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FINANCIAL TIMES: A sartorial strategy for growth


There is no question that football can sell fashion – Louis Vuitton’s current heritage campaign, featuring legends Zinedine Zidane, Pelé and Diego Maradona playing table football in a Madrid bar, was chosen, according to the company, specifically because of the “universality” of the sport’s appeal. But can fashion sell football?

For the first time, Fifa, the sport’s governing body, is betting yes. This year it has licensed its imagery, including mascots and logos, to be transformed into a clothing brand, courtesy of Singapore-based Global Brands Group. In turn, the company, which also owns the rights to create and distribute products from the PGA golf tour, has licensed its products to 19 territories round the world – including the US, football’s most fan-challenged region. The theory is: if the sartorial strategy works there, it will work everywhere.

Janon Costley, chief executive of Total Apparel Group (Tag), the company charged with making this happen in the US, believes that consumerism could be the answer. “During the period around every World Cup, Fifa has huge sales – during the last one they did $2bn in merchandise globally – which then dwindles to basically zero over the next three years,” he says. “It became clear to Fifa that they needed to come up with a new form of outreach to consumers. When Global Brands approached them with the idea of creating a clothing brand, they decided it could be the answer.”

So, while Nike (sponsor of nine teams, including the US and Brazil) and Adidas (sponsor of 12 teams) project huge sales during South Africa’s event, Fifa is hoping that by entering the lifestyle market, it will not only keep interest alive between tournaments but may actually increase its audience in the US.

This is especially important in the US, where, Don Jones, Tag’s chairman, points out, there is the most room for expansion.

“The potential market is huge,” agrees Mike Principe, managing director of Blue Entertainment Sports Television (Best), an equity investor in Tag. He says there are now 18m registered football players in the US, a number that includes children playing in soccer leagues as well as adult weekend teams and official teams. Yet somehow all those players have never cohered into an identifiable and dedicated consumer fan base.

Of course, there have been previous efforts to turn football into a mainstream sport in the world’s biggest market. The US hosted the World Cup in 1994 and, five years later, when the US football team beat China in the finals of the women’s World Cup, pundits predicted that this would provide the breakthrough.

Even more famously, in 2007, David Beckham moved to Los Angeles to play for LA Galaxy and opened a football academy, saying “soccer is huge all around the world except in America, and that’s where I want to make a difference”. But earlier this year sponsor AEG closed Beckham’s California soccer academy.

Why do the backers of the Fifa clothing brand think they can succeed where others have failed?

Don Jones, Tag’s chairman, says the problem in the past was that the sport failed to cement its place in mainstream US culture. “Now, sport and fashion and entertainment are interchangeable, and you have to strategise with that in mind. Clothes put the sport squarely in front of people who might not see it any other way,” he says.

Mr Costley adds that “if you buy the product, you participate in the sport in some way, so the garment itself becomes an educational platform”.

The hypothesis works like this: a customer in search of a cool T-shirt sees one with, say, a cartoonish player on the front, or a faded, “aged” looking logo; he buys it and by wearing it, becomes both a walking advertisement for the sport and, perhaps, someone who starts kicking a ball around; he might then join a league, or at least turn on ESPN soccer, and football will then, like baseball or American football, become part of their identity.

But despite Tag’s bullishness, not everyone is convinced. According to Robert Burke, founder of Robert Burke Associates, a strategic brand consultancy, a clothing brand is unlikely to achieve what a World Cup, celebrities and sport stars have not. “As with any licensing deal, the success is gauged by the size of the audience,” he says.

“The Fifa brand could be interesting, with cool designs, but it would be very small compared to the American sports of football, basketball and [ice] hockey. With regards to the product helping influence the America interest in soccer, it is a long shot. The problem is that America. . . has not embraced soccer. I don’t think a fashion product will do the trick.”

Andrew Sacks, head of Agency Sacks, a luxury branding firm, agrees. “It’s hard to believe that audiences – American or in football-loving nations – will respond to merchandise from a league,” he says. “Passions are aligned with teams, not with corporations and bureaucracies. The only exception that I can think of may be Nascar, which is a movement in itself and is made up of individuals. In team sports, the team sells.”

