avenue have not had much sympathy for the troubles of the retail industry. At the end of last year, the average asking price for a square foot of retail space from 49th to 60th Streets was more than $2,900, up from $2,283 at the end of 2012, according to data from Cushman & Wakefield.

Those figures make the area one of the most expensive in a city known for the stratospheric cost of its real estate. But other factors have affected retailers’ prospects in the area, too. Foreign tourists, who typically spend more than domestic visitors, have been pinched by the declining value of the euro and the pound.

And for the first time since the recession, New York City is expecting a drop in international tourism, citing President Trump’s recent travel ban and protectionist rhetoric.

NYC & Company, the city’s tourism and marketing agency, projects that 300,000 fewer international travelers will visit the five boroughs this year. While domestic travel is expected to remain strong, the group has cautioned that it takes four domestic travelers to equal the spending power of one international visitor.

Fifth Avenue was particularly hard-hit between the presidential election in November and the inauguration in January, when Mr. Trump, then the president-elect, continued to work out of Trump Tower, on the avenue between 56th and 57th Streets. Swarms of security personnel made a leisurely stroll around Trump Tower into a nightmarish maze, slowing foot traffic to nearby retailers.

“Yes, there are still some gates and cement barriers,” said Tom Cusick, the president of the Fifth Avenue Business Improvement District. “But the kinds of problems that we had between election and inauguration have mostly evaporated.”

Mr. Cusick acknowledged that the turnover in the past two years or so has been higher than what he has seen in the past decade. But, he said, those spaces are not staying empty.

“There are stores moving in,” he said. “In six months to nine months, if you walk up and down the corridor the same way you might today, you won’t see as many closed stores.”

WWD: Wolf & Badger Unveils First U.S. Outpost in SoHo

WWD: Wolf & Badger Unveils First U.S. Outpost in SoHo

WWD | Lisa Lockwood

The retailer introduces consumers to emerging brands on a three-month rotating basis. Could concessions be the wave of the future?

Wolf & Badger, the U.K.-based multichannel retailer, is bringing its concession business model to the U.S., where it has opened its first outpost at 95 Grand Street in New York. The 2,500-square-foot, multilevel and multipurpose space is located near retailers such as Alexander Wang, Acne, Dior and Saint Laurent.

Wolf & Badger, which has two stores in London, introduces consumers to emerging brands on a three-month rotating basis. The company doesn’t buy on a traditional wholesale model but takes a commission of anything it sells either on the online platform or at the store. Brands pay a small monthly membership fee to be part of Wolf & Badger, which goes toward marketing the brands. Wolf & Badger pays the store’s rent and hires the staff.

Founded in 2010 by brothers George and Henry Graham, Wolf & Badger’s three stores and online operation offer a curated roster of more than 700 emerging brands from around the world. Among the offerings in the New York store are women’s wear designers such as Hebe Studio, My Pair of Jeans, Florence Bridge, ElleSD and Parlor; handbag lines such as Cafune, Ohktein and Scalo;  footwear such as Lucy Choi (Jimmy Choo’s niece); jewelry designers such as Alexa K, Kasane,  Talia Naomi, Bonheur Jewelry and Nan Fusco; men’s wear such as Rubirosa; and homeware such as O.W. London.

“We look to work with incredible up-and-coming talent who are at this stage of their life cycle that they’re focused on design and manufacture of their collections, and rightly so, but lack a reach to consumers that they deserve,” said George Graham, cofounder and chief executive officer,  who was interviewed with his brother at the SoHo store.

Comparing Wolf & Badger to the way concessions operate at department stores, he said, “We call it a service retail model.”

In explaining the fee schedule, Graham said,“Each brand contributes $500 to $1,200 per month towards marketing and in return for all other services provided, including unlimited use of the store for events and for their showcase in a fully staffed store in SoHo.  We then charge 20 percent on sales generated on their behalf in-store or online, rather than the typical 60 percent to 70 percent on a standard wholesale arrangement.”

Graham said the store doesn’t insist on exclusivity. “We like to see our brands develop and grow within the Wolf & Badger platform. We’ve had many who have gone on to open their own flagships, and be in fashion weeks and pick up stockists around the world, and for us, it’s great to see,” he said.

Up until now, the London stores and the web site have been focused on U.K. and European brands. “Now we’re expanding into the U.S. market; we’re working with incredible talent coming out of the U.S.,” he said.

The store rotates 20 to 25 percent of the merchandise every three months. Brands stay on the online platform for a longer period. In order to familiarize the customer with the designers, Wolf & Badger hosts “Meet the Maker” events two to three times a week, where it invites the designer to meet and get to know the customers and vice versa.

Robert Burke, ceo of consultants Robert Burke Associates, sees the potential of the concession model for the U.S. “I think it’s a unique model. I think it provides an opportunity for brands that may not have the reach of their own online sites, or be able to afford having a retail concept to have this type of exposure. I think it certainly serves a lot of the needs that the brands have, but also provides the customer with a highly curated shopping experience and the fact that it rotates regularly. I think one of their biggest draws is their web site.”
The biggest risk for a brand is if it puts in a lot of stock that then doesn’t sell and then the firm doesn’t get money up front, he said. “It’s a matter of timing, but interesting. I think it could catch on. Everyone’s looking for interesting shopping experiences,” said Burke.

Marigay McKee, founder and ceo of MM Luxe Consulting, said, “The concept of Wolf & Badger in SoHo is interesting as it brings together an eclectic mix of talent and design from niche and up-and-coming brands (many English names too) in a lifestyle format that, without the master umbrella that Wolf & Badger creates, for young brands, these couldn’t afford to retail their lines in the U.S. under normal brick-and-mortar scenarios. There is also the feeling of discovery when a consumer enters the store as they want to be surprised and find newness and niche brands they may not have been acquainted with previously. The model is certainly working as a mixed-use concession for new brands.”

She said the multibrand arena is thriving with new concept stores like The Webster, The Line and Forty Five Ten “appealing to the lifestyle-edit concept consumers seek out, and focused around the theater, hospitality and experiential aspects as well as the curation of product and merchandising.”

In the beauty area, she pointed out that it’s evident at stores like Bluemercury, Cos Bar, Blushington and Violet Grey. “Multibrand mix stores each have a point of view that gives a personalized approach and edit to the subject of beauty and the Millennial consumer who values the experiential as well as the digital associations,” said McKee.

“The combination of digital and experiential is the recipe for success for a lot of these lifestyle-concept stores as everyone attempts to design the store of the future. The alignment of digital content, merchandising content in-store and commerce creates value and information for the consumer too,” she said.

The SoHo store was designed by Augustus Brown, a Royal College of Art graduate architect, who also designed the London boutiques. The main level features women’s wear and accessories,  the lower level houses men’s wear and homeware, and the upper floor is dedicated to key designer jewelry collections. Sixty to 70 percent of the merchandise mix is women’s apparel and accessories; 20 to 25 percent is men’s wear, and the rest is home.

The way they discover new brands “is organic,” said Henry Graham, cofounder and creative director. “We have a good reputation among the designers we work with. Most of the brands are coming through recommendations or through other designers we stock or reading about us in the press. We’re always on the lookout for new brands.”

