Modish Issue #3: Fashion's New Normal and 1H2021 in Review

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RT O P E RE U 1 2 S 0 2 S 1H G I


Issue #3: Fashion’s New Normal and 1H2021 in Review



© 2021 Carolyn Hammond

AUGUST 16, 2021


Welcome to

Issue #3








ORT P E R UE S 2021 S I



Forging Ahead: What We’ve Learned So Far After an exhausting end to FY 2020 and a tough start to FY 2021, it seems that the fashion industry has finally regained its stride, with companies across the sector posting strong numbers this quarter, in many cases finally beating their abysmal, COVID-riddled results from a year prior. Now, as distancing restrictions go by the wayside and the Delta variant surges, the fear of the unknown


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begins to creep in once again. However, while this may mean being cautious going forward, we remain cautiously optimistic, equipped to take on the challenges presented by the pandemic, despite the looming uncertainty. Over the course of the past quarter, the fashion industry has been incredibly active. After more than a year of business plans being put on pause, this Q2 boom was not just unsurprising, but incredibly refreshing. LVMH celebrated the end of lockdown in Europe with the grand opening of a revamped, in-person experience at La Samaritaine, while H&M doubled down on their carbon neutrality and responsible sourcing commitments. Richemont snapped up Delvaux, building out its burgeoning fashion and leather goods portfolio, and fast fashion giants Boohoo and Shein have once again found themselves at the center of multiple copyright infringement lawsuits. In short, the fashion industry has had a whirlwind quarter adjusting to the return of normalcy. Additionally, not only did masking policies finally loosen this quarter, but many companies’ balance sheets finally got a breather, too. Under tremendous strain from the economic fallout of COVID-19 for Q2-Q4 2020 and well into Q1 2021, many companies netted losses for the first time in years, scaring investors and damaging their cash flows. However, in Q2, many companies—from LVMH to Farfetch—posted revenues that not only surpassed their Q2 2020 numbers, but their Q2 2019 numbers, too. In closing, while Q2 2021 had its fair share of ups and downs, the fashion industry came out stronger than ever before, posting robust numbers, reviving acquisitions, and rolling out exciting new campaigns. Ultimately, by forging ahead, the fashion business has not only learned how to survive, but to thrive in the constantly changing, hyper-volatile, and ruthlessly competitive postCOVID economy.


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Letter from the Editor Dear reader, Welcome to the third installment of Modish! It’s hard to believe we’re already into Q3 of FY 2021. Just a year ago, FY 2020 seemed interminable. However, the fashion industry has since recovered dramatically, adapting to its “new normal” post-COVID with grace and, of course, style, despite the Delta variant’s recent surge. As a result, the fashion business today has shed much of its deadweight to become a leaner, meaner industry ready to take on the post-pandemic economy. In this issue, I review 1H 2021 in full, focusing primarily on Q2 2021. As usual, my beloved luxury conglomerates have continued to beat analyst expectations, making big plays that have paid huge dividends thus far. I also go into greater depth on a few of my favorite topics as of late: Copyright infringement issues, and the everevolving sustainability conundrum. Next, I highlight the innumerable problems with luxury resale despite its incredible popularity. Finally, I look ahead to Q3 and the remainder of FY 2021, sharing the stocks I’m watching and why they’re on my radar, with a particular focus on the in-vogue world of installment pay apps. This has been and continues to be one of the most exciting fiscal years in the fashion industry thus far, as brands learn to not only adapt, but to thrive in the era of post-COVID consumerism. From reimagining their digital strategies to taking strides toward reducing their carbon footprints, fashion companies have become more active than ever, and I can’t imagine a more exciting time to examine the industry and analyze its future. Sincerely,

Carolyn Hammond, Editor-in-Chief of Modish


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In this Issue Q2, 1H 2021 in Review Resale in Question……6 Taking Stock: The RealReal, Poshmark, and Farfetch……6 Editorial: Great Expectations……7 Editor’s Notes: Why is Rent The Runway filing for IPO now?……10 The IP Problem……11 Editorial: Too Big To Care…..11 Editorial: Too Little, Too Late……14 In The News: Copyright Copycats……17 Luxury Leads……18 Taking Stock: LVMH, Richemont, Kering……18 Editor’s Notes: Luxury’s Big Bets……19

Looking ahead : Q3 2021 and Beyond The Gen Z Gamble……20 Editorial: Tik, Tok……20 Editorial: The Prediction Predicament……23 Sustainability Suspicions……26 Editorial: The Greenwashing Gambit……26 Stocks I’m Watching……29 Stock Watch: Klarna, Affirm, AfterPay……29

Final Thoughts What to Expect in Q3 FY 2021……30 References, Citations……31


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Taking Stock

Resale in Question 2


Resale is all the rage amid a renewed push for sustainability. However, which of the main players are viable investments?

Gross Profit vs. Net Loss, 2019-2021 Gross Profit Net Loss


$46.1 $50.1

19 2


Revenues + GMV (in millions of $)






Q2 2020


Q2 2021

Revenues vs. Net Profit, 2019-2021 $600 Revenue + Net Profit (in millions of $)


model Farfetch has also entered the secondhand luxury game, introducing Farfetch Fix, a luxury restoration service powered by The Restory, as well as Farfetch Second Life, which allows customers to trade their pre-owned luxury bags in exchange for Farfetch site credit. Though Farfetch is first and foremost an e-tailer, it has quickly gained traction in the secondhand market, seeming to have a better digital strategic and business model by which to make its secondhand luxury wing profitable.

$517.0 $409.0

$400 $200

$301.0 $146.0

$0 -$200
































Q2 Revenues + GAAP income, 2020-2021




While different from The RealReal in its business



name in luxury resale,” The RealReal became one of the hottest investments on the street. However, the company’s financials simply don’t add up. Despite its growing GMV and increasing revenues— after a 21% decline last year, the company has rebounded to $104.9 million—REAL is still not profitable 10 years since its founding.