Tag’s products have been specially selected to appeal to the US market – both men and women – with the company’s executives working with GBG’s design team in the Netherlands. Simon Hawkins, general manager of the Fifa Football Business Unit for GBG, says: “The collections have been engineered to garner an emotional connection with the consumer through the power and history of the Fifa brand.”

To wit: for the first time, former World Cup mascots have been used on current products, with many chosen to appeal to the US demographic. For example, “Juanito” from the 1970 World Cup in Mexico, is featured to appeal to the large number of Mexican-Americans.

There is also a separate “heritage” line that focuses on Fifa’s founding in 1904 on the Rue St Honoré in Paris, with the address embossed on the shirts not unlike the way Loewe, the Spanish luxury brand, has embossed its address on wallets, and Yves Saint Laurent has on clutches. “Before, football was seen as a European sport,” says Mr Costley. “And it was presented that way. We are trying to transform that perception.”

Still, the history of such forays into the garment world is that they have not been enormously successful. As Jeff Bliss, a former marketer at New Balance, the running shoe brand, and co-founder of consultancy Brand Ideology, pointed out in Sports Business Journal: “Fan passion follows teams and players – they do not get excited about a governing body.”

Yet Tag says that to worry about the meaning of Fifa is to miss the point, which is that whatever a consumer’s relationship with the governing body, the designs stand on their own. “Soccer isn’t just a game,” says Mr Principe. “It’s a fashion statement.” That’s the goal anyway.

FINANCIAL TIMES: The new fashion retailers


When the women’s ready-to-wear shows begin today in New York, they will be punctuated with the many champagne-fuelled branded store openings that accompany the beginning of the fashion season, from Tommy Hilfiger in New York to Anthropologie in London and Uniqlo in Paris. There will be one retail event, however, that is unlike the others.

On Tuesday, Barneys will launch a “pop-up” shop within its Manhattan department store called Sartorialust that will, says a Barneys spokesperson, be “a temporary showcase ... which we expect to be very natty and eclectic showing how old school Italian can be mixed with designer in a very cool way.” To anyone not involved in fashion, this may not mean much, but what marks out this occasion is that the temporary space will be “curated” (ie, stocked) by a photographer called Scott Schuman.


Mr Schuman, otherwise known as The Sartorialist, is the man behind a blog of the same name that features photographs of men and women whose style he likes on the street; the pictures are posted online immediately, accompanied by a short commentary. Mr Schuman started the blog “simply to share photos of people that I saw on the streets of New York that I thought looked great” and has since travelled the world shooting regular, stylish people.

Ed Burstell, buying director at Liberty who is responsible for bringing the pop-up shop to the London store for London Fashion Week later this month, calls the blog a “cult-like hit”. The success of the site can be attributed both to Mr Schuman’s aesthetic skill – the shots are all notably well framed and lit – and his judgment: the people featured tend to look original and great, but not weird, so there is an informational aspect to the site. It isn’t sensational, but user-friendly.

However, though Mr Schuman is a talented photographer and a good judge of chic with a book based on the blog out this month, there’s nothing in his pictures to suggest he should be a retailer, or has any real retail credentials. He does have some experience in the area – he ran his own showroom in New York prior to 9/11 and worked in sales and marketing with Valentino and the distribution company Onward Kashiyama – but his blog fans don’t follow him because of that; as far as they’re concerned, he’s a name behind a lens.

Yet he and a group of fashion insiders like him – including Tyler Brûlé, founder and editor-in-chief of the magazine Monocle and a columnist for this newspaper who has opened three Monocle-branded shops on the back of an internet retail shop linked to the magazine’s website, and Nick Candy of the luxury real estate group Candy & Candy, who is planning to open retail outlets to sell the fittings and furniture from his flats even though he has no background in design – are moving out of the shadows and into the world of shopkeeping.

