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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The line between fad and fixture is so fine as to be almost invisible to the naked eye. Yet isolating those trends which have staying power from those that don’t is precisely the task facing luxury investors as they attempt to evaluate the sector’s brands.
See, for instance, the debate around Golden Goose, seller of used-looking trainers (‘distressed’, in fashion parlance) at €500 a pop to well-heeled customers including Taylor Swift and Selena Gomez.
Owner Permira is targeting an IPO at an enterprise value of around €2.2bn — or about 10 times this year’s expected ebitda. That is below expectations but still a luxury-like multiple: factoring in a typical IPO discount that puts Golden Goose within reach of Moncler, Prada and even LVMH. Yet its growth runway is strewn with potential obstacles.
The group’s main issue is that it is a one trick farmyard animal. Over 90 per cent of its revenues come from selling trainers. It does this well, of course, managing net sales growth of 18 per cent last year at a plush 25 per cent ebit margin. And it can point to “casualisation” — the long-standing trend towards less formal clothing — as a tailwind.
It is also attempting to harness the luxury trend towards increasing personalisation by letting customers co-create their shoes in store. But footwear lovers are a fickle bunch. Dr Martens — another Permira IPO — can testify to what happens when trends change.
Meanwhile, pricey trainers likely have a capped addressable market. Half of Golden Goose’s sales go to repeat buyers. While customer satisfaction and loyalty are positives, that does suggest it may be bumping up against the limits of its fan base.
For the group to grow sales from last year’s €587mn to €1bn by 2029, as it is targeting, it will probably need to expand into clothes and handbags. That is a difficult proposition at any time, let alone in the context of luxury spending that is returning to earth following the pandemic. Gucci’s and Burberry’s turnaround travails suggest that customers concentrate tighter budgets on tried and tested luxury staples.
Golden Goose reckons it has the wherewithal to step out of its niche, helped by its presence on three continents, a network of almost 200 stores, and a strong following among younger consumers. That is not impossible, of course. Moncler, for instance, has managed to escape its down jacket straitjacket. But Golden Goose’s reliance on trainers — as distressed, personalised and on trend as they may be — means it is stretching the definition of a credible luxury brand.