Q2 2019


Thanks to continued hype from investors, who laude it as the “first




Revenues (in millions of €)


$203 $105

$63.4 $70.7


$400 $302



Q2 Revenues + GMV, 2019-2021


The RealReal




Net Profit

More similar in structure to The RealReal, Poshmark has become one of the largest and most prominent players in the secondhand market. From t-shirts to Louis Vuitton totes, Poshmark has everything. However, after an exciting $21.3 million in GAAP income in Q2 2020, the company netted a loss of $2.9 million in Q2 2021, despite a 22% increase in revenues Y/Y. Having gone public in the last year, Poshmark has proven an interesting company for investors, but has yet to maintain consistent numbers.

Revenues + GAAP Income (in millions of $)


GAAP Income


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Great Expectations The RealReal is all the rage, but its business model is shaky at best. Originally published on, June 17, 2021. This weekend, I travelled to Dallas to see some friends. Naturally, shopping was the first thing on our agenda. After hitting up NorthPark, wandering through the dreamy Neiman Marcus shoe salon and attempting to pick our way through Zara’s manic sale rack, we decided to go to The RealReal’s new Dallas storefront in Knox-Henderson. My friend Isabell was interested in looking at and potentially purchasing a pre-owned bag, and I wanted to see their business model in action—and, of course, look at handbags, too. Considering the hype The RealReal has garnered from investors, with many hailing it as the ultimate pre-owned luxury destination and the “next big thing” for Gen Z consumers, I expected to be wowed. Having already visited TRR’s flagship in SoHo a couple of years ago, I not only wanted to see how the Knox-Henderson location compared, but I wanted to understand why investors were so enamored of a company that, ten years since its founding, still isn’t profitable. The TRR storefront in Knox-Henderson. Credit: Dallas News

From the outside, the storefront was basic. Unlike the SoHo location, Knox-Henderson had few, if any, windows. In fact, without the TRR logo over the door, you probably would

have missed it entirely. Upon walking in, I was struck by how small the showroom itself was. Composed of only two small rooms, there was extremely limited space for merchandise. Taking a quick glance around the boutique, I noted that there were only about thirty handbags on display and three jewelry cases, with random pairs of shoes and racks of clothing slotted in here and there. I was stunned. Given Dallas’s massive market and the company’s constant boasting about its more than $1 billion in gross merchandise value (GMV), I was surprised that TRR didn’t have more available.


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While the lack of items was confusing, it was TRR’s pricing that raised immediate red flags. When we walked in, Isabell immediately gravitated toward the uber-trendy Prada Re-Edition 2005 nylon crossbody. Even from high up on the shelf, I could tell it wasn’t in “pristine” condition—TRR’s highest classification for used goods---nor was it in “excellent” condition—TRR’s second-highest classification for its used goods. To me, it appeared “very good,” the next step down in terms of wear, as the nylon was a touch puckered near the zipper, likely indicating that it had been worn on multiple occasions, not just once or twice. A sales assistant removed the safety wire attached to the bag and took it down for her to try on. Not seeing a price tag, Isabell asked how much the bag was. “So, it’s $1895, but today it’s 5% off, so $1800,” she said, glancing at her iPad. I was stunned— that same bag retails new for $1390, and there’s no waitlist for it. It was simply illogical. Who would pay more for an obviously-used bag that they could go to Neiman Marcus or Prada and buy for $500 less? It simply didn’t add up. After the Prada purse debacle, I probed a bit further, checking the price on every purse in the showroom. From a 2010 Louis Vuitton pochette with visible wear listed for $1400, to a scuffed Fendi micro baguette for $800, I couldn’t believe the Prada Re-Edition 2005 bag, new. Credit:

prices I was seeing. Every single bag in the store was

listed for more than its original retail price, with most marked up by almost 40% from their original retail price, even with obvious signs of wear. This was a huge red flag for a number of reasons. First, TRR’s “luxury specialists” don’t know how to price their goods—a massive problem that could seriously hurt its credibility, especially considering that TRR is considered the “first name” in luxury resale. This inability to realistically price merchandise also makes it harder to move inventory, which, in turn, hurts TRR’s revenues and strains its relationship with those who consign their pieces with them. Goods must be

Prada Re-Edition 2005 bag, used. Credit:

priced to sell in order to keep the business afloat. Second, by pricing its goods so unrealistically, TRR is


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alienating its largest consumer base: Millenials and Gen Z. As I argued in my most recent article, The Prediction Predicament, the main reason Gen Z is currently “big on resale” isn’t because it’s “sustainable;” it’s because most of Gen Z is under thirty, and therefore doesn’t have the money to drop on a new designer bag. However, they still want designer labels; and, as such, turn to resale to find deals on used designer goods. This is the primary function of luxury resale: To rehome pre-owned goods at a substantially discounted price. Thus, by listing pre-owned luxury goods for more than their original retail price, The RealReal is shutting out nearly 40% of its clientele. Just like with a car, luxury goods lose substantial value over time. In fact, as soon as you buy a handbag in a boutique and take it home, that handbag loses around 10% of its value. Thus, even if you listed it the next day on eBay or another resale site as “new with tags,” you would still have to take a considerable cut on what you paid for it in order to sell it. Save for select items like Birkins, Kellies, or in some cases, Chanel bags and rare or limited edition finds, bags always lose value. TRR is somehow ignoring this basic principle. Ultimately, instead of offering items at “up to 90% off retail,” as it has claimed, TRR seems to be imposing some

The inside of The RealReal in Dallas. Credit:

kind of sustainability premium instead. Essentially, it


seems like TRR is just trying to cash in on the popularity of the sustainability movement, hoping its “circular luxury” business model will attract consumers looking to stick it to “wasteful” fashion companies by paying more for pre-owned items. While this logic may apply to 1% of consumers; in general, it is a sure-fire path to business model collapse. While I went in with great expectations, TRR simply couldn’t live up to its hype. Regardless of its popularity, TRR’s business model is fundamentally unstable. And, if the company is precarious at a base level, it’s no wonder that it fails to meet profitability, quarter after quarter. In order to stay in business, The RealReal needs to stop focusing solely on its growing GMV and instead seriously reevaluate the basic elements of its business model, from its pricing to its store experience. If it doesn’t, The RealReal will face a serious reckoning from investors and customers alike that could destroy the company. In closing, as the old adage goes: Buyer beware.