The result, says Robert Burke, president of the luxury consultancy Robert Burke Associates, is a “new wave” of vendors. Indeed, Mr Burke sees this as the next evolution of niche retail: after the socialite retailer (Gloria Vanderbilt, Tory Burch) and the celebrity designer (Jennifer Lopez, Sarah Jessica Parker) comes the socially networked retailer.

Thes difference is that the earlier non-trained retailers were women who clearly wore – and were photographed in – clothes that defined their style and represented a public track record of their taste. For their followers, the decision to shop at their stores was, in effect, a decision about whether or not they wanted to look like a celebrity.

By contrast, Mr Schuman and his ilk have a largely virtual track record, and with it, an even larger virtual community. Mr Schuman’s blog, for example, gets approximately 140,000 hits a day.

Monocle’s website gets 890,000 page views a month, and its shopping page has about 850 visitors per day. Compare this with the magazine’s hard copy subscription number of 12,500; if even a quarter of the online fans become bricks-and-mortar customers, the shops will be in the black.

Indeed, Mr Brûlé notes that his London store had paid for itself within a month of opening, a fact he attributes to its tiny size (“we have a 100 sq ft model,” he says), opportunity in the real estate market, purposefully low overheads and the “people who find us online or in a news agent and come to hang out”.

Likewise, he says, the store in Palma de Mallorca has worked partly because readers who knew the magazine via its online version but could not get it locally went to the boutique in search of the brand.

Similarly, Liberty’s Mr Burstall notes that one reason the store is attracted by Mr Schuman is his “fanatic” online following.

Mr Candy says the idea for his store was sparked by the number of requests from consumers who had viewed the company’s work on the web or in person, and asked if they could buy select bits of the fittings, rather than employing the firm for an entire project. “Having a store will allow people to buy into our world in a way they couldn’t before,” he says. “The great advantage is we already know them; we just have to let them know where to go.”

Just as celebrities and socialites before them could branch out into retail by taking advantage of the values and groups their media coverage generated, now the internet allows a similar move as otherwise low-profile people who would have had no opportunity to air their views can present themselves as experts in their fields simply by claiming the title for themselves. And though Mr Brûlé is arguably better known than either Mr Schuman or Mr Candy, he is still more publicly linked to Wallpaper*, his first publishing effort, than Monocle, which he has presented as a standalone (if slightly obscure) brand name.

“The media is now such that if you have a strong point of view you can put it in a blog and it will show through, even if you don’t have a lot of money,” says Mr Schuman. “Then people will find you. The blog started because I think I had read a book called Just Make Yourself an Authority and it made a lot of sense to me. I thought, ‘I know what I like, and everyone else can decide if they agree’.”

“Fashion is based on dictatorships,” says Mr Burke. “You know: the 10 must-haves of the season. What the internet has done is democratise that, so there are many more voices who can be dictators.”

Combined with the current retail climate, which has seen many stores forced into fire sales, he adds that this has created an opportunity for entrepreneurs like Mr Schuman. According to Mr Burke, a former senior vice-president of fashion at Bergdorf Goodman, department stores under financial pressure traditionally protect their bottom lines by sticking with names and brands they know and styles that they know sell, a strategy that may be safe but is rarely enough to inspire consumers to buy during difficult economic periods.

New retailers fresh from the wild, wild west of the internet and free from any obligations or history are more likely to make innovative decisions about stock that can result in sales. It’s an inversion of the current equation that sees brands with stores moving into online retail; instead, these online names are moving into bricks and mortar.

“Traditionally, luxury retailing and the internet have not gone hand-in-hand, but I think that’s because we were coming at it from the wrong direction,” says Mr Candy. “Instead of trying to move people from stores to the virtual world, we are now trying to migrate them the other way.”

FINANCIAL TIMES: Bamford looks to expand the definition of luxury


Bamford is looking for partners. The British organic luxury brand presenting its spring/summer 2009 women's wear collection in Milan has engaged Blackstone Group to help it field investment offers.