Asked if the store ever gets pushback from an emerging designer who doesn’t want to pay a fee and prefers that the collection be purchased, Henry Graham said, “Of course. But more regularly, we get brands who want to work with us, and we say, ‘We’re not prepared to work with you. You’re not the right fit.’ We turn away 90 percent of the people who want to work with us. We get about 200 to 300 applications a month.”

George Graham said they are looking at retail opportunities in Miami and Los Angeles, where they have an existing customer base. Ninety percent of the company’s business is done online. They carry 20,000 stockkeeping units on the site.

Wolf & Badger launched in 2010 with an online operation and a store in Notting Hill in London. It opened a second store on Dover Street in London in 2012.  “We saw a gap in the market where brands didn’t have the exposure to customers they deserved. They could sit around waiting for a department store to come find them, which wouldn’t really happen without sales metrics or without a track record, or they could go to a street market. That wasn’t appropriate for the premium labels we work with,” said George Graham.

The company employs 15 people in London and New York working on digital marketing for all the designers. To drum up exposure, Wolf & Badger does public relations and product placement, plans to host offline events, and is active across such social media channels as Facebook, ShopStyle, Polyvore, Instagram and Google. It has also developed a lot of relationships with bloggers.

“We have a big flow of customers who are interested in independent brands, and use that data we built to introduce the right customers to the right brands,” said Henry Graham. “That allows us to market these smaller designers that independently they’re unable to because we have a collection of so many brands and have so much traffic. It allows these smaller brands to compete on a level playing field.”

Under this model, participating designers have access to such business services as creative and merchandising consultancy, retail advice, press and marketing support for short- and long-term success.

As for why they decided to expand to SoHo, George Graham said, “We were looking for two years for the right space in New York. We spent a lot of time out here getting to know the city and the different neighborhoods. We felt that SoHo had the right adjacencies and right customer base for the designers we carry.”

“It’s the best place for our brand. We’re hoping it will be as good or better than London. It’s always been a dream for us to be here,” he added, declining to disclose first-year volume projections for the SoHo boutique.

WWD: Out From the Shadows: Chloé Banks on Ramsay-Levi to Maintain Growth

WWD: Out From the Shadows: Chloé Banks on Ramsay-Levi to Maintain Growth

Women's Wear Daily | Joelle Diderich

PARIS — In opting for a relative unknown as its new creative director, Chloé joins the ranks of fashion houses taking a chance on a studio talent used to working in the shadow of a star designer — and no doubt hoping that she turns out to be the next Phoebe Philo.

Ending months of speculation, the French fashion house confirmed on Friday it has appointed Natacha Ramsay-Levi as creative director for ready-to-wear, leather goods and accessories, effective April 3. WWD first reported that the two parties were in talks on Dec. 15.

Ramsay-Levi, a longtime key associate of Nicolas Ghesquière, joins the company from Louis Vuitton, where she had been creative director of women’s rtw since 2013. She will show her first Chloé collection, for spring 2018, at Paris Fashion Week in September, the house said.

Ramsay-Levi succeeds Clare Waight Keller, who exited Chloé earlier his month after showing her final collection for the brand and reportedly has another job lined up — though market sources say it is not at Burberry or Céline, as has been rumored.

Geoffroy de la Bourdonnaye, chief executive officer of Chloé, said Ramsay-Levi was chosen for her personality and rock-solid background.

She started her fashion career at Balenciaga in 2002, and rose through the design ranks to become Ghesquière’s top deputy. When the Frenchman left Balenciaga in 2013, she went on to consult for several brands, including Hermès and Acne Studios, before rejoining Ghesquière at Vuitton, according to a Paris source.

“Natacha is remarkable because she is completely natural. She’s bold, she’s unafraid to be herself, she has excellent creative vision, she knows what she wants, she has charisma and she shines,” de la Bourdonnaye told WWD.

“She’s a Chloé girl and above all, she’s very experienced and very loyal. She has proven that she is capable of working in different environments and handling the pressure of large brands,” he said.

Her appointment comes at a time of radical change in the European fashion industry: Riccardo Tisci left Givenchy after 12 years at the helm and is said to be in talks about heading to Versace, while Emanuel Ungaro revealed this week it was parting ways with Fausto Puglisi and has hired Marco Colagrossi as creative director as it takes production in-house.

The last year has seen changes in creative direction at Christian Dior, Yves Saint Laurent, Lanvin, Berluti, Brioni, Valentino, Roberto Cavalli, Salvatore Ferragamo and Bally.

With a number of established names — including Alber Elbaz and Hedi Slimane — unemployed, going with someone who is not a household name keeps the emphasis on the spirit of Chloé, founded in 1952 by Gaby Aghion to create clothes that allow women to express their identity.

“I am very proud to join a house founded by a woman to dress women. I want to create fashion that enhances the personality of the woman who wears it, fashion that creates a character and an attitude, without ever imposing a ‘look,’” Ramsay-Levi said in a statement.

It is understood that Ghesquière has been supportive of Ramsay-Levi taking the Chloé job, and that her post will be filled internally at Vuitton. In an Instagram post on the day of his Louis Vuitton show, held inside the Louvre Museum, Ghesquière posted a photo of him with Ramsay-Levi alongside a tribute.

“Thirty shows and many more fantastic projects we experienced together @nramsaylevi. We spent an extraordinary part of our life sharing our passion. You are an inspirational, talented and generous woman and I am truly grateful for that ❤️❤️❤️,” he wrote.

De la Bourdonnaye said the choice was in line with Chloé’s history.

“The interesting thing is that since the creation of the house, all the designers who started out at Chloé were virtually unknown, and not all of them, but a vast majority, became stars,” he noted, reeling off the names of Karl Lagerfeld, Stella McCartney, Phoebe Philo, Martin Sitbon and Waight Keller.

“The brand is strong and there is a strong message that hasn’t lost an ounce of relevance since the day that Gaby founded it,” he added.

It’s an approach that harks back to former Chloé ceo Mounir Moufarrige tapping a young and inexperienced McCartney – then 25 – to succeed Lagerfeld as creative director. Philo, previously McCartney’s right-hand woman, followed suit in 2001.

More recently, Gucci president and ceo Marco Bizzarri took a winning gamble by promoting Alessandro Michele, a longtime Gucci employee who was second-in-command to Frida Giannini, overseeing accessories. Within the year, he had been named International Designer of the Year at the British Fashion Awards.

Emma Davidson, owner and ceo of Denza, a fashion recruitment firm based in London whose clients include LVMH Moët Hennessy Louis Vuitton, Compagnie Financière Richemont and Roberto Cavalli, said the decision to tap an under-the-radar designer could be purely pragmatic.

“There was a time when people only wanted someone who was famous, but the costs involved in that are astronomical. In the current climate, there will be many factors in forming those kinds of decisions: Looking for a breath of fresh air, looking for something design-wise that’s a little bit different, something of the next generation and an understanding of a different kind of customer and individual in the world today,” she said.

Star designers typically throw a house into turmoil. “Often half the team leaves, or the new creative director wants to pick their own team and then bring a whole team with them from wherever they’ve come from. All of the teams get changed around, and for the very senior management of any house, it’s a huge logistical nightmare, with huge extra costs involved,” Davidson said.