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Editor’s Notes

12 years in__ Founded in 2009 by Jennifer Hyman and Jennifer Fleiss, Rent the Runway, known as RTR, has been in business for more than 12 years. Introduced as a solution to the expensive, wear-once formal dress problem, the website took off as the place to rent a $2,500 Hervé Leger gown for $80. However, the company quickly decided to expand beyond just formal dresses.

Heavy competition__ The resale market has become incredibly crowded thanks to the renewed push for sustainability and investor excitement over fashion’s budding “circular economy.” With companies like The RealReal, Poshmark, ThredUp, and many more, the resale space is more competitive than ever. Furthermore, the majority of these competitors’ stocks have underperformed since going public, a black mark on resale that will make investors think twice before buying stock in RTR.

Valuation drop__ Last year, RTR raised funds at a valuation of $850 million, nearly $150 million less than its previous valuation of $1.5 billion.

Why Now? As Rent the Runway announces its impending plans to go public, is it too late for the rental giant to cash in on the resale boom?

__Quality control RTR began expanding its strategy beyond formalwear to include everyday, ready-to-wear items in its rental portfolio. However, with blouses and jeans being rented, quality control became an issue, hurting RTR’s brand.

__Over-expansion In addition to over-extending its online offerings, RTR expanded into brick and mortar stores, too, setting up boutiques in New York, San Francisco, and more, before shuttering every storefront except for its NYC flagship due to lacking sales and waning interest.

__Poor pricing Finally, RTR added a shopping function to its business model, allowing customers to not only rent pieces, but to buy them for a discounted price. However, the pieces are priced too high given their age and the wear and tear their rental life puts them through. Ultimately, consumers are unlikely to buy heavily used items for 85% of their original value. As such, by pricing its products so high, RTR will destroy its own business model and kill its revenue.

An Alexis dress from 2018 being sold for $50 off its original retail price. Credit: RTR

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Too Big To Care Fast fashion companies are notorious for stealing designs, but can they really be stopped? Originally published on, June 17, 2021.

Recently, fast fashion group Boohoo PLC came under fire for allegedly stealing Kai Collective’s “Gaia” print, renaming it “Marble” and selling it in an array of shirts, skirts, and dresses on the Boohoo site. Kai Collective has since sent Boohoo a cease and desist letter, demanding £30,000 in damages and legal fees, according to documents leaked by The Fashion Law. Should Boohoo refuse to comply with CEO Fisayo Longe’s demands, Kai Collective will file suit.

This isn’t the first time a fast fashion brand has been accused of copyright infringement and pilfering a lesser-known designer’s intellectual property. However, fast fashion companies are rarely held accountable for their blatantly illegal actions, seldom acknowledging the suits brought against them, and outright ignoring the terms of cease and desist letters, often refusing to remove the allegedly-stolen designs from their websites. So, why is it that fast fashion brands continue to lift copyrighted designs? And, more importantly, how do they get away with this time and again?

Kai Collective’s cease and desist letter. Credit:

In short, fast fashion companies are too big to care.

The Tab

First off, how severe is a copyright infringement allegation? Though it is a serious charge in terms of business ethics, copyright infringement actually carries with it underwhelmingly lenient penalties. According to US Law, those found guilty of copyright infringement will be forced to a pay

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a fine, between $200 and $150,000, per each work that is infringed, as well as the legal fees of the opposing party. And, unless a copyright infringement case is considered criminal, there is no potential prison sentence for the offender, nor is there a probationary period or threat of shutdown for the company at fault. For a group like Boohoo, a publicly-traded company with a market cap of £4.3 billion and £857 million in revenue, a fine of $150,000 is just a drop in the bucket. For Boohoo, it is cheaper to steal another designer’s work than to commission their own for a collection. This is the nature of the incredibly unique and much-hated fast fashion business model. Companies like Boohoo are built on production, price point, and presence. Essentially, fast fashion labels thrive on their quantity of merchandise, cheaper price point, and massive social media following. As such, not only is Boohoo’s copycat “Marble” print available in more styles and colorways Kai Collective vs. Boohoo. Credit: The Fashion than Kai Collective’s “Gaia,” but it is also more Law cost-effective for the average consumer—Kai Collective’s “Gaia” apparel retails between £67 and £130, while Boohoo’s “Marble” apparel retails between $8 and $16. Furthermore, while Boohoo boasts an impressive 32.2 million followers across its group’s platforms, Kai Collective only has 64.3k. As a result, not only are Boohoo’s “Marble” designs more recognizable, but they are also more accessible than those of Kai Collective. Thus, whether Boohoo pays the £30,000 being demanded, or is found guilty of copyright infringement and forced to pay the maximum $150,000 fine, the fast fashion giant will come out on top. In fact, Boohoo will likely make more money from selling its counterfeit “Marble” design than it is forced to pay for stealing it.

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This lack of consequence is why Boohoo and other fast fashion brands continue their illicit practices. In order to curb this rampant problem, there must be stricter copyright infringement penalties in place to ward off poachers. Without legal reform, fast fashion will continue to profit off the intellectual property of smaller designers who are ill-equipped to take on behemoths like Boohoo, Inditex (Zara), and H&M. Ultimately, without harsher laws, smaller brands and lesser-known designers will struggle to protect their work, and fast fashion companies will remain unaffected, unrepentant, and too big to care.