"We've come to the end of phase one, and we need a partner with more expertise in other markets," Carole Bamford says, acknowledging the extraordinary luck she has had with a label she founded from her Gloucestershire farm in 2004 on the "intuition that the timing was right to introduce a brand with a conscious." Bamford includes the eponymous women's ready-to-wear brand as well as the men's wear Bamford & Sons and the food and beauty brand Daylesford Organic (but not JCBs, the Bamford business started by her husband's father), and is characterised by its founder as "a way of life".

A more accurate description might be "our way of life". The organic ethos and the products - trapper jackets, trenchcoats and jodphurs in recycled wool, flannel and taffeta - are inspired by the pastimes of the family (the farm went organic in 1978). It is this instant "heritage", she believes, that has enabled the four-year-old brand to establish itself so quickly: 50-55 per cent growth a year for the past two years, now selling in 52 doors. But even she does not think such numbers are sustainable: "35 per cent is probably a more realistic figure."

Interest has reportedly come from the major luxury groups such as Richemont and Moët Hennessey Louis Vuitton, who have recently explored non-traditional acquisitions. Last month LVMH bought Royal van Lent, the maker of Feadship luxury yachts, while in 2007 Pinault Printemps Redoute purchased sportswear brand Puma. Also in the running are private investors, who have driven many of the sector's deals. Case in point: Labelux, the Benckiser family's holding company, which has bought Derek Lam of the US, Swiss footwear brand Bally and British jeweller Solange Azagury-Partridge in the past year.

If any of these companies were to invest in or acquire Bamford, the deal would continue the trend towards expanding the definition of the luxury market, as well as underlining the importance of a world that most groups believe may exert growing influence over their consumer base.

Bamford is the first mainstream luxury brand to make an identity out of its organic stance. Though high street brands such as Gap have added an eco component to their offering, it generally takes the form of a smaller diffusion line. Similarly, London Fashion Week showcased a number of high fashion eco-brands but they were accorded their own niche display. The only luxury brand with an overtly environmental onus is Stella McCartney (part of Gucci Group), which does not use leather products and introduced an organic skincare line last March, but they position this as a personal choice, not the brand identity. Bamford, by contrast, set out to "be as organic as possible and make it part of our DNA".

Thus it sources its cotton in India via two villages it has supported to control the use of pesticides or fertilisers, its cashmere is hand-loomed in Scotland and Tim Field has been employed as organic scientist specialist. But Bamford does use leather and fur.

"I think it's luxury," Lady Bamford says. "I know it's an area where we can be attacked, but we only use Saga furs and they are very carefully sourced and farmed. I've questioned myself about it many times, but I am satisfied." Bamford does not show on the catwalk and often re-uses designs.

Industry observers see this as working both for and against it. Robert Burke, founder of the consultancy Robert Burke Associates, thinks tougher economic conditions may lead to consumers becoming reluctant to pay an organic premium, especially from a young brand. A report from Research and Markets, however, suggests as consumers make harder choices, brands that wear their values on their sleeves could benefit.

As to whether any future partner will appreciate the investment needed to ensure organic strictures, Lady Bamford is not concerned. "I do think I will know whether someone is genuine in their interest and commitment. In the end, it's pretty easy to recognise a greenwash."

FINANCIAL TIMES: LVMH seizes spotlight with Philo appointment


As the women’s ready-to-wear season began on Thursday in New York, LVMH, the world’s biggest luxury-goods group, ensured all attention was on Paris by announcing the appointment of Phoebe Philo as creative director of Celine, the French fashion house. It is the style equivalent of a vice-presidential bombshell.

Ms Philo, who is British, was the designer responsible for putting Chloé, owned by LVMH rival Richemont, on to the path toward becoming a billion-dollar brand, but she resigned in 2006 to spend more time with her family.

The Celine appointment marks her long-awaited return to the industry, as well as a change in policy at LVMH, according to Robert Burke, chairman of the brand consultancy Robert Burke Associates.

“It’s an obvious shift in overall direction,” said Mr Burke. “Consumers today are more educated than they’ve ever been and they want to know who’s behind the label.”

