On the occasion of the Paris Fashion Week Spring-Summer 2024, Balenciaga and Louis Vuitton held their highly anticipated fashion shows. However, the excitement surrounding these events was met with sobering Q3 2023 results, signaling a shift in the industry.
Balenciaga’s fashion show took place in a grandiose setting dominated by the color red. The entire scene was draped in ruby velvet, creating a theatrical atmosphere reminiscent of the iconic Twin Peaks time room. The communication surrounding the show emphasized a return to baroque aesthetics, with a brutal and splendid scenography. The artistic director of Balenciaga paraded close friends and intimates on the catwalk, creating a nostalgic and final moment before the curtain fell.
In contrast, Louis Vuitton’s fashion show had a vibrant atmosphere, evident from the invitation cards waved by the audience. The translucent all-over backdrop revealed the backstage and reflected the zenith light. The room was enveloped in a generous orange tarpaulin, and the models made a loop surrounded by the audience. Despite the challenging times, the atmosphere remained serene, hinting at a potential contract extension for the artistic director of women’s ready-to-wear.
These extravagant fashion shows have become the norm, with audiences eagerly anticipating the spectacle each season. However, in an era of financial constraint, the costs of these productions may be seen as excessive. While they do not generate direct income, they are crucial for the storytelling and brand image of these mega-brands. As the market grows colder, it’s time for these brands to dress in humility while considering their financial realities.
In terms of financial performance, it’s challenging to obtain precise figures for luxury conglomerate LVMH. However, the annual revenue of their fashion and leather goods divisions saw a significant increase between 2020 and 2022. Louis Vuitton alone accounts for approximately half of the group’s sales and profits, demonstrating its position as a flagship brand for the luxury sector.
The same is true for Balenciaga, which has faced its fair share of challenges. One bad buzz surrounding the artistic director can tarnish the entire brand, potentially affecting the entire group. The current global challenges, such as inflation and rising interest rates, as well as the Chinese real estate bubble, have further weakened luxury conglomerates. In this harsh conjuncture, change is necessary.
Kering, the parent company of Balenciaga, is currently focused on elevating Saint Laurent and Bottega Veneta to super-brand status. The exceptional growth of the past needs to be put into perspective, considering the current struggles faced by both Balenciaga and Louis Vuitton. This indicates that action needs to be taken across the luxury industry as a whole.
In this challenging period, potential strategic movements are on the horizon. Richemont, weakened by Farfetch’s downfall, may be looking to make a move. Bernard Arnault, the head of LVMH, has missing gems in his luxury portfolio, including Cartier, Bulgari, and Tiffany. Additionally, Kering’s acquisition of a stake in Valentino suggests the possibility of a complete acquisition. Burberry, also facing difficulties, remains without a majority shareholder.
While one side of the curtain appears solemn, the other side reveals the light of a monumental project for Louis Vuitton. The brand’s plans to construct a building on Avenue des Champs Elysées symbolize everlasting expansion and a commitment to pushing boundaries.
In conclusion, a sluggish quarter cannot undermine the long-term strategies of these luxury brands. The budget allocated to elaborate scenography may need to be reevaluated, but it does not diminish the overall vision. The wind may be unyielding, but these thoroughbred brands will continue to strive for greatness.