Kai Collective’s Gaia print. Credit: BIDHAAR

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Too Little, Too Late Why Gucci and Facebook’s joint lawsuit isn’t enough to make a dent in the dark online market of counterfeit goods. Originally published on, April 19, 2021

On Tuesday, The Fashion Law reported that Facebook, Inc. and Gucci America, Inc. had filed a joint lawsuit in the US District Court for the Northern District of California against Natalia Kokhtenko, a serial seller of counterfeit luxury items. The complaint, dated April 26, 2021, claims that Kokhtenko was “operating an illegal online business, trafficking in illegal counterfeit goods” in which she used Facebook and Instagram accounts to “promote the sale of [luxury brand] counterfeit goods.” This joint suit marks a new chapter in the ongoing battle between luxury brands and counterfeit con artists. In the past, labels like Gucci have primarily taken on “offline” counterfeiters—those who sell their illicit handbags and accessories on the streets—by shutting down dealers at notorious counterfeit haunts New York City’s infamous Canal Street. However, with the overwhelming ecommerce growth over the course of the last decade, counterfeiters have increasingly taken their goods online in order to make them more accessible, forcing luxury labels to face the even more daunting challenge of tackling “online” counterfeiters. This shift online has made killing off counterfeits virtually impossible for luxury brands. Thanks to etailers like DHGate, Alibaba, and Aliexpress, among others, counterfeit luxury goods are more abundant and more accessible than ever before. Furthermore, despite its professedly air-tight User Agreement and “crackdown” on IP infringements, Facebook’s algorithms continue to let high numbers of criminal and bot accounts operate on their platforms, allowing The complaint introduction. Credit: The Fashion Law

them to continue promoting their counterfeit goods with few, if any, real consequences. However, with !1 4

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Gucci and Facebook’s joint complaint, it seems that luxury brands have finally found a way to trace and crack down on the seemingly untouchable online counterfeit market. But, with hundreds of thousands of counterfeiters operating on social media and online, is prosecuting a single offender too little, too late? In the trademark infringement and counterfeiting complaint, the Plaintiffs state that, since “at least April 2020 and continuing until at least April 26, 2021,” Kokhtenko used “multiple Facebook and Instagram accounts to promote her online [counterfeit] stores.” Facebook estimated that the defendant had used more than five Facebook accounts and more than 150 Instagram accounts to promote her products. In total, Facebook claims to have deleted more than 160 accounts linked to her, but only 125 posts promoting her goods. Despite Facebook’s actions, Kokhtenko continued to create new accounts and breach Facebook’s User Agreement—an arduously long document that most users accept blindly when signing up. According to Facebook, Kokhtenko used “automation software that allowed her to create user accounts in bulk, while misrepresenting how she was accessing Facebook computers and circumventing Facebook technological measures.” And, while Facebook claims to monitor for and delete all automated bot accounts, in reality, most of the accounts slip through Facebook’s algorithms.

Photos of one of Kokhtenko’s counterfeit bags. Credit: The Fashion Law

Facebook asserts that working with brands like Gucci has allowed it to develop a “robust IP protection program.” However, the group’s results in eradicating counterfeiters indicate otherwise. According to the social media giant, Facebook and Instagram removed more than one million pieces of content—posts, comments, or users—flagged as promoting counterfeit in 2020. Given that there are approximately 4 billion users between the two platforms, a combined 287 million of which are fake or bot accounts according to Statista, removing a million pieces of content a year is nothing. On Instagram alone, nearly 9 million posts are published every day. Thus, if Facebook deleted a million pieces of content identified as

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counterfeit promotion a year—2,739 posts a day—the deleted posts would only make up 0.03% of the daily content posted to Instagram. This simply isn’t enough to make a difference.

One of the defendant’s fake accounts on Instagram. Credit: The Fashion Law

Both Facebook and Gucci are seeking injunctive relief via a formal order that attempts to bar Kokhtenko from selling her counterfeit goods through Facebook’s platforms and demands that she stop infringing on Gucci’s trademark. Additionally, Gucci is seeking monetary damages, demanding “three times the profits realized by Kokhtenko” or statutory damages of $2 million “for each and every one of the prohibited marks counterfeited.”

Ultimately, while Gucci and Facebook will undoubtedly win the lawsuit, this complaint only stands to take down one of the thousands of counterfeiters active on Facebook’s platforms. Thus, while this suit is a big step toward tracing online counterfeits, it won’t make a dent in the multi-billion-dollar online industry of counterfeit luxury goods. In the battle between luxury labels and the ever-evolving world of online counterfeits, this lawsuit is too little, too late.

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In The News

Copyright Copycats


Canada Goose vs. Goose

Renowned outerwear brand Canada Goose filed suit against fellow retailer Goose Country in a federal court in Illinois on June 30th, claiming that, as a result of its similar name and its attempt to mimic the “look and feel” of its products, Goose Country is guilty of trademark infringement, trademark dilution, unfair competition, false designation of origin, and unjust enrichment, according to The Fashion Law. This is a developing case. Credit: The Fashion Law

Intellectual property cases making headlines


New Balance v. Michael Kors

Last week, New Balance filed suit against Michael Kors, claiming that the new sneaker being rolled out by the designer, emblazoned with an “N” similar to the American sneaker company’s iconic “N,” is designed to “confuse consumers,” or to “suggest an affiliation, connection, or association with New Balance.” This is a developing case. Credit: The Fashion Law


Versace v. Fashion Nova

After Versace filed suit against Fashion Nova in late 2019, fast fashion e-tailer Fashion Nova fired back with 32 defenses, 2 counterclaims, and a 25-page answer denying Versace’s claims that it sold “deliberate copies and imitations of [its] most famous and recognizable designs, marks, symbols, and protected elements.” At the center of the quarrel? J Lo’s iconic Jungle Print dress from 2000. However, as of mid-July, the two parties entered into a settlement, just days before the projected start of the trial. This case has been settled. Credit: The Fashion Law


Yeezy v. Walmart

In yet another installment of the Yeezy v. Walmart saga, the brand filed suit against the American superstore chain on June 24th, claiming “unjust enrichment based upon Walmart’s willfully trading off the renown Kanye West and iconic YEEZY brand,” arguing that consumers are purchasing the look-alike Foam Runner shoes “with the mistaken belief that the shoes are associated with West and the YEEZY brand.” Walmart maintains that it was not directly involved, and that the shoe was being sold by third party retailers. This is a developing case. Credit: The Fashion Law, Newsweek