Pierre-Yves Roussel, chief executive of LVMH’s Fashion Group, which includes the conglomerate’s smaller brands such as Givenchy, Pucci, Loewe and Marc Jacobs, said: “LVMH is fully committed to developing the potential of the brand within the group.”

After the departure of Tom Ford from Gucci in 2004, strategy in the fashion industry moved from one focused on high-profile creative talents to one focused on the brands themselves.

Little-known designers were hired such as Frida Giannini, Mr Ford’s successor at Gucci, and Ms Philo’s predecessor at Celine, Ivana Omazic.

The last time Celine had a recognisable designer at its helm was four years ago, when Michael Kors resigned. Neither his successor, Robert Menechetti, nor Ms Omaciz, managed to turn the house into one of LVMH’s “star brands”.

Ms Philo’s appointment is part of a general reshuffle. On the corporate side, Marco Gobbetti, the chief executive of Givenchy, will move to Celine to become president, and Serge Brunchswig, the current chief executive of Celine, will become chief operating officer of Christian Dior Couture, one of LVMH’s flagship brands.

Still more changes are coming, as Mr Roussel needs to fill the design chair at Pucci, which has been left empty since Matthew Williamson’s departure earlier this summer.

“Pierre-Yves Roussel obviously has a business strategy he wants to implement to turn these brands around, and we’re just starting to see it,” said Mr Burke.

Ms Philo’s first collection for Celine will be shown next February during Paris Fashion Week.

FINANCIAL TIMES: High quality can beat the credit crisis


Luxury goods group are traditionally hit hard by economic downturns. Lehman Brothers’ analysts point to a 25 per cent cut in earnings in the previous slowdown after the September 11, 2001, terrorist attacks on the US and say that the sector underperformed the market during the period despite its appeal to high-end customers.

LVMH, the world’s largest luxury goods group, saw its profits drop by 20 per cent in 2001. But heading into the current slowdown courtesy of the financial crisis, luxury goods companies appear upbeat.

In some ways they are right to be – they have expanded out of their long-time base in the west into faster-growing countries in emerging markets and analysts’ consensus earnings estimates for this year still point to ten per cent growth in the sector. But can they really escape a global slowdown thanks to rich customers from Dubai, Moscow and Shanghai? Or will they become yet another victim of the credit crunch in the traditional fashion?

Most industry executives insist it will be the former, but most analysts and experts believe the latter. Both sides have supporting evidence but the feeling persists that the luxury goods industry will not escape unscathed.

“At the very top end of the market is a part of the luxury goods sector that is not very cyclical and that is full of growth from the emerging markets.” says Gerry Adolph, a senior management consultant at Booz & Company. “But the aspirational brands in the middle will be the ones most sensitive to the economic slowdown.”

Argument number one for the positive view of the industry is the continued spending by the super-rich. Gerard Aquilina, head of international private banking for Barclays, says his ultra-wealthy clients have felt no effects of the credit crunch and, if anything, are more optimistic at the moment. “They look at this crisis as an opportunity. I haven’t seen a decrease in them buying luxury goods whatsoever,” he says.

That is good news for the most exclusive and traditional brands at the top end of the market such as Chanel and Hermès.

It was notable when Gucci reported mixed first-quarter sales recently that Bottega Veneta, its most upmarket brand, was the top performer, with a 32 per cent sales increase on a comparable basis.

Argument number two for the industry is exposure to emerging markets. Regions such as the Middle East and Asia have developed into main drivers of growth for many companies. Francesco Trapani, chief executive of Bulgari, says softness in the US and some parts of Europe is being offset by the strength of Asia. All of this shows how far the balance of power has shifted in the industry and how the worst-performing luxury goods companies currently are those with the highest exposure to countries such as the US and UK.

Examples abound of success in countries recently thought unable to support a big luxury goods sector – LVMH, with its stable of luxury goods from Louis Vuitton to Dom Pérignon, more than tripled its revenues in Vietnam last year while Richemont of Switzerland says it sees growth not just in China but in virtually every country in Asia.