De la Bourdonnaye noted that Ramsay-Levi would not be coming with an entourage. “Natacha is arriving alone to work with the Chloé teams,” he said. “We have a very high-quality studio with strong talents at every level, and I am very confident that Natacha will rapidly blend in with the rest of the family.”

Robert Burke, chairman and ceo of fashion industry consulting firm Robert Burke Associates, said although brands have been shying away from star designers for the last few years, this may be changing as social media increasingly dictates the way luxury houses run their business.

“The houses put in relatively well-known people and then became beholden to them, and then they went through a period where they felt that the brand was bigger than the names and didn’t really want to have such big names,” he noted.

“Now there’s so much emphasis on social media, and recognized names, and celebrity friends and associations, and stylist associations. That seems to be a more recent movement for the brands,” he said, citing the hire of Raf Simons at Calvin Klein. “He was used to set the image for the Calvin brand, he himself as much as his design talent.”

Nonetheless, Burke did not think there was a one-size-fits-all approach.

“There’s a danger both ways. You can have someone that has a huge Instagram following and lots of connections, but no one can underestimate the amount of hard work that goes into leading a brand, so those things absolutely do not guarantee successful collections or a successful brand,” he said.

“It’s really important that they bring in the new talent that is oftentimes behind the scenes working,” Burke added. “There’s no hard and fast rule that it works or doesn’t work. I guess the risk is if sometimes these designers are better as a number two person, or can they really be the brand from a creative vision?”

Since joining Chloé in 2011, Waight Keller — an alum of Pringle of Scotland and Gucci — brought a sure and steady hand to the house, rejuvenating its rtw and accessories business and winning largely positive reviews for her collections.

In its interim report for the fiscal third quarter ended Dec. 31, Chloé’s parent, Compagnie Financière Richemont, said Chloé’s performance helped its “other businesses” division log growth of 7 percent at constant exchange rates during the period.

Some have questioned whether Ramsay-Levi, who is identified with Ghesquière’s futuristic, sport-inspired aesthetic, is the right fit for a brand best known for its floaty dresses and men’s wear-inspired coats and pants. De la Bourdonnaye said he was confident she was up to the task.

“The intelligence of great designers is to adapt their style to the houses they work for,” he said, noting that Philo worked successfully in different registers, first at Chloé and then at Céline.

“When Natacha was at Balenciaga, she did Balenciaga. When she was at Vuitton, she did Vuitton. I am not recruiting the culture or the creative inspiration of Vuitton or Balenciaga. The Chloé girl stays, the Chloé strategy stays,” he said.

“There will be some bad surprises occasionally, but that’s the nature of the creative process. If you don’t allow designers to take risks, you will never have beautiful creative results. I am convinced we will have more good surprises than bad, and that is why I am very confident about this choice,” he concluded.

New York Times: Another Arnault Takes Charge

New York Times: Another Arnault Takes Charge

New York Times | Elizabeth Paton

PARIS — Cocktail parties during Paris Fashion Week can seem as common as paillettes on an evening gown. But on Monday, one particular event may attract an unusually excited crowd.

Held in honor of the new flagship store for the German luggage maker Rimowa on the Rue du Faubourg St.-Honoré, it is being co-hosted by the brand’s freshly minted — and in some eyes unconventional — co-chief executive, Alexandre Arnault.

Mr. Arnault is 24 and the son of Bernard Arnault, chairman of LVMH Moët Hennessy Louis Vuitton, the luxury conglomerate that bought a majority share in Rimowa last October.

Indeed, some eyebrows were raised when LVMH, alongside its announcement that it had acquired an 80 percent stake in Rimowa for 640 million euros, or $673.6 million, added that the third of Mr. Arnault’s five children would be installed at its helm.

For Alexandre Arnault — whose official start date was Jan. 23 — the store opening on Monday will mark his first official moment in the limelight. And everyone will be watching.

The oldest of Bernard Arnault’s three sons from his second marriage, to Hélène Mercier, Alexandre Arnault graduated from Télécom ParisTech and holds a master of research in innovation from École Polytechnique. He shares his father’s height, and his family’s love of tennis. And he also follows in the footsteps of two older stepsiblings: Delphine Arnault, 41, who spent 12 years working her way through the ranks at Dior to become deputy general manager under its chief executive, Sidney Toledano, and who today is executive vice president at Louis Vuitton; and her 39-year-old brother, Antoine, who spent eight years as Louis Vuitton’s head of communications and now is chief executive of the shoemaker Berluti and chairman of the cashmere label Loro Piana.

Unlike his siblings, Alexandre Arnault has landed atop a brand after only three years of behind-the-scenes work at his father’s behemoth holding company, Groupe Arnault, helping to define digital strategy and being instrumental in a handful of key technology-focused hires and investments.

That his ascent has been so speedy has not been lost on industry observers, particularly as succession questions around Bernard Arnault, who just turned 68, start to arise (though there are no signs the billionaire patriarch is going anywhere anytime soon). Nor was the fact that in January, Alexandre accompanied his father to Trump Tower in New York to meet then President-elect Trump, the only Arnault scion to make the trip.

“From the first time I met him, it was clear that Alex was observant, extremely smart and ambitious, so the suggestion that he would be the head of a company now at the ripe age of — what is he? — 24 was not shocking to me at all,” said the writer and journalist Derek Blasberg, adding that the two had had lunch in January. He described Alexandre as “knowledgeable about what’s going on with the family firm — and proud of it, too,” with a clear vision of what he wanted to achieve with Rimowa, as well as a highly supportive relationship with his other siblings.

“I think that most people when they’re in their early 20s are still feeling out the fashion industry and figuring out where they fit,” Mr. Blasberg said. “But Alex knows exactly what he’s doing. Yes, his father facilitates a great deal of opportunity, but I’ve never doubted Alex’s capabilities. It would be a mistake to do so.”

Reportedly the young Mr. Arnault is both sociable and outgoing, often in the front row of LVMH-brand shows and friendly with designers both in and outside the LVMH fold — though you would never see him falling out of a nightclub at 4 a.m. (he has been known to occasionally take to the decks as a D.J., however). All signs suggest he is game for a challenge, and not worried about showing his age.

Mr. Arnault tweeted the day the Rimowa deal was announced: “Can’t feel guilty for using RIMOWA suitcases anymore. Herzlich willkommen!” (The German phrase means “Warm greetings!”)

The photo with the message shows him clutching one of the brand’s trademark grooved aluminum suitcases, next to Dieter Morszeck, his 63-year-old co-chief executive, the grandson of the German group’s founder. (The family has retained a 20 percent stake in the brand).

Smiley-face emojis have not been part of the C-suite lingo at LVMH, which takes a famously conservative approach to its public interactions (both Alexandre Arnault and LVMH declined to provide comment for this article). But perhaps emoji use will become more common now.

“Alexandre seems bright and determined,” said Luca Solca, luxury analyst at Exane BNP Paribas. “This is a good training ground and an important sign of recognition for him. And from what I understand, he has been a key driver in getting digital onto his C.E.O. father’s agenda.”

Mr. Arnault — reportedly the first to spot the acquisition potential of Rimowa, the last high-end luggage brand left in the market after the acquisition of Tumi by Samsonite last year — speaks German fluently and has moved to Cologne, Germany, where the company is based.