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Taking Stock

Luxury Leads

Group Revenue + Net Income, 2019-2021 Revenue

Post-COVID, these luxury heavy hitters have managed not just to rebound, but to beat their FY 2019 numbers

FCF vs. Net Debt, in millions of





1H 2019




1H 2021

1H 2020

1H 2019 Net Debt

1H 21 20

€13.86 €5.66

1H 20 20 €1.77

1H 19 20

€10.43 €3.25 €7.75




Kering had a particularly excellent quarter, posting strong numbers across its brands. Unsurprisingly, Gucci remained its main money-maker, accounting for 58% of the group’s revenue. However, across all its labels, Kering beat its 2020 numbers and most of its 2019 numbers, too. This quarter, LVMH dominated the luxury sector once again, outright beatings its 2019 numbers and posting record revenues across its fashion and leather goods group. Under the leadership of Bernard Arnault, the French conglomerate is poised to continue its growth through Q3, with a strong possibility of setting a record-breaking group revenue for FY 2021.




Despite an incredibly rocky FY 2020 and a challenging Q1 2021 trying to regain consumer confidence and waiting out ongoing lockdowns, the luxury conglomerates have still managed to reign supreme, reimagining their business models, from their in-store experiences to their raw materials sourcing in order to stay a step ahead of the pandemic.

€619 €566



Revenue + Net Income, in millions of €

Fashion & Leather Goods Revenue + Profits, 2019-2021






Revenue + Profits, in billions of € Revenue Profits







1H 2020




1H 2021

FCF vs. Net Debt, 2019-2021

Net Income

Despite a slow start to the year, Richemont has quickly turned its numbers around, beating its 2019 numbers across three of its four main categories. And, thanks to its online distribution investments in YNAP and Farfetch, the French group remains a step ahead of its more traditional competitors.



€549 €612

1H 2019 Revenues, in millions of €

1H 2020 Revenues, in millions of €

€1,827 €204





€359 €440

€356 Jewellery

1H 2021 Revenues, in millions of €

Online dist.


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Editor’s Notes


Luxury’s Big Bets

Richemont buys a controlling stake in famed Belgian leather goods maison, Delvaux.

Massive investments by LVMH, Kering, and Richemont pave the way for even bigger returns

Richemont x Delvaux

La Samaritaine


After nearly 15 years and $1 billion spent on renovations, LVMH has finally reopened La Samaritaine, an iconic Parisian department store founded in 1870 by Ernest Cognacq and Louis Jaÿ. In addition to housing a multi-floor department store, the historic structure also boasts a 5-star Cheval Blanc hotel—another jewel in the LVMH crown— 96 social housing units, offices, and a creche. C’est magnifique!

#3 LVMH x Off-White

Having cultivated a relationship with Virgil Abloh for some time, appointing him creative director of Louis Vuitton’s nowwildly successful menswear line, engaging in collaborations with Off-White and house-favorite Veuve Clicquot, Bernard Arnault has finally made a play to bring Virgil Abloh and his cult brand, Off-White, under the LVMH umbrella. In July, LVMH announced it would be acquiring a 60% stake in the French luxury brand as well as putting Abloh in an advisory role for the group.

Kering x Cocoon


In an effort to get in on the resale craze and join the increasingly popular “circular luxury” economy, Kering invested in handbag rental company, Cocoon, in late June. Though not well-known in America, Cocoon Club is an online, membership-based handbag rental site that deals exclusively in luxury handbags. Think Bag Borrow or Steal, but updated.

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Tik, Tok When will consumers call time on Gen Z’s biggest internet celebs?

Originally published on, May 9, 2021

Last week, Hollister Co. announced the impending launch of its new label with TikTok stars Charli and Dixie D’Amelio, aptly named Social Tourist. The announcement, while not surprising given that the social media starlets have been Hollister Jean Lab ambassadors for over a year, showcases the rising popularity of TikTok stars among retail companies desperate to attract Gen Z consumers. However, in the age of social media, fame is fleeting, faddish, and commanded by early teens—a risky combination for retailers. So, the question becomes: Will TikTok stars prove to be valuable investments before their 15 minutes of fame are up? Since the birth of Facebook in 2004, brands have faced the challenge of social media marketing; specifically, the art of attracting over-stimulated consumers. The creation of Twitter in 2006 and Instagram in 2010 only made this challenge more difficult, as brands were forced to expand their marketing across multiple platforms, partnering with bloggers and influencers in order to reach consumers. Unfortunately, just as companies were getting comfortable with the power of Instagram and Facebook, a new kind of social media platform shot to the top of the App Store charts: Vine. The original video-clip app, Vine quickly became one of the most popular social media platforms on the planet, primarily among Millennials and Gen Z, reaching over 200 million users at its peak. Unlike Facebook and Instagram, Vine allowed users to post seven-second clips of just about anything, from dance moves to memes, and everything in between. Amazingly, people became famous, or “went viral,” as it’s now known, from these short videos, garnering millions of followers, and hundreds of millions of views. Suddenly, brands were fighting each other for partnerships with once-anonymous, now-viral stars like Lele Pons, Curtis Lepore, Nash Grier, and KingBach, seeing