But will the emerging markets be enough, and could the slowdown hit them eventually?

There seems little doubt that the rich of the Middle East and elsewhere, flush with oil and raw material cash, will continue to splurge. But it is less clear what will happen in other regions such as China if the ripple effects of the financial crisis reach them.

Allegra Perry, analyst at Lehman Brothers, points out that 50-60 per cent of the luxury goods industry’s consumers remain in classic, developed markets. “The most important thing right now is geographical exposure,” she says.

The naysayers have not just history to back them up but also early evidence that points to a slowdown from companies themselves – Bulgari felt slower sales growth in March, Richemont at the end of last year, while Gucci sold less in the first quarter than last year.

Top-end department stores in the US, such as Neiman Marcus and Saks, reported that it was not just aspirational luxury customers cutting back on spending but the very rich ones as well.

Robert Burke, a former luxury retail executive who is now head of Robert Burke Associates, a consultancy, says US consumers are definitely cutting back on spending but foreign tourists to the US are using the cheap dollar to go on shopping sprees.

“Is that enough to offset the losses? In some cases yes, in many others no,” he says. “When times get tough, though, the aspirational luxury buyer is pinched out of the market first.”

All experts are agreed that consumers are likely to become more discerning. And that in turn is likely to lead to a shake-out in the industry with the lower-end brands and the aspirational marques suffering the most.

“Companies selling the $10,000 to $20,000 handbag are likely to be OK but those that moved downmarket to find growth – like Burberry or even Gucci – are going to be more exposed,” says Mr Adolph.

Rogerio Fujimori, an analyst at Credit Suisse, agrees that more accessible companies such as Coach in the US are the most likely to struggle. But he says factors other than the economic slowdown will determine how luxury goods groups perform – particularly tourism flows and the related issue of currencies.

One consequence of the possible shake-out of the industry is that many expect to see a return of merger and acquisitions activity. Many in the industry still have a sour taste in their mouth from the last round of deals that peaked with the ill-timed purchase of Gucci by PPR on September 10, 2001.

But LVMH, the arch-rival of PPR, in April made its first acquisition in years when it paid several hundred million euros for Hublot, the high-end watchmaker. Experts such as Mr Burke and Mr Adolph expect to see companies from outside the sector and from areas such as Asia and the Middle East becoming involved. Mr Burke says he is advising SK Networks, a South Korean conglomerate, as well as investors from Dubai. Mr Adolph underlines that many companies still owned by the founder, such as Armani, need to decide on their development and, if they sell, whether to become part of a luxury goods conglomerate or sell to an alternative buyer.

As a sign of how investors see the sector going, rumours have already started up about Hermès, the French group that is one of the most expensive and best-protected in the sector.

Few in the industry doubt that – acquisitions or not – “some kind of slowdown is inevitable”, as Mr Fujimori says. But the jury remains out on how hard the impact will be. As in many industries the flight to quality is likely to be apparent.

Mr Burke says: “The true luxury shopper is going to be more discerning than in the past. They are going to buy fewer things and more selectively.”


FINANCIAL TIMES: Brands look to the east to ease pain of credit crunch


One in four bankers at Lehman Brothers, the investment bank, owns three to five luxury watches, according to Allegra Perry, the bank's luxury goods analyst.

It is statistics like that which make the luxury goods industry boast about its potential and at the same time worry about the impact of the financial crisis.

The credit crunch is likely to answer the question: are luxury goods companies subject to the same consumer pressures as other retailers or are they in a sector of their own catering to the super-rich?

Luxury goods companies have traditionally been hard hit in economic downturns. Already evidence is amassing that after a difficult Christmas for many, the new year has not started as positively as some expected. The Gucci brand provided the first real sign on Thursday when its like-for-like sales growth in the first quarter reached only 2.4 per cent (in reported terms it was even down 3 per cent).

That comes after Bulgari, the Italian jewellery company, warned of soft sales in March. But it contrasts with solid figures from Richemont, LVMH and Hermès.

