Does Its Brand Change To Make The Luxury Group Profitable?

After the founder of Donna Karan went out and focused on the development of vice line DKNY also failed to reverse the decline, the world's largest

Group LVMH Mo? T Hennessy Louis Vuitton SE (LVMH.PA) MOET & CHANDON Hennessy -

Group officially announced in July 25th to US $650 million to the United States

G-III Apparel Group Ltd., the manufacturer and distributor, sells Donna Karan International Inc., which is expected to be delivered by the end of 2016 or early 2017.

Fashion leather products downturn

The sluggish performance of the fashion leather industry is the source of LVMH SE's attempt to lose weight.

With the declining sales of its Louis Vuitton Louis Weedon brand, the LVMH SE group's fashion and leather goods department fell 0.8% in the first half of the year, and its operating profit dropped by 1.9%.

As the proportion of business profits of fashion leather parts is 55%, the business status of the Department is self-evident for the overall development of LVMH SE group.

In the first half of the year, the profits of leather goods and Fashion Department declined significantly against the group. The overall operating profit of LVMH SE group also fell 0.1% to 2 billion 955 million euros, compared with 2 billion 959 million euros in the same period last year.

Excluding the exchange rate and other factors, LVMH SE group did not record any organic growth in the first half of the year.

The G-III Apparel Group Ltd. will win two brands of Donna Karan and DKNY, although the sale price of $650 million is at a loss compared to the LVMH SE which acquired DKI in 2001 for 643 million US dollars, but considering the situation of the DKI has always been, it is a good price to sell.

It is reported that last year, when we stopped the Donna Karan line and hired DKNY's Public School co founder and creative director of Dao-Yi, Chow and Maxwell Osborne as the creative director, the performance of the 80% luxurious sub line brand was still disappointing.

MainFirst Bank analyst John Guy has revealed that the brand has been under tremendous pressure in the US and Europe in the past 12-18 months.

"Selling loss business is second only to reversing the business and is better than staying behind in the group, especially when the market is tough."

Exane BNP Paribas SA (BNP.PA), a luxury industry analyst Lua, also holds the same view.

As for the LVMH SE group's efforts to clean up the unprofitable brand, the Chinese luxury industry research website analyzed: "in the current global economic downturn and completely unable to see any growth prospects, it is the survival way to retain only those profitable brands, and the 70 hand brand LVMH" may be considered a large ship full of explosives, so even if the brand is sold very little, it is the right way to sell Donna Karan International Inc..

Citigroup Citigroup analyst Thomas Chauvet also speculated: "LVMH SE may also sell Marc Jacobs International LLC business, taking into account the great similarity between the contemporary brand and DKI in the business mode and development trajectory, and the struggling development."

Due to the impact of lifestyle changes on the retail industry, in addition to the downturn in the fashion leather sector, the two fashion related departments of LVMH SE group, including beauty and perfume, watches and jewellery, also showed a sharp slowdown in growth.

In the face of not optimistic market situation, LVMH SE group also took corresponding action.

In the early June 29th, LVMH SE group pferred its holding beauty brand NUDE to cater for the beauty brand Beautycounter parent company Counter Brands. LLC.

Since LVMH acquired the equity of NUDE Brands Ltd. 70% in February 2011, despite its strong support from LVMH and Bono, NUDE has been developing mediocre in recent years, which ultimately led to the decision of LVMH to sell the brand.

No profit - cut when chopped.

In fact, the development strategy of emptying unprofitable brands is no longer a novelty in the luxury group industry.

As early as last December, the French luxury group Kering (Kai Yun) reached an agreement with Investindustrial, a private equity group in Italy, to sell all the shares of Italy's luxury shoe brand Sergio Rossi.

In the strong brand portfolio of Kering group, Italy luxury shoe brand Sergio Rossi has been living in the shadow of strong brands such as Gucci, Bottega Veneta, Saint Laurent Paris, and has not been much improved.

After the founder Sergio Rossi left, the brand changed the design director and the number of executives.

Turning to the practice of changing the brand, Kering SA Kai Yun group called it a win-win deal: "this paction will promote the further development of Sergio Rossi in the future, and the new strategic partner (Investindustrial) will bring more long-term growth prospects to the brand."

Andrea C. Bonomi, a senior partner of the group and a well-known investor in Italy, said that "the development strategy for Sergio Rossi will be formulated to continue the group's consistent investment success".

It is reported that Investindustrial has "revived" many classic brands, such as Ducati, Ruffino, PortAventura, Gardaland and Stroili.

In January this year, in the case of Gucci Kering, the group's main profitable pillar brand, Gucci's profitability was weak. The SA SA group started to rearrange its small brand without profit, announcing the sale of its sports brand.

"Electric brand sold 25 million dollars in 2015, which is unprofitable for Kering SA group."

MainFirst Bank AG analyst John Guy talks about the brand's emptying.

The California sports brand Electric, founded in 2000, was incorporated into the Kering SA Open Cloud group in 2011 when it acquired Volcom.

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Change of vane

The change of vane in luxury market is one of the main reasons for luxury brands to sell offline brands.

According to the performance of LVMH SE in the first half of the year, the demand for "wearable" and cosmetic products has become sluggish. On the contrary, the experience of alcoholic products is strong.

The group is also catering to the trend. On the one hand, it continues to buy liquor brands. On the other hand, it has begun to clean up DKI's brand that will affect profits and struggle in the future.

In addition, considering that the luxury goods industry has rapidly declined from double-digit high speed growth to low single digit and flat overall situation in the past three years, the brand under the clear line is also a fast and less risky business strategy. While trying to avoid the unprofitable brand dragging down the overall development of the company, it also wins more manpower and financial support for the better offline brand.

For the brand itself, the move to change hands has created more possibilities for its future development.

From the positive attitude of the catcher group, it seems that with the dual promotion of financial support and strategy formulation, these brands will have the opportunity to usher in a new round of spring.