The D’Amelios for Jean Lab. Credit: Us Weekly

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them as the gateway to Vine-obsessed Gen Z consumers. However, after only four years of existence, Vine announced it would be shuttering in 2016. And, while many “Viners” moved over to YouTube in order to continue their content, their fame died with the app, leaving brands high and dry, partnered with now-obsolete celebrities. Gen Z then moved on to the next app,, where the same thing happened all over again: A boom and bust in fame among the platform’s viral stars, followed by the demise of the app itself. Enter: TikTok. Launched in late 2017, TikTok has become one of the most popular apps on earth, with more than 700 million users worldwide. Of the hundreds of millions of users on the platform, a few became “TikTok famous,” and have since become some of the most recognizable celebrities for Gen Z: Charli D’Amelio, sister Dixie D’Amelio, Loren Gray, Josh Richards, and Addison Rae. Within the last year and a half, these five users have shot to fame, thanks in part to TikTok’s surge in popularity during lockdowns. With 115 million followers and 9.3 billion likes, Charli D’Amelio tops the list, followed by Addison Rae with 80 million followers, Loren Gray with 52.2 million, Dixie D’Amelio with 34.6 million, and Josh Richards with 25 million fans. Now, thanks to their cult followings, brands are clambering to partner with these teens in order to capitalize on the enigmatic Gen Z consumer. Loren Gray has partnered with everyone from Burger King to Revlon; Josh Richards has deals with Reebok, House Party, and Ani Energy; and Addison Rae has partnerships with Fashion Nova, Reebok, Daniel Wellington, and American Eagle. Unsurprisingly, Charli D’Amelio has the most extensive brand portfolio of all, boasting deals with Dunkin Donuts, Pura Vida Bracelets, Orosa Beauty, EOS Beauty, Sabra Hummus, Morphe, Hulu, and has even published her own book, titled Essentially Charli: The Ultimate Guide to Keeping it Real, according to The Richest. Now, she and sister Dixie can add their own brand with Hollister to the list.

Addison Rae for American Eagle. Credit: People

However, given the historical boom and bust cycle of trendy apps as well as Gen Z’s constantly shifting celebrity loyalties, investing heavily in TikTok stars is risky. The threat of TikTok becoming passé or another app replacing it is all too high—Keep in mind, Vine lasted four years !2 1

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and 2021 will be TikTok’s fourth year running. Not only that, but given Gen Z’s faddish nature and the overstimulation caused by social media, internet celebs may get 15 minutes of fame—tops— before their time is up and Gen Z moves on to someone new. This is a lethal combination for companies. Brand partnerships are a delicate balance between capitalizing on trends and making sustainable profits. Social media stardom has made this balance increasingly difficult to strike. Now, with TikTok, brands seem to be blinded by their desire to reach Gen Z consumers, concentrating more on exploiting trends than on securing longterm profits. Ultimately, Gen Z is destined to call time on the likes of Addison Rae and Charli D’Amelio, shifting its celebrity loyalties once again, regardless of TikTok’s future. The D’Amelios in the first campaign for their collab with Brands need to wake up to this harsh Hollister, Social Tourist. Credit: YouTube reality, focusing on the risks of taking on TikTok ambassadors instead of being blinded by their desire to capitalize on superficial celebrity. If they don’t, their collaborations with these social media stars could be dead in the water.

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The Prediction Predicament Why analysts’ consumer behavior projections for Gen Z may be premature

Originally published on, June 27, 2021. Since Gen Z was first given its now-iconic moniker, analysts have tried feverishly to predict its interests, tastes, and behaviors, attempting to decipher how its differences from Gens X and Y will alter consumerism as we know it, from the food industry, to the music industry, and everything in between. For analysts, predicting the consumer habits of the next generation is a race to the presses. Nowhere has this been truer than in the fashion industry. However, it seems that many analysts have been haphazard in their projections, especially considering that most members of Gen Z are only in their teens. Ultimately, I believe that analysts have been shortsighted in their predictions of Gen Z consumerism, treating incomplete or skewed data, fleeting trends, and the current social climate as concrete evidence of the digital generation’s future consumer behavior. First, analysts wrongfully view “wokeism” as a permanent characteristic of Gen Z. In 2019, McKinsey reported that nine in ten Gen Z consumers believe that companies have a “responsibility to address environmental and social issues.” Since then, many fashion companies have completely overhauled their What Gen Z looks for when choosing products. public image, promoting high-profile Credit: Vogue Business sociopolitical movements, such as #BLM, #MeToo, and even going so far as to temporarily change their logos in a bid to highlight their social consciousness. While analysts argue that brands must be “woke” in order to attract Gen Z consumers, "wokeism" is actually not a key factor in most members' decisionmaking. Additionally, I believe that today’s “woke” agenda is merely a trend that Gen Z will abandon within a few years. Though social justice issues will remain important and brands will continue to promote

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social awareness, Gen Z consumers will eventually move past their desire for companies to match their interest in social issues. Second, I argue that analysts have been misguided in their love of “sustainable,” or “shared” luxury. In recent months, despite the downturn caused by the COVID-19 pandemic, secondhand luxury sites like The RealReal (TRR) and Vestiaire Collective have become wildly popular among investors. However, blinded by TRR’s GMV, which has increased 27% Y/Y to $327 million, analysts not only fail to see that TRR still operates at a considerable profit loss of around $175 million, but that its number of active buyers hasn't grown significantly year-over-year despite its mounting popularity among investors. The same goes for membership-based rental companies like Vivrelle, Rent the Runway, and Cocoon, all of which have raised significant funding from groups looking to gain share in the sought-after space. Hailed as the “future of sustainable luxury,” analysts believe that secondhand luxury will find a new life in Gen Z because of its sustainability appeal. However, sustainability isn’t the main thing attracting young consumers. Given that most members of Gen Z are only in their teens, the rise of secondhand luxury is also the result of younger, entry-level consumers who want REAL GMV Y/Y. Credit: REAL IR 1Q2021 Report designer labels, but don’t yet have the budget for brand new luxury items or department store prices. In fact, in its 1Q2021 Investor Presentation, TRR reported that only 40% of its buyers and consignors cite environmental impact or extending the lifecycle of luxury as “key motivators” for consigning.

Additionally, the vintage goods market isn’t consistent. While a brand can assign a value to a new item—for example, a handbag—a vintage bag’s value is completely subjective, fluctuating based on current trends. For example, prior to the relaunch of the Dior saddle bag under Maria Grazia Chiuri, the original Dior saddle bag, released in the 1990’s, had very little value, with mini models listed between $150 and $250, and larger, shoulder models listed between $350 and $500 in 2018. Now, those same vintage bags are listed for at least 2x what they once were, their desirability increasing as a result of the re-issued saddle bag’s popularity.

