In Fashion: What Ralph, Capri and VF Results Say About 2022

There’s never a final word in fashion — just statements of where the industry is at a given moment with a sense, if we’re lucky, of what might come next.

And while there’s so much still up in the air, a trio of recent earnings reports from some of the biggest U.S. players gave a generally hopeful take on the industry.

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VF Corp., Capri Holdings Ltd. and Ralph Lauren Corp. are not a proxy for the whole industry — they’re too big and well-funded for that. But they are proof positive that it’s possible to go through two strange years of COVID-19 and come out in fighting form.

Brands, it seems, can win out online and off.

There are still plenty of challenges, but lots to work with headed into 2022.

Here, four takeaways from the latest round of earnings reports.

There’s Still Money in Fashion

Just as the printing press that is Facebook and Instagram took a big step back — with parent company Meta losing more than $200 billion in market capitalization in a single day — fashion brands stepped up and showed more of their potential.

VF (parent to The North Face, Vans and Supreme), Capri (parent to Versace, Jimmy Choo and Michael Kors) and Ralph Lauren collectively posted net profits of $1.1 billion on $7 billion in revenues for their fiscal third quarters, ended in late December or early January.

That’s not the take seen by some of the tech giants, but proof that brands can still compete.

Less Can Be More

When Supreme really caught the attention of the financial set a few years ago, the streetwear brand was kind of a marvel of restraint — selling out its looks at full price and often in seconds.

The conventional wisdom was that larger runs would build a larger and, therefore, a better business.

But Supreme might just have been living in the future.

Fashion was in fact caught in a promotional cycle with more product leading to price cuts, thinner profit margins, even more product and so on.

Now, companies are following the Supreme model. John Idol, chairman and chief executive officer of Capri, said the company has cut its stock keeping units by more than 30 percent during the pandemic — and isn’t going back.

“We’re seeing very strong [average unit retail price] growth at Versace, and that’s really driven by the accessories business and the full-price selling and sell-throughs that are happening in that business,” he said. “So AUR growth is quite significant at Versace, and it’s really driven by those two things. Accessories and much, much better full-price sell-throughs because we’re not over on ready-to-wear, which always has higher markdown rates.”

Likewise, Lauren has cleaned up its distribution and been raising its prices — and brand — for years.

And VF, which now owns Supreme, is crowing over full-price sell-throughs at The North Face and Timberland.

China Is a Challenge, but Still an Opportunity

Both VF and Capri called out China as a complication.

The country’s zero-COVID-19 policies have helped it avoid many of the deaths seen in the more open West, but the accompanying lockdowns and restrictions have also been disrupting everyday life and business.

“There’s some bumps in the road in China,” Idol said on a call with analysts. “You’ve all heard about it, certain travel restrictions that are going on right now and certain lockdowns in the cities.”

But China is also not that simple. Beijing has been cracking down on big tech — a vital link to consumers in the mammoth country — and concerns are growing that shoppers are going to demand more local brands.

Steve Rendle, VF’s chairman, president and CEO, said his brands aren’t getting pushback now, but added: “This is an important part of our go-forward strategy…really speaking to the Chinese consumer as a Chinese consumer and elevating our local-for-local product creation, demand creation and really tailoring events that are relevant to them and their needs.”

The Metaverse Can Be Home Turf

So much of the talk around the metaverse is so high-tech. How will people plug in? Where will they go? What will they do? And on and on.

But the futuristic-ness of it all can obscure just how much the metaverse plays into fashion’s sweet spot — and expertise in brand, image and consumer connection.

“We’re not a clothing brand,” Patrice Louvet, Lauren’s president and CEO, told WWD. “We’re closer to Disney than we are to other apparel companies because we’re in the dreams business….What is the multiverse? It’s an alternative world.”

And it’s a world Lauren is fighting for, showing up Roblox, which has 47 million users, in the digital online world of Zepeto and more.

(And it’s not the only one fighting, just look at Nike’s suit against StockX over NFT sneaker rights).

Despite the rush, the future of the metaverse is still a very open question and many are remaining cautious.

Bernard Arnault, chairman and CEO of LVMH Moët Hennessy Louis Vuitton, recently expressed his reservations — even as his group reported profits leaping 68 percent and sales 22 percent.

“Let me start by saying that it’s a purely virtual world and until now, we are in the real world and we sell real products. To be sure, it’s compelling, it’s interesting, it can even be quite fun. We have to see what are the applications of this metaverse and these NFTs,” he said in a videoconference with analysts and reporters.

“If it’s well done, it can probably have a positive impact on brands’ activities. But we’re not interested in selling virtual sneakers for 10 euros,” the LVMH chairman and CEO added.

“In conclusion, I would just say, beware of bubbles. I remember this from the early days of the internet, at the beginning of the 2000s,” Arnault continued, noting there are a multitude of companies building the metaverse. “There were a bunch of would-be Facebooks back then, and in the end, only one of them worked out. So let’s be cautious.”

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