"The luxury goods sector is impacted by the financial crisis but to a much lesser extent than normal retail. The traditional, high-end brands will do well. The more accessible ones will struggle more," says Rogerio Fujimori, analyst at Credit Suisse.

Gerard Aquilina, head of international private banking at Barclays Wealth, says there is no sign whatsoever of a slowdown of spending among the ultra-wealthy - perhaps it is even the opposite. Gucci's best-performing brand Bottega Veneta is its most expensive.

More of the super-rich are coming from emerging markets in the Middle East, Asia or eastern Europe.

That in turn means those luxury goods companies most exposed to these regions seem to have the best chance of avoiding the slowdown. LVMH, for instance, more than tripled its revenues in Vietnam last year while Richemont is seeing growth across Asia.

In contrast, those companies most exposed to developed markets such as the US and Europe will feel the most pain.

Francesco Trapani, chief executive of Bulgari, told the FT last month: "We are seeing a pretty soft business in the US and in some important European countries . . . [But] almost all of Asia is going extremely well and counterbalancing [that softness]."

Robert Burke, a former luxury retail executive who now heads the Robert Burke Associates consultancy, says brands which cannot offer the consumer anything special will suffer particularly. "Product is paramount. The true luxury shopper is going to be more discerning than in the past," he says. "They are going to buy fewer things and more selectively and that means second-tier and less sophisticated luxury companies will suffer."

Industry watchers are divided as to who will suffer most. Luxury stores in the US report sales declines across the spectrum - not just with aspirational buyers but also very affluent customers.

However, names such as Chanel and Prada seem the most secure. Mr Fujimori points to two other issues that play a role on luxury goods as well as the economy: tourism and currency. Anecdotal evidence suggests that wealthy tourists are not just heading to the US to buy, taking advantage of the weak dollar, but also to London because of the weak pound.

Ms Perry underlines that the strength of the euro leaves companies with the dilemma of either raising prices and thus lose sales or not pass on the full impact of the currency, which will affect margins.

FINANCIAL TIMES: Deal appetite mounts in luxury sector


Wealthy individuals used to be content buying a luxury watch or boat. Now they are looking at buying the company as well.

Luxury goods analysts say the sector could see another wave of deals as ultra-wealthy individuals and investors from Asia and the Middle East increasingly seek out companies to buy.

"You can buy a yacht but you can also now buy your yacht builder. That is something we are seeing more and more of as it is an interesting market for ultra high-net worth people and their friends," said Gerard Aquilina, head of international private banking at Barclays Wealth.

Robert Burke, the head of a US luxury goods consultancy, said: "We help bankers screen companies and we have never been busier than in the past few weeks.

"We are seeing a lot of interest from places like Korea and the Middle East, and also from rich individuals for smaller deals. That is very new."

LVMH, the world's largest luxury goods group, this week unveiled its first acquisition for some time as it bought Hublot, the upmarket watchmaker, leading some analysts to predict increasing merger and acquisition activity from companies too. Mr Burke said: "Before it was only seen that the likes of LVMH and Gucci were buying luxury goods groups but this time it will be broader just because that it where the money is."

Few companies have openly said they are for sale but analysts say attempts to buy some of the big name fashion houses are likely. "All the potential target companies say they are not for sale but I think we will still see some approaches," said Allegra Perry, analyst at Lehman Brothers.

She said she expected the big companies only to get involved if share prices continued to drop.

The increase in interest in luxury acquisitions comes amid the first signs of the financial crisis hitting the sector. Gucci unveiled weaker-than-expected sales this week and many analysts are predicting a shake-out could take place as the lower-end and more aspirational brands suffer more than traditional, exclusive names.

Analysts point to Mulberry and Burberry - and even to Gucci - as brands that could come under threat, while top-end brands such as Hermès and Chanel are more likely to escape.

"The higher the prices for the products, the more insulated the company will be. The more accessible brands will suffer more," said Rogerio Fujimori, analyst at Credit Suisse.

