On: Taking on the leaders
Switzerland’s finest sportswear brand celebrates its 15th birthday with excellent results that suggest it is starting to put a significant dent in a market that has long been dominated by Nike and adidas.
The company claims to be on a mission to ignite the human spirit through movement, and it can certainly flog you a decent range of kit in which to do whatever movement you fancy, while its premium positioning offers profit margins that would make many a brand jealous.
Sales were up 43% year on year to a record Sf726.6m in the first quarter, reflecting the strong momentum of the brand across all channels, regions and product categories. While it’s still best known for its footwear, it is evolving into a head-to-toe sportswear offering, with its success in the US driven by partnerships with actress Zendaya and luxury group Loewe. Growing its presence in Asia is a focus area, and its efforts are paying off, with first-quarter net sales in the region up 130%.
With high-grade Swiss understatement, the company acknowledges that “recent global trade policy shifts have introduced higher levels of planning uncertainty”, which can roughly be translated as “nobody’s got a clue what sort of craziness might emerge from the White House from day to day”, but it believes that its commitment to innovation, operational excellence and elevated consumer experiences will help it to navigate whatever is thrown at it. It is cementing its position as the Roger Federer of brands, and Federer’s 3% shareholding in the company has made him another fortune.
LVMH: Expensive hangover
The MH bit of Bernard Arnault’s luxury juggernaut, LVMH, has left the straight and narrow path as if it’s being driven by someone who’s had a skinful of one of its finer cognacs.
Despite owning iconic brands such as Moët & Chandon, Dom Pérignon, Krug and Château d’Yquem, the wheels have come off financially and Moët Hennessy has gone from generating €1bn in cash in 2019 to eating up €1.5bn last year. Sales were down 9% in the first quarter and it has announced that it is laying off about 1,200 staff.
The wine and spirits sector as a whole has been hit by a global downturn in demand, but Moët Hennessy appears to have worsened the problem with overly aggressive price increases and a series of unfortunate acquisitions.
Its former CEO Philippe Schaus has fallen on his sword, replaced by the former CFO Jean-Jacques Guiony, with Alexandre Arnault representing the big boss as his deputy. They will be reviewing the company’s portfolio of brands and taking the microscope to underperforming operations such as its direct-to-consumer retail business.
The €2bn acquisition spree included 50% of Jay-Z’s champagne label Armand de Brignac, Provençal rosé brand Minuty and the Napa Valley’s Joseph Phelps, and with the benefit of hindsight it was a long way from perfect timing. It seems that there is a limit to what customers are prepared to pay for their favourite tipple, and years of chunky price increases may well have pushed them too far. It will be a substantial challenge for the new management team to turn the business about and get it back to form.
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