Rimowa is expected to report revenue of more than €400 million for 2016, LVMH said at the time of the deal. The business is also expected to grow substantially — not least because of the enviable profit margins on its ribbed aluminum or more affordable polycarbonate products, which are designs are based on the fuselage of the first metallic aircraft. Prices, which start at $400, can go to as much as $1,000 and more for a piece, and there are limited styles, color choices and fabrications. Mr. Arnault has already outlined plans to open seven more stores in 2017, in addition to the new Paris flagship.

“The major trend in luxury right now is towards travel and experience, and Rimowa is a uniquely placed brand to take advantage of the global boom in tourism and the traveling consumer,” the luxury consultant Robert Burke said. He noted LVMH has strong roots in what he called “the art of travel,” including a string of hotel investments.
“LVMH knows that there is a young luxury consumer who is keen to explore the world and a digital native,” Mr. Burke said. “Alexandre is likely to understand their online interactions — and how to communicate effectively with these shoppers — far better than many seasoned executives, though plenty of those will still be onside to support him. I have a feeling that this brand is being primed to be an incredibly strong and focused online play.”

Indeed, Mr. Arnault’s digital background (he has described himself as a “technology freak and geek at heart”), applied to a low-risk, high-performing heritage brand, in a market with strong fundamentals, has all the makings of a success story.

Still, before LVMH Kremlinologists get too excited, it is important to remember that if there are any deep internal rivalries within the family — and the business — the outside world has not been privy to it.

Besides, there are two more Arnault sons, Alexandre’s younger brothers, who could hypothetically join the family business: Frédéric, 22, a graduate student, who has proved a standout academic star at École Polytechnique, and Jean, 18. When it comes to the question of the great Arnault succession race — and the next generation leadership of the world’s largest luxury empire — only time will tell.

Meanwhile, there’s a luggage brand to tend, and a store to unveil.

BUSINESS OF FASHION: The Decline of the Liberal West Poses Major Threat to Fashion

BUSINESS OF FASHION: The Decline of the Liberal West Poses Major Threat to Fashion

BUSINESS OF FASHION | HELENA PIKE

LONDON, United Kingdom — “We’re undergoing a structural transformation in which politics is being redefined along the fault line of globalisation… Those that embrace globalisation, and those that are left behind by globalisation," Alexander Betts, Leopold Muller professor of refugee and forced migration studies at Oxford University, told audiences at VOICES, BoF’s first annual gathering for big thinkers last December.

As growing internet access, travel and trade have accelerated the integration of global markets and the worldwide exchange of ideas, information, people and products, some have benefited far more than others, giving rise to a surge of nationalism across the Western world, rooted in a rejection of globalisation and reflected in the election of Donald Trump in the US and Britain’s vote to leave the European Union. “When we look at the [Brexit] voting maps, there is an almost-perfect correlation between the voting patterns of those who wanted to leave, and the hollowing out of labour-intensive manufacturing,” explained Betts. “Those who wanted to stay live in areas where the dominant sectors are professional, financial, technological and innovative.”

With its global supply chain, international talent pool and dependence on new wealth creation, upward socio-economic mobility and optimism to fuel spending, fashion has benefited greatly from globalisation and stands to suffer in a new political reality that could give rise to new curbs on the free movement of people and products, and breed greater uncertainty at a time when many consumers are already feeling less secure.

New barriers to trade

For fashion, the most drastic consequence of the political shift away from liberalism is the resurgence of protectionist trade policies. Many fashion businesses have spent years building up global supply chains and outsourcing vast swathes of their production to manufacturing hubs in China and South East Asia. In fact, about 97 percent of clothing and about 98 percent of shoes sold in the US are imported from overseas, according to the American Apparel and Footwear Association.

As one of his first actions as president of the US, Donald Trump pulled out of the Trans-Pacific Partnership, a 12-nation agreement that was designed to encourage trade between a bloc of countries — including Vietnam, Japan and the US — by reducing import and export duties. Trump has also threatened to introduce punitive tariffs and quotas to restrict the importation of goods from countries like Mexico and China.

In bid to encourage businesses to reshore manufacturing, the US president has backed a so-called “Border Adjusted Tax” prompting fierce opposition from a coalition comprising over 100 companies from Nike to LVMH. The measure would be “absolutely crippling” for businesses, says Robert Burke, chief executive and chairman of Robert Burke Associates, a retail advisory firm. “It would virtually put businesses out of business immediately… Brands have spent years and years developing production and mills in foreign countries. [They] are not set up for a quick change on this. If there is going to be any kind of evolution in bringing jobs and production back [to the US], it has to be done strategically.”

Certainly, reshoring production would allow some businesses to play on the appeal of movements like “Made in America,” which have been gaining momentum. But the West — after losing ground to Asia for decades — currently lacks the skilled labour pool and the modern equipment necessary for mass garment manufacturing. What’s more, the high cost of labour in the US and Europe would also all but eliminate product margins and make it impossible for companies to maintain current prices. “Some [American workers] are making $15 or $16 dollars an hour — in a day, they make more than someone in Bangladesh makes in a month,” says Edward Hertzman, founder and chief executive of Sourcing Journal, a trade publication focused on fashion’s supply chain.

Indeed, according to Americans for Affordable Products, the coalition formed to oppose the “Border Adjusted Tax” plan, the tax could result in a 20 percent price hike on everyday items including clothing. In today’s subdued retail market, this would be devastating. “The industry has struggled with getting people to buy clothing right now that is manufactured overseas for exorbitantly low rates unless it’s discounted heavily, so how are you going to get people to buy clothing that’s four or five times the price?” asks Hertzman.

The situation in Europe is equally bleak. “If the new [post-Brexit] trade agreement is not favourable and suddenly we have all of these additional taxes and import duties put on stuff, that’s going to affect the pricing of products coming into the UK,” says Fflur Roberts, global luxury manager at Euromonitor. “Somewhere along the line, someone’s got to pick up that bill… I’d imagine at the end of day the consumer will have to pay.”

While the actual terms and conditions of Britain’s departure from the EU remain unknown, it would be “politically untenable” for the UK government to pursue a so-called “soft Brexit” option where the country remains part of the European single market, explains Dr Peter Holmes of the UK Trade Policy Observatory. A more likely scenario would see the UK losing its favourable trading status and “dealing with the EU like any other member of the World Trade Organisation.”

“Ultimately, anything that limits free trade is not good for global business,” says Mario Ortelli, a senior research analyst at Sanford C. Bernstein.

Curbs on talent migration

The decline of liberal values across Europe and the US has also manifested itself in calls to restrict immigration. Less than two weeks after his inauguration, US president Donald Trump issued a highly controversial executive order barring anyone from seven Muslim-majority countries — including Syria, Iraq, Iran and Sudan — from entering the country. (The ban has now been lifted following legal challenges.) Meanwhile in the UK, Prime Minister Theresa May has refused to guarantee EU citizens living in the UK the right to remain after Brexit. In turn, British citizens’ freedom to live and work anywhere in the EU will almost certainly be revoked. For the fashion industry, which depends on a global talent pool, restrictions on immigration are bad news.