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Furthermore, secondhand luxury is a trend in and of itself. Like fashion, the love of vintage goods fades, regardless of its environmental value. Remember the original bag rental company from the 90’s, Bag Borrow or Steal? The same cycle is inevitable with this new wave of secondhand consignment and rental companies. Finally, analysts tend to make consumer behavior predictions based solely on Chinese consumers. And, while China as a whole is inarguably the fashion industry’s largest consumer demographic, China’s Gen Z is not, making up only 16% of the country’s total consumer power, according to Vogue Business. As such, the behaviors of China’s Gen Z

Gen Z luxury consumers on sustainability. Credit: Vogue Business

consumers should not be unilaterally applied to Gen Z consumers from other major markets like the United States, Japan, and Canada, nor should companies adhere to them blindly as they adjust their business models going forward.

A graphic specific to China’s Gen Z consumers. Credit: Vogue Business

In closing, investors and analysts alike must remember that fashion is first and foremost a trend-based industry, and an increasingly fastpaced one, thanks in large part to social media. As such, it is important to treat trends as trends, not as definite indications of what’s ahead. Ultimately, in their scramble to predict the future, analysts have failed to look at the whole picture, building models based on trendy buzzwords and teenage spending, neglecting to recognize that, despite their best efforts, Gen Z is far from predictable.

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The Greenwashing Gambit Can companies really follow through on their sustainability promises?

Originally published on, May 21, 2021. As a result of increasing political and consumer pressure, the fashion industry has steadily increased its sustainability initiatives over the course of the last decade, from using recycled materials to funding numerous “green” causes. However, in recent months, sustainability has become the hot-button issue in the world of fashion business. And, thanks to the rise of cancel culture, seemingly every brand has become “sustainable” for fear of consumer backlash and alienation. From using 100% recycled materials, to creating new collections from unsold pieces from old collections, everyone has jumped on the sustainability bandwagon. However, as companies pledge massive, and in many cases, impossible sustainability initiatives, many are being accused of “greenwashing”—marketing sustainability measures they can’t back up. So, the question becomes: Will fashion companies be able to follow through on their sustainability promises, or are they simply “greenwashing” to please their consumer base? Recently, I asked my friend Luce for her perspective on this topic, and I found her response quite interesting. She thinks that companies will keep their sustainability commitments, citing consumers’ desire for more sustainable products as the driving force. As she put it, in the past, consumers didn’t care about sustainability. As such, it wasn’t an issue brands needed to address. However, with today’s consumers pushing for greater sustainability, companies have responded accordingly, creating new executive positions, The appeal of “green” across generations. Credit: like Chief Sustainability Officer, funding The Fashion Law sustainability organizations, and promising extensive renewal efforts. The Fashion Law showcased this change in consumer behavior with a recent chart, tracking the appeal of "green" buzzwords across generations.

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However, while I see Luce’s point, I don’t think brands will follow through on their sustainability pledges because they’re only being held accountable for their words, rather than their actions. In the age of cancel culture, consumers care more about statements and “virtue signaling” than they do actions. As a result, these companies have no reason to fulfill their lofty sustainability commitments. Thus, while I agree with Luce that consumers drive everything, including the recent push for sustainability, today’s consumers care far more about mission statements and press releases than they do about viable, concrete actions. Unsurprisingly, fashion conglomerates and fast fashion companies have taken the brunt of the public backlash, with ecowarriors continuously calling out their “unethical” sourcing, production, and general disregard for the environment. Unlike smaller, private companies, these titans of industry are forced to respond to mounting shareholder and consumer pressure in order to maintain their impressive market share. Kering has had a sustainability strategy for years, but has reinforced and reemphasized it as of late. The group, whose goal is to create “more sustainable, more responsible luxury,” breaks its sustainability goals into three pillars: Care, Collaborate, and Create. Through these three pillars, A graphic outlining Kering’s sustainability and biodiversity Kering has developed a biodiversity initiatives. Credit: Kering strategy that aims to stem biodiversity loss caused by the fashion industry, restore ecosystems and species, and trigger systemic change that goes “above and beyond” its supply chains, according to the group’s website. Specifically, Kering aims to reduce its greenhouse emissions, targeting the reduction of Scope 1-2 GHGs by 90%, and the reduction of Scope 3 GHGs by 70% per unit of value added by 2030. The Group also aims to restore and regenerate 1 million hectares of its supply chain and protect another 1 million hectares of critical, irreplaceable habit by 2025. While this pitch sounds lovely, Kering has taken few publicly-disclosed steps toward meeting these massive goals. Like Kering, LVMH has a long-term sustainability commitment. On its website, the French conglomerate states that it views protecting the environment as “not simply an obligation, but an imperative, and a source of competitiveness. It is imperative because the long-term success of LVMH Maisons depends directly on preserving and respecting the natural resources that [we] use !2 7

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to make [our] products.” Unlike other luxury conglomerates, LVMH has taken concrete steps toward achieving this goal, having created five different environmental initiatives: Maison O, Life 360, Environment Academy-LVMH, Life in Stores-LVMH, and Dîner des Maisons EngagéesLVMH. Compared to luxury, fast fashion brands face incomparable scrutiny and resentment for everything, from their business models to their materials sourcing. Naturally, their lack of sustainability is heavily criticized by consumers and industry executives alike. Recently, H&M promised to use only 100% recycled or other “sustainably sourced” materials by 2030. Inditex, the parent company of Zara, also pledged to use 100% recycled or sustainably sourced cotton, linen, and polyester —which make up 90% of the group’s materials— by 2025. Consumers and stockholders were incredulous: How could a company whose business model revolves around unethical wages, massive production, and a constant influx of new products commit to such an overhaul? Furthermore, what does “sustainably sourced” really mean, and who is going to hold these brands accountable for their promises? This question of accountability is the main issue with the push for sustainability. Ultimately, while I believe fashion companies have the capacity to overhaul their business models and fulfill their environmental promises, I don’t believe they will. Without accountability, they have no incentive to act beyond the scope of the words printed in their marketing campaigns.

