TT Vol. 28

Tourist Trapp

Nov 15, 2020

Clockwise from Top.

Farfetch Q3 Results

Following a strong Q2, Farfetch again posted strong results for Q3 that saw their share price jump. Third quarter sales were up +62% versus the same period last year, while gross profit was up even more at +81%, indicating it is not only selling more, but doing so with less discounting and lower customer acquisition costs. While they continue to lose money, Farfetch still forecasts that it will be cash positive beginning next quarter. On the earnings call, CEO José Neves stated “We believe we are witnessing a paradigm shift in the way people buy luxury.” We couldn’t agree more: we predict that more and more sales for luxury brands will happen digitally, with physical retail stores acting more and more as a marketing expense. Younger customers are attuned to shopping online, and the pandemic has only accelerated this trend. As we wrote about last week, Farfetch is entering into a joint venture with Alibaba to better serve the Chinese luxury customer, and it seems that given the excellent Q2 and Q3 results, it’s well positioned for 2021 and beyond.

Sustainability News

We came across the New Standard Institute (NSI) when doing some research this week. It’s a fashion policy think tank here in NYC, and their mission is “using data and the power of citizens to turn the fashion industry into a force for good.” Reading about them in Harper’s BAZAAR, we found ourselves nodding along. The founder of NSI, Maxine Bédat, doesn’t like the term “sustainable fashion” and prefers a more rigorous, data driven approach to meeting quantifiable metrics. We believe that companies should be required to measure and analyze key environmental indicators like water usage, greenhouse gas emissions and energy embedded in their supply chains, while also examining labor practices at any factories used. Ideally, companies shouldn’t need to differentiate themselves based on how “green” they are — rather, all companies should be legally bound to a sustainable baseline, and consumers shouldn’t have non--sustainable options to choose from. Design and brand should be the big differentiating factor, not sustainability. Read more about NSI’s Roadmap to Rebuild here and follow them on Instagram here.

Woodbury Common Day Trip

Last week, we took a day trip up to Woodbury Common, an enormous outlet mall north of NYC that has become (in normal times) a huge tourist destination. So much so that there are buses that leave from the Port Authority three times a day to get up there. There are travel agencies that specialize in bringing Chinese customers from Asia to Orange County for the deals. A long time ago, I used to go to the Nike outlet store for soccer and basketball gear, but now we are more interested in the fashion brands selling older season merchandise for cheap. In addition to more mass market brands like Gap and Ralph Lauren, there are a large number of luxury outlet stores. We noted lines at Tory Burch, Lululemon, Gucci, and Saint Laurent, with the longest lines at Prada. The Celine store, as rumored, does still have some old Phoebe Philo era product (mostly the Luggage bag), though not much at this point. They do have a few Big Bags left, which Raquel and I have been wanting to share, but even after discounting they are still going for $4K each! For anyone with access to a car, we highly recommend checking out Woodbury Common at some point. It’s an outdoor mall for safer pandemic shopping, it is actually really easy to get to from NYC (just over an hour each way!), and you can find some really great product there for much less than what you would in Soho. In fact, most of the leading luxury stores don’t actually carry much marked down merchandise online or in their main stores, and you can find some great deals at their outlet locations that you can’t find elsewhere.

Supreme Acquired For $2.1B

Last week, VF Corp., the owner of brands like Vans, The North Face and Timberland, signed a deal to acquire the legendary streetwear label Supreme for $2.1B. Private equity heavy weight Carlyle had acquired a significant stake in Supreme back in 2017, and it looks like they will double their money once the sale to VF Corp. closes. Now that Supreme will be part of the VF family, we predict that the trend setting brand will start to see its cachet slowly erode over time. The Carlyle acquisition saw Supreme start to expand into new locations like Williamsburg and San Francisco, and to justify the price tag on this deal, VF will start to open additional doors in more cities. Supreme has long collaborated with The North Face, Vans and Timberland, and we would expect to see a collab with Dickies (another VF brand) soon. We would not expect to see some of its other bigger collaborations end, e.g., Nike, as these perform very well. A brand that prided itself on exclusivity will now need to expand rapidly to keep up with other VF brands. We’re sure Supreme will continue to churn out interesting product, but with a history of producing some crazy pieces (e.g., a Supreme dirt bike and a Supreme Oreo), they are probably going to be more conservative and stick to collaborations with VF brands and other mainstream companies like Nike. Resale values for mainline, non-collab product will fall as VF produces more units behind each style, though we wouldn’t be surprised if collaboration product is still kept lean to build interest and maintain some semblance of exclusivity.

The Streaming World

It’s now getting dark in NYC around 4PM, so after a summer of spending most of the evenings outside, it’s been back to the living room. Raquel has been in the mood for British-set fare of late, now that The Crown (this season with Princess Diana!) has returned as of today. We ended up watching Mary Poppins and Bedknobs and Broomsticks, which it turns out have a lot of similarities. Both were produced by Disney, both are based on beloved children’s books, and both feature extended sequences that mix live action with animation. We especially liked the chic striped soccer shorts in this scene from Bedknobs and Broomsticks. It’s also great to see Julie Andrews and Angela Lansbury in their primes on screen. Once we finish The Crown, the plan is to watch Audrey Hepburn’s My Fair Lady, which beat out Mary Poppins for Best Picture in 1964.