“Brands have a worldwide audience. They need to have an understanding of the world. In order to do so, they must be able to access and hire the most qualified profiles in every field, from entry level to C-suite,” says executive search consultant Floriane de Saint Pierre. “Companies absolutely need to hire the talent they need — so to have free movement of talent.”

A tightening of immigration policy will likely not have a huge impact on top-level personnel. “If you’re the best design director in the world and you’re based in the UK and Bernard Arnault wants you, he’s going to get you — whatever the political situation is,” says Moira Benigson, managing partner of specialist executive search firm The MBS Group. “Top-level design talent usually don’t have a lot of constraints to get a working visa in the US or Europe, because they are very skilled individuals with a unique skillset,” agrees Ortelli. But some of the fashion schools that train top design talent‚ like London’s Central Saint Martins, would certainly suffer from stricter border controls. “Generally, schools that are not international will be less interesting,” says Benigson.

And the situation is very different at lower levels of the fashion industry. In the UK, 15 percent of workers in retail and related wholesale operations were born abroad, with 6 percent coming from the EU, according to Oxford think tank Migratory Observatory. Across Italy and France, many of the highly skilled artisans working in the manufacturing ecosystems of large European luxury brands come from all over the world, says Ortelli. “The limitation of visas could be dreadful for this sector.”

Dampening tourist flows

Rising uncertainty, a less welcoming political climate and restrictions on travel would also undermine tourism, a key source of sales for the global fashion and luxury industry. Indeed, according to a 2015 report by Bain & Company, a consultancy, tourists are responsible for more than half of the luxury goods spend in Europe.

“If you make it more difficult for people to travel around, the consequence is that the touristic flows will probably decrease,” Ortelli says. The drop in tourist travel to Paris following a wave of terror attacks in Europe, demonstrated just how dependent sales of fashion and luxury goods are on tourism.

And while tourists from the seven countries barred from entering the US don’t account for a significant portion of the country’s fashion and luxury spend, these sorts of restrictions send off-putting and unpleasant signals to all potential visitors. “Even people from countries that aren’t on the list — lots of people generally won’t feel like they’re welcome or won’t want to go to the US,” says Roberts. “Likewise in the UK, people just don’t feel welcome.”

Of course, some brands, like Burberry, have enjoyed short-term gains as, in the immediate aftermath of the Brexit vote, Britain briefly became the cheapest place in the world to shop for luxury goods after the pound fell to a 30-year low against the dollar, attracting tourists to the country. “But the exchange rate won’t be as low as this forever. Or, failing that, retailers will eventually adjust their prices,” says Roberts.

Eroding consumer confidence

Whatever the long-term policy outcomes, recent political shifts in the US and Europe are feeding increased anxiety for many, with serious implications for the emotionally-driven fashion industry. “In the US, there’s so much anxiety on the streets and so much uncertainty, it’s going to affect overall spend,” says Roberts.

In America, the election of Trump caught many by surprise. The rich, who may benefit from Trump’s plans to cut taxes, are feeling more buoyant than most. “The very high net worth consumer is relatively confident that there are going to be tax cuts… and that they are going to end up with more money to spend,” says Burke. “But overall, the consumer is very uncertain about what the future holds and is in a wait-and-see mode.”

“Uncertainty is not good for luxury spend,” adds Ortelli. “Luxury is supported by economic growth and stability. The consumer buys luxury products when they are reassured that they can afford their mortgage and the school fees for their kids.

“It’s a business of happiness.”

WALL STREET JOURNAL: Ralph Lauren CEO Stefan Larsson Quits After Dispute With Founder Over Creative Control

WALL STREET JOURNAL: Ralph Lauren CEO Stefan Larsson Quits After Dispute With Founder Over Creative Control

WALL STREET JOURNAL | SUZANNE KAPNER

A dispute over creative control led Ralph Lauren Corp. Chief Executive Stefan Larsson to leave the struggling luxury fashion brand after less than two years at the helm.

Mr. Larsson, a 42-year-old fast-fashion executive tapped to work alongside founder Ralph Lauren, said Thursday that the two men agreed the business needed to evolve but disagreed over the company’s creative and customer-facing strategies.

“The board, Ralph and I have over the last month worked very hard to find common ground,” Mr. Larsson said on a conference call with investors, calling his abrupt exit a mutual decision. “However, we have found that we have different views on how to evolve.”

Shares fell 12% in New York Thursday, and are now down more than 30% over the past year. Ralph Lauren also reported another slide in quarterly sales.

Executives said turnaround efforts led by Mr. Larsson—which included closing stores, pulling back on discounts and jettisoning some of the company’s smaller labels—were on track, and promised smaller revenue declines next fiscal year.

Mr. Lauren, 77, who is the company’s biggest shareholder, executive chairman and chief creative officer, didn’t participate in the call. In a news release, the founder said he was committed to the business plan laid out by Mr. Larsson and would continue “to move our business and iconic brand forward as we have done for the last 50 years.”

Until a few weeks ago, all had been going well, according to a person familiar with the situation. Mr. Larsson had made strides streamlining the supply chain, with the help of new executives he had brought on board, and Mr. Lauren was supportive of the progress he was making.

Then, Mr. Larsson told Mr. Lauren that in order for him to be accountable for executing the business plan outlined in June, called “The Way Forward,” he would need control of the creative side of the business, which was Mr. Lauren’s domain, this person continued.

In particular, Mr. Larsson argued that he needed the ability to hire and fire creative talent, this person said. Mr. Lauren, who has overseen the creative side of the business since he founded his label in 1967, was unwilling to cede that control.

Tensions continued to bubble over the next few weeks, with the two men disagreeing over how the design, marketing and creative vision should evolve, another person said. The board met to discuss the impasse in recent days, and directors backed Mr. Lauren, this person continued.

Mr. Larsson will leave Ralph Lauren on May 1 and the company has started a CEO search. Its finance chief, Jane Nielsen, will lead the turnaround effort in the interim, the company said.

“Ralph is not interested in running the business day-to-day,” Ms. Nielsen said.

Mr. Lauren is one of the few remaining designers of his generation to retain an active role in his company, which unlike rivals hasn’t sold out to a large corporation.

The designer retained the CEO title until anointing Mr. Larsson his successor in November 2015, two years after his longtime No. 2 executive, Roger Farah, stepped back from his daily role as president and chief operating officer. Mr. Farah later left the company and is now the CEO of Tory Burch LLC.

Although many designers, including Calvin Klein, Donna Karan and Yves Saint Laurent, found success by pairing their creative talents with a strong business leader, clashes between the two sides aren’t uncommon in the fashion industry. Diane Von Furstenberg ’s first ever CEO left her company late last year, after just 18 months on the job.

People who know Mr. Lauren said he is truly interested in seeing his company evolve. “There is not a more modern thinker or someone more open to change than he is,” said Robert Burke, who spent 11 years at the company before leaving to join Bergdorf Goodman in 1999. “But it’s a question of how much change a company and its consumers can handle.”

Citi analyst Kate McShane said finding a successor to Mr. Larsson “could be challenging as the new CEO’s vision still has to fit with that of Mr. Lauren’s.” In a note to clients, she said Mr. Larsson was considered “one of the best players in the industry” and worried that executives he recruited to the company would follow him out the door.