Mr Burke, a former senior executive at luxury retailer Bergdorf Goodman, said: "There is going to be a major shake-out of the companies. When times gets tough the aspirational luxury buyer gets pinched out first."

FINANCIAL TIMES: From gangsta rappers to classic chic


Tommy Hilfiger is reclining in a deep sofa in a private room at Claridges Hotel in London trying to weigh up which is his preferred Hilfiger pin-up: Is it Paris Hilton, the poster girl of Hollywood’s brat pack, or Lauren Bush, the archetypal all-American girl?

“You can never control who wears our clothes,” says the immaculately dressed fashion entrepreneur. “But we feel that with our European-influenced approach, the sophisticated and higher level of quality and fashion somehow reaches the type of people who represent the brand very well.”

A decade ago, Mr Hilfiger may have given a very different answer. Back then, the label he launched in 1984 had turned into a mega-brand on the back of celebrity endorsements from edgier stars such as Snoop Dogg, the gangster rapper.

But its success as the favourite and most fashionable label with America’s youth was short-lived.

By the early noughties, through a mix of changing tastes and competition from newer brands such as Abercrombie & Fitch, the business was struggling. Profits fell from $123m in 2001 to $85m in 2005.

The solution was radical: Hilfiger, which had a far more chic image outside of its home market, was taken private in a management buy-out by its European team, led by Fred Gehring, now chief executive, and backed by Apax Partners. The headquarters were moved from New York to Amsterdam and Mr Hilfiger, who remained creative director, dropped streetwear for classic chic.

The positioning of Europe became the positioning for the rest of the world. “Fred started Tommy Hilfiger in Europe 12 years ago, and he positioned the brand on a much higher level,” explains Mr Hilfiger. “He put clothes only into very sophisticated, better specialist stores.”

Turning round an all-American brand from the vantage point of Amsterdam is a novel – and high-risk – idea. But Mr Hilfiger, kitted out in a pristine pin-striped suit, complete with brown suede desert boots, says he had little choice but to turn to the European team.

“Decisions were being made that were not necessarily the best for the business, and it was very frustrating,” he says, looking back. “Tommy Hilfiger was struggling, it was public and decisions were made to do certain things that were not healthy for the business.”

He is about to go on but is cut short by Mr Gehring. “I don’t think you should go into that,” he says.

Mr Gehring says he has “redefined” America over the past three years. “We have shrunk the business and traded it up. We have a position now where there is a significant level of demand and a much lower level of supply.”

The fashion label has signed an exclusive wholesale deal with Macy’s to stock Tommy Hilfiger Sportswear. This is the classic casual line – navy wool jersey dresses paired with riding-style burgundy boots – that Mr Hilfiger showed on the catwalk at the Lincoln Center in New York. It is aimed at 25- to 45-year-old Americans, who have a household income of at least $75,000.

Street wear is over, with the old US “baggy jeans” collection replaced with Europe’s Hilfiger Denim. This line is targeted at 18- to 24-year-olds and competes with the likes of Diesel, Replay and G Star.

It is an “unusual” rebranding exercise, says Robert Burke, founder of Robert Burke Associates, the New York luxury consulting firm. “It is always more difficult to trade up than trade down in any brand. I think that Tommy Hilfiger and his team are repositioning in Europe first because they have a better chance trying that in Europe,” he says.

The next stage is to introduce Tommy Hilfiger stores into the US. Of 550 shops around the world, only six are based in the US. In November, the company plans to open a flagship on Fifth Avenue in New York for conservative, affluent urbanites. It will open up to 10 stores a year for “several years”.

“Our own brand is positioned in a different way [now],” says Mr Hilfiger. “Ten years ago it was positioned with a lot of red, white and blue and a lot of logos and you would look at these street kids wearing the clothes as billboards.”

Now Tommy Hilfiger – as modelled by Ms Bush – represents something very different. “The brand had been known for its streetwear and now it is not as much on people’s radar, which is probably a good thing when they go about repositioning,” says Mr Burke.