A recent BoF sustainability index. Credit: Business of Fashion (BoF)

As brands have discovered, sustainability initiatives are about promising a better tomorrow, not building one.

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Stocks I’m Watching

Taking Stock

With installment pay all the rage, these big players have the potential to be major portfolio heavy hitters Net Operating Income + Net Profit, 2019-2021



-SEK96,198 1

Q 20



-SEK459,660 1









-SEK650,105 -SEK750,000




An equally recognizable force in the installment pay business, AfterPay boasts more than 13.1 million active customers, an increase of 5.8 million in the same period a year prior. Furthermore, despite its loss after tax growing between FY 2019 and 2020, the company still managed to increase its total income by about 90%. This, combined with its steady increase in active customers and merchants puts the company in an excellent position to capture an even larger share of the installment pay market.

Income + Loss, in millions of $

Net Operating Income + Net Profit, in SEK Net Operating Income Net Profit

Revenue + Net Loss, 2020-2021


2 20


3Q 20





$85.6 $113



Revenue + Net Loss, in millions of $


Net Loss

Net Income + Loss After Debt, 2019-2020 $500

$417.2 $375


$250 $125 $0

$79.2 FY 2020

Total Income



Klarna, the Swedish installment pay giant has taken command of the world of installment pay apps, covering more than 6,000 banks in 24 countries. This past quarter, the company-bank hybrid expanded to almost a dozen new markets, including Portugal, Denmark, and Luxembourg, among others. In a recent round of funding, Klarna raised nearly $1 billion, achieving a smashing valuation of $31 billion. With more than 90 million active users and 2 million transactions a day, Klarna has firmly established itself as the leader in the buy-now, pay-later market.

$31.6 FY 2019

Loss after Tax

Finally, Affirm, another major player in the buy-now, pay-later arena, posted results similar to its competitors. Like both AfterPay and Klarna, the credit company posted a larger net loss in Q3 2021 than in Q3 2020, likely as a result of the precarious financial situation caused by COVID-19. However, it still managed to increase its revenues by nearly $100 million Y/Y, build its active customer base to 5.4 million—up from 3.3 million the previous year—and grow its number of active merchants from 4,800 to 12,000.

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Final Thoughts What to Expect in Q3 of FY 2021…. If I’ve learned anything from the past year and a half, it’s that the future is impossible to predict— whether related to the pandemic or not. While stores have reopened and fashion weeks are once again welcoming their infamous crowds and street style fanatics, the immediate future still remains hazy. However, seeing how the fashion industry has recovered following the initial COVID strain— both literally and economically—I am confident that it will recover from this new variant just as quickly, and with equally exciting results. In regard to the push for sustainability, I expect even more companies to announce performative, overzealous sustainability plans and incredible carbon neutrality projections designed to please both consumers and investors. However, I also predict a larger number of lawsuits aimed at brands who don’t act on their promises. Just a few days ago, footwear brand Allbirds was sued by consumers claiming that its sustainability marketing was “misleading and over-exaggerated.” Get ready for more of these not only in 2H 2021, but into the next few fiscal years. As for resale, I believe that its fifteen minutes of fame are almost up. With most publicly-traded resale companies massively overweight in their valuation and with shaky business models to back them up, these “circular economy” players that took the industry by storm are likely to face a serious reckoning in the latter half of the year. Finally, as the pandemic seemingly comes to a close, I expect fashion companies to place a renewed focus on their in-store experiences. During the pandemic, brands clambered to overhaul their digital strategies in order to maintain customer engagement. Now, as consumers go back to brick and mortar shopping, many labels will need to reinvigorate their tired boutique concepts in order to compete. In closing, I am optimistic that Q3 2021 will be the most successful quarter since Q2 2020—even more so than this smashing quarter. As business models rebalance and consumers regain their full confidence, I believe the fashion industry is in for a lucrative end to the fiscal year. Until next time, Carolyn

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References & Citations Sources, By Page -(pg. 6) The RealReal Q2 2021 Presentation -(pg. 6) The RealReal Q2 2020 Presentation -(pg. 6) The RealReal Q2 2019 Presentation -(pg. 6) Farfetch Q1 2021 Presentation -(pg. 6) Farfetch Q1 2020 Presentation -(pg. 6) Poshmark Q2 2021 Report -(pg. 17, #1) The Fashion Law -(pg. 17, #2) The Fashion Law -(pg. 17, #3) The Fashion Law -(pg. 17, #4) Newsweek -(pg. 18) Kering 1H 2021 Presentation -(pg. 18) Kering 1H 2020 Presentation -(pg. 18) LVMH First Half 2021 Results -(pg. 10) Richemont Q1 2021 Press Release -(pg. 29) Klarna Q1 2021 Report -(pg. 29) Klarna Q1 2020 Report -(pg. 29) AfterPay Limited Half Yearly Report FY 2021 -(pg. 29) Affirm FY 2021 Q3 Report *The above list does not include sources cited within previously published articles..

Photos, by Page -(Cover/pg. 1) Popsugar -(pg. 2, L-R) The Fashion Law, What Now Atlanta, American Marketer -(pg. 2) LVMH -(pg. 10, clockwise from top left) Rent The Runway, WSJ, -(pg. 17, clockwise from top left) The Beet, GQ, Dazed, Highsnobiety -(pg. 19, top to bottom) Fashion United, Sortir Paris, CR Fashionbook, Retail Bum -(pg. 29, L-R) Twitter, Lever, Affirm -(Back/pg. 32, top to bottom) Cultured Mag, Architectural Digest, Vogue *The above list does not include photos cited within previously published articles.

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© 2021 Carolyn Hammond

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