Ralph Lauren’s profits were sagging when Mr. Larsson took the helm in November 2015. His strategy has been to focus on fewer brands and speed the company’s supply chain. He has also started to slash costs, cutting more than 1,000 jobs, or 8% of the full-time staff, and is closing dozens of stores. In an interview in June, he also touched on product changes, saying he wanted the merchandise to focus on core items like blazers, military jackets and polo shirts, but with an updated look.

Mr. Larsson joined the company from Gap Inc. ’s Old Navy, where he was credited with helping revive sales at the casual apparel brand. Previously, he spent 15 years at fast-fashion retailer Hennes & Mauritz AB.

He stands to receive more than $26 million in exit pay, depending on the performance of the company and its shares over the next few years, according to his severance agreement. The company promised to pay him at least $10 million in cash, as well as a bonus for the fiscal year ending in March that has a target of $3.75 million, the filing shows.

For the fiscal third quarter, Ralph Lauren reported profit of $82 million, or 98 cents a share, down from $131 million, or $1.54, a year earlier. Revenue fell 12% to $1.71 billion.

Executives said Thursday they expected sales to decline by a midteens percentage for the fiscal year and to shrink by a mid-single-digit percentage next fiscal year.

—Imani Moise and Theo Francis contributed to this article.

NEW YORK TIMES: Samantha Cameron, From 10 Downing Street to Selfridges

NEW YORK TIMES: Samantha Cameron, From 10 Downing Street to Selfridges

NEW YORK TIMES | VANESSA FRIEDMAN

Not quite three months after standing supportively, and silently, behind her husband, Prime Minister David Cameron of Britain, as he resigned his position after losing the Brexit vote, Samantha Cameron is about to do what, to my knowledge, no spouse of a global leader has ever done before.

Start a fashion brand.

Confirming the news, which was first rumored in October when she registered the company name “Samantha Cameron Studio Limited,” Mrs. Cameron told British Vogue, which will reveal first looks in its December issue: “I felt that there were a lot of American and French brands out there that fit that bracket of designer contemporary with the right price point and the right styling. But there aren’t that many British brands which fill that space.” She is aiming to fill it.

The new line, which consists of 40 styles, will be called Cefinn and will be available at Net-a-Porter, Selfridges and cefinn.com.

As to the clothes and their style, “Well obviously you’re thinking about yourself, but at the same time it can’t be all about yourself because that would be pointless,” she said to British Vogue. “I’ve spent a lot of time trying stuff on my friends.”

An image released by the magazine shows her in an ecru midcalf trumpet skirt with a white windowpane print and matching belted shell. It looks perfectly proper and accessible (and less obviously “fashion-y” than some of the looks she wore during her husband’s time in office).

On the one hand, this career segue makes a fair amount of sense. Before she landed in 10 Downing Street, Ms. Cameron was the creative director of the British brand Smythson and responsible for turning it into a buzzy heritage handbag house. As W.P.M. (wife of the prime minister), she remained a part-time consultant for the brand — attending Smythson’s New York store opening last March, for example. Her sister, Emily Sheffield, is the deputy editor of British Vogue.

As W.P.M., Ms. Cameron’s clothing choices were deliberate (and diplomatic), in the model of Michelle Obama, and as a result widely watched: She was applauded for wearing pieces at many different price points and by many different British designers, including Marks & Spencer, L. K. Bennett, Peter Pilotto, Christopher Kane, Erdem and Roksanda.

She also became the ambassador to the British Fashion Council, making it her official duty to support the industry, and hosted numerous cocktail parties for London Fashion Week on Downing Street.

And, given the way pretty much anyone with a public profile and popular image, from rock stars to athletes, has seized on fashion as a career forward, it was probably only a matter of time before politicians or their spouses joined the trend.

Especially considering how much time and thought they are now forced to devote to what they wear, and all its possible meanings, they may as well put all that background research to good use. (A crisis strategist once told me he spent hours discussing tie color with a client who was a head of state when they could have been talking about the peace accords.)

Mrs. Cameron is in her mid-40s — she clearly has more career left in her — so why not? And other former Downing Street wives (and other political wives) have continued their pre-government careers post-government.

It’s just that the next step has been a little more obviously worthy than fashion.

Consider perhaps the most famous former first lady with a career (at least in recent times), Hillary Clinton. Or Cherie Blair, the wife of former Prime Minister Tony Blair of Britain, a Queen’s Counsel. When her husband left office, she established the Cherie Blair Foundation for Women, which focuses on empowering women in developing economies.

Or Sarah Brown, the wife of Gordon Brown, another former prime minister, who founded the children’s charity Their world and became the executive chairwoman of the Global Business Coalition for Education (among other things).

Receive occasional updates and special offers for The New York Times's products and services.There are exceptions: Carla Bruni Sarkozy, a former model and the wife of former President Nicolas Sarkozy of France, became the face of Bulgari jewelers the year after her husband left office, and it didn’t raise many eyebrows.

But in this case, “The response to what she does is going to be in part about how we process political figures,” Robert Burke, a luxury consultant and founder of Robert Burke Associates, said of Mrs. Cameron. “She’s going to be judged through the lens of her name, and her name is Cameron.”

And that’s even if the name on the label in the clothes is different; even if they are clothes for many, as opposed to the exclusive few. Especially if she continues to be her own best model.

Her products will be assessed not just as a nice skirt, say, or a pretty dress, but as a nice skirt and a pretty dress by the woman married to the former Conservative prime minister of Britain, the man who lost the Brexit vote, with all the implications and emotions that are attached to perceptions of him and his party. It is thanks to both, after all, that Mrs. Cameron is as well known as she is. You can’t detach the designer and her history.

And though the new generation of first ladies has taught us that fashion is an increasingly powerful personal and political tool, and a universal one, it is still widely dismissed as frivolous and unseemly. (I have the social media responses to many column about the politics of dress to prove it.)

As a result, for someone in her position, to make clothes her focus is a risk.

I honestly hope her brand is a success, because if it is, it may legitimize fashion as the serious choice it clearly is, and help break yet another expectation that wives of leaders behave a certain way and reside in a certain box. But I don’t think it will necessarily be a seamless transition.

Something to watch for in the new year.

BUSINESS OF FASHION: Athleisure's Winners and Losers

BUSINESS OF FASHION: Athleisure's Winners and Losers

BUSINESS OF FASHION | HELENA PIKE

LONDON, United Kingdom — A decade or so ago, the average retailer’s athletic wear offering was limited to basic t-shirts and trainers — clothing that was practical for exercise, but nothing else.

Today however, fuelled by increasingly casual dress codes and a growing consumer focus on health and wellness, looking like you have an active lifestyle has become cool and athletic wear has become part of the everyday wardrobe.

“This idea of being healthy and sporty and fit has become the new sexy … There’s a desire to look sporty even if you aren’t practising any sport,” says Bernadette Kissane, apparel and footwear analyst at Euromonitor.

This shift has led to the rise of the so-called ‘athleisure’ category — clothing that marries the functionality and aesthetic of activewear with the desirability of catwalk trends. Demand for fashion-inflected yoga leggings and crop tops helped drive the global activewear market to a staggering $265 billion in 2015, up from $196 billion in 2010, according to Euromonitor. And the market shows no signs of slowing down, with global sales predicted to grow at 4.4 percent CAGR through 2020.

For existing sports brands and retailers, this trend presents an obvious opportunity. But, while some, like Nike, Adidas, Foot Locker and JD Sports, have been riding the athleisure wave with great success, many have struggled. This past year has seen Sports Authority, City Sports and Vestis Retail Group, parent company of Eastern Mountain Stores, Bob’s Stores and Sport Chalet, file for bankruptcy in the US, while in the UK Sports Direct reported that pre-tax profits for the year to April 2016 were down 15 percent. So what are the necessary requirements for a successful athleisure strategy?

Established players in the activewear market were well placed to tap the athleisure trend when it first emerged, as they were already familiar to consumers. “The reason why sports brands such as Nike and Adidas have done so well is they already had that brand image, the prestige you’d want to be associated with,” explains Kissane. “The fact that [this trend] is more status driven, and wanting to look cool and sexy, than it is actually being healthy and fit, [means] you then want to be associated with the brands in that area.”

“They have built up brand affinity over the years and consumers are accustomed to buying brands they are familiar with,” agrees Diana Smith, senior research analyst, retail and apparel at Mintel. They also have a proven track record of performance-quality product, which is still a core attribute of activewear, even if a garment is not actually going to be worn for exercise, Smith adds.

Multi-brand activewear retailers were less appealing in the eyes of the athleisure consumer. “What they had sold in the past was really performance wear. You went in, you bought your tennis shoes, your running shoes, your wick-away, and it was generally not very attractive but it functioned,” explains Robert Burke, chief executive of consultancy Robert Burke Associates.

“It’s not the sort of environment and soul of what athleisure is — that balance between fitness and fashion and the trend of wellness,” agrees Wendy Liebmann, chief executive of consultancy WSL Strategic Retail.

Investing in the in-store experience to attract the largely female and fashion-conscious athleisure consumer is crucial for retailers attempting to capitalise on the opportunity. “It requires a very different design sensibility, a very different approach — not focused overly on items and products and tickets and prices and discounts and mark downs, but focusing more on presenting the whole assortment,” says Adheer Bahulkar, a partner in the retail practise of global strategy and management consultant firm AT Kearney.

Indeed, Sports Authority’s inability to invest in store rejuvenation — the result of crippling debt from a $1.4 billion leveraged buyout by private equity firm Leonard Green & Partners in 2006 — was a significant factor in its demise.

“That’s been a misstep in this sector — not getting their fair share of women,” says Mintel’s Smith.

In comparison, in 2015, Dick’s Sporting Goods, launched Chelsea Collective, a dedicated women’s fitness and lifestyle boutique, which currently has two locations, in recognition that its typical stores — which cater to a wide range of sports, from golf to hunting to martial arts — weren’t the ideal setting for athleisure.

“They created a totally new format that said, ‘If we are going to sell this type of product … then we need to create a totally different environment for it,’” explains Liebmann. “They understood that they couldn’t force fit it into this sporting motif where they’re selling everything. They understood that they needed to separate it out.”

In a similar move, Foot Locker has opened over 30 Six:02 stores, an elevated retail concept for women first launched in 2012, as well as dozens of Lady Foot Locker stores.

Catering to the fashion element of the athleisure trend is also crucial to succeeding in this shifting sportswear market. “[They] can’t just be geared towards athletes and they have to have a fashion-interesting aspect to it,” says Burke. “Now it’s become the expectation of the consumer today that they expect to have stylish and fashionable athletic wear.”

In order to appeal to the consumer who is wearing athleisure items to look stylish rather than do sport, the likes of Nike, Adidas and Under Armour have noticeably infused their offering with more fashion-led designs. “Those brands are pushing more into a fashion orientation as opposed to just a professional sports orientation. If you look at some of the styling, the colouration, the fabrications, the silhouettes they began to push out, it became a broader fashion statement,” says Liebmann.

They have also employed savvy advertising campaigns and designer and celebrity collaborations. Adidas, which pioneered fashion-active collaborations in 2003 with Yohji Yamamoto, has worked with designers including Alexander WangStella McCartney and Raf Simons, while earlier this year, Nike announced a new collection with Louis Vuitton’s Kim Jones, and Puma released collaborations with both Kylie Jenner and Rihanna, whose second “Fenty x Puma” collection showed during Paris Fashion Week. And instead of using professional athletes in their advertising, recent Nike campaigns have featured Karlie Kloss and Bella Hadid, as well as comedian Kevin Hart, while Under Armour cast Gisele as the star of its 'I Will What I Want' campaign. “What you see [when you look at those adverts] is not an athlete,” explains Burke. “It makes them more approachable to a new customer base.”

For multi-brand sporting goods retailers, catering to athleisure’s fashionable consumer means ensuring they have the right product from the right brands. Both Foot Locker in the US and JD Sports in the UK have focused on a more prestigious product offering, stocking hot, of-the-moment products including Fenty x Puma and Kanye West’s Yeezy Adidas collection. This approach seems to be working. For 2015, Foot Locker reported a net income of $541 million, up from $520 million in 2014, while JD Sports reported a 20 percent increase in revenue to £971 million for the first half of 2016.

Some sports retailers have also introduced their own athleisure-inspired private labels to cater to this new fashion-focused consumer. Since 2014, Dick’s Sporting Goods has partnered with country music singer Carrie Underwood to create an accessibly-priced athleisure line, Calia by Carrie Underwood.

As the primary consumer of this new trend, women have become an important target in brands and retailers’ athleisure strategies. Along with expanded product ranges, dedicated stores and events have also been used to capture this consumer. In 2014, Nike opened its first women-only store in Newport, California, followed by similar spaces in London and Shanghai. The brand also hosts events such as its NikeWomen Victory Tour marathons. Showing a similar commitment, earlier this year Adidas hired former Lululemon chief executive Christine Day to advise them on targeting women.

But as a flurry of other industry players have moved to take advantage of the athleisure sector — including Selfridges, which now boasts a dedicated luxury athleisure department, and Beyoncé and Sir Philip Green’s Ivy Park label — the market has become significantly more competitive.

Looking forward, “it’s going to be really important to continue to innovate — the industry is so crowded,” says Smith. “There are going to be winners and there are going to be losers.”

FINANCIAL TIMES: New York jewellers open at uncertain moment

FINANCIAL TIMES: New York jewellers open at uncertain moment

FINANCIAL TIMES | RACHEL GARRAHAN

Just as London’s watch retail scene is experiencing the fruits of expansions and refurbishments planned in recent years, so New York’s jewellers are opening and reopening their stores throughout Manhattan to create a luxurious environment for customers. But while the weak British currency is buoying UK sales, the strong dollar — and previous electoral uncertainty — have been weighing on New York’s tourism and these outlets.

Consultants Bain & Co are predicting a slight fall in global luxury good sales to €249bn in 2016 and many jewellers are privately complaining about a slow year in terms of sales. Nevertheless, some observers are enthusiastic about the openings — planned as long as four years ago. “I’ve rarely seen this much activity in jewellery retail,” says Robert Burke, a New York-based retail consultant. “The economy has been less than stable but brands and stores are investing in long-term success.”

On Manhattan’s “luxury corridor”, which stretches up Fifth Avenue from 49th Street to 59th Street, Cartier recently celebrated the reopening of its US flagship store, now its largest boutique in the world, with an event during New York Fashion Week. Neighbouring Bulgari and Harry Winston are also among the luxury brands whose stores are undergoing extensive, lengthy and costly refits.

It took more than two years to complete the refurbishment of Cartier’s neo-Renaissance style mansion, originally acquired in 1917 in exchange for a string of pearls and $100. The jeweller has converted the store — once a user-unfriendly warren of different levels, sales floors and office space — into a cohesive, four-storey, 44,000 sq ft temple to luxury and heritage.

Cartier on Fifth Avenue

A few blocks away, one of Bulgari’s signature Serpenti snake-designs wraps itself around the hoarding of the Italian jeweller’s flagship on the corner of Fifth Avenue and 57th Street — prime real estate that is shared by Tiffany, Bergdorf Goodman and Van Cleef & Arpels. Daniel Paltridge, North American president of Bulgari, declined to share details about the refurbishment, which is scheduled for completion in the second half of 2017, except to say that it will bring “a slice of Rome to New York”. One block south, Harry Winston is is preparing to renovate its home of 56 years; it would not comment.

New York has the local wealth to justify these stores. It has the largest GDP of any metropolitan area in the US: more than $1.6tn, the Bureau of Economic Analysis reported last year. (Los Angeles was second, with $931bn.) More than 389,000 millionaires lived in the city in 2014, according to Spear’s magazine and WealthInsight, and it has the fourth highest percentage of millionaires per capita (at 4.6 per cent) behind Monaco, Zurich and Geneva. It also has 79 billionaires, with a combined wealth of $364.6 billion, a greater number than any other city in the world, according to Forbes.

It has plenty of tourists too. A record number — 58.3m — visited New York last year, according to NYC & Company, the city’s tourism marketing organisation. The most recent figures available show that in 2014, they spent $41bn, an increase from $38.8bn in 2013.

Taken together, this makes New York City a global hub for luxury spending. It accounted for more than 10 per cent of the global personal luxury goods market, according to Bain, in 2015. With €26bn in sales of watches, jewellery, bags and fashion, according to Bain, it was the top-performing city in the world.

The outlook is not quite as rosy: Bain’s forecast of a fall to €25bn in 2016 is due to the closely-fought election, a slowdown in tourist spending and a shift by consumers towards spending on luxury experiences rather than goods. The Fifth Avenue luxury corridor was the most expensive for retail rent in Manhattan in spring 2016, with an average asking price of $3,358 per square foot, according to the Real Estate Board of New York. But this is down 8 per cent on spring 2015.

There are many other jewellers who have invested in their Manhattan offerings. Wempe, the German watch and jewellery retailer, fully reopened its doors in October on the corner of 55th Street after an $8m, two-year renovation. The family-owned business has more than doubled its retail space to 5,500 sq ft, introducing dedicated Rolex and Patek Philippe areas as well as a VIP room housing its offering of Buben & Zorweg watch winders and safes for dedicated collectors.

Ruediger Albers, president of Wempe US, says the expense of a Fifth Avenue lease is more than justified by the traffic such a location attracts. Wempe’s only US store is the top performer in its 32-branch network. “Thirty million people pass this building every year,” he says. “It’s the least expensive billboard in the world.”

Beyond the luxury corridor, brands are opening shops elsewhere in Manhattan. High-end department store groups are looking for new locations, to attract customers living in growing residential areas across the city and to reverse sagging fortunes elsewhere. Neiman Marcus reported that 2016 sales were down 2.9 per cent on the year before, with four straight quarterly declines. In August, Nordstrom reported its first quarterly revenue decline in seven years, and Saks Fifth Avenue’s most recent earnings reported a 1.3 per cent fall on the same quarter last year.

In the shadow of One World Trade Center, Saks recently opened its first downtown branch, one that mixes fine jewellery with fashion on the sales floor. A $250m overhaul of its Fifth Avenue flagship is also under way, including a new jewellery department called the Vault, which is scheduled to open in spring 2017.

Near Saks by Ground Zero, London Jewelers — a traditional watch and jewellery store — sits in the modern surroundings of Oculus, the recently opened shopping mall and transportation hub designed by Santiago Calatrava.

Candy Udell, president of the company, says the Long Island family business was prompted to open its first Manhattan store to take advantage of the area’s burgeoning residential and retail development. “We wanted to be part of the wonderful, growing community here,” she says.

Jewellers who have been in the area for some time welcome the new shops. Blocks from the Oculus, Greenwich St Jewelers has been located on Manhattan’s southern tip for 40 years. Its toughest times came in the aftermath of the September 11 attacks on the World Trade Center, when its original premises had to close after suffering serious structural damage.

“It was like a ghost town in this neighbourhood. No one came down here for three years,” says Jennifer Gandia, who, with sister Christina Gandia Gambale, took over her parents’ business after they retired. Ms Gandia has seen the area change since then, initially thanks to the city subsidising business and residential development. Residents moved in first, luxury retailers followed. She does not feel threatened by the opening of Oculus and its neighbouring office and shopping complex Brookfield Place, home to Saks and brands such as Gucci and Omega. “We see them as an opportunity. Hopefully this will become a major shopping area,” she adds.

One retail expert, who declined to be named, is less sure: “There are a lot of visitors and commuters coming through the Oculus and Brookfield Place, but it remains to be seen whether there is a luxury customer at the high-end level there.”

New store Material Good, meanwhile, chose the heart of SoHo, an area not traditionally associated with selling watches and jewellery. The shop, which opened in September 2015, was created by Rob Ronen, former wholesale manager at Audemars Piguet, and diamond merchant Michael Herman, who spotted an opportunity to meet the needs of wealthy young consumers living downtown, who do not want to go uptown to shop.

While ecommerce, according to Bain, is the fastest-growing sector in luxury retail, bricks-and-mortar stores are realising they have a unique opportunity to create a memorable experience, a factor that is valued by the luxury consumer. “With the rise of online luxury sales, the client has become very focused on product and price,” says Mr Ronen.

Material Good has tried to create a different ambience from traditional, opulent Fifth Avenue stores. They have a first-floor, loft-apartment-style space with high ceilings, contemporary designer furniture and full kitchen. An Andreas Gursky photograph of a cityscape dominates one wall; a bank of watches lies along another in custom-designed, custom-lit vitrines.

Hosting regular private events and dinners, the store is designed to evoke what Mr Ronen describes as “unforced luxury”, an environment where clients can feel at home while they shop. As well as Audemars Piguet and Richard Mille timepieces, customers can peruse fashion, fine and custom-designed jewellery and a selection of Hermès handbags.

Those loyal to Fifth Avenue are not worried. Bulgari’s Daniel Paltridge says he is unconcerned about luxury retail expanding its horizons across Manhattan. “There are more than enough customers in the city, and it will be interesting to see how it evolves,” he says. One thing he does not doubt: “The Fifth Avenue corridor will remain the iconic location for watch and jewellery brands in New York.”