Interview. Former Board of Director at Prada on The Luxury Industry

(upbeat music) Hello and welcome to the Synopsis, an investing in business podcast for professional investors. On today's episode, we have actually a really special interview with a former board member of Prada. This interview was originally an AlphaSense webinar from a few months ago, but it is still relevant and evergreen. We talk with Claire Kent about all sorts of things pertaining to the luxury landscape and luxury investing and I know you will enjoy it. But really important that you know tomorrow, we will be releasing another webinar focused all on coupon. Now as you probably know, there is a lot going on with coupon and the stock has sold off over 35%. Tomorrow, a webinar with someone who is a former VP of e-commerce finance there, whose title later changed to the VP of strategy and business at coupon. And so he knows a lot about the business and we had a really interesting conversation with him where we touched on all sorts of growth initiatives. Everyone is talking about, of course, what comes after South Korea and Taiwan. We actually broached that question for the first time ever. I've never heard anyone from coupon talk about what could come after Taiwan. So we talked about that in the webinar, as well as the 1P versus 3P economics, which again is another thing. A lot of e-commerce companies are pretty tight-lipped on. And so we dove into that as well as a bunch of other risks that investors may be underestimating. So please go to the show notes right now. You could click that link and sign up. It is free. You just got to give a corporate email and you will get into that webinar when it is released tomorrow on January 20th. And so if you want to listen to it now, while everything he's saying is still really relevant and the stock is still down, 35%, you're going to want to sign up for that through the link. Otherwise, we may or may not republish it here, but that will be many, many months down the line. And so once you're done signing up for that, go ahead and hit play and you may enjoy this unedited interview with Claire Kent. Today's title of the session is called From Hype to Heritage, Identifying Durable Winners in Luxury Investing. Now, my name is Drew Cohen and I am a founder of Speedwell Research, which focuses on long-term investing for investors. Today, we are joined by Claire Kent, who is a current advisor and former director at Prada with almost 40 years of experience in the Luxury Good Sector. And so this is kind of a little bit like a mock of what an expert call interview is. Now AlphaSense, of course, has over 200,000 of these expert call transcripts on their platform. That is in addition to another 500 million other documents. And so you're going to get a feel of sense for what this expert call service is like live right now. And in addition to that, you should know that they have a lot of other company filings, event transcripts, news, trade journals, and equity research. But that is enough of a plug for AlphaSense. There is going to be a link you could check it out and let us begin. And so Claire, thank you so much for joining us. Well, thank you for having me, Drew. And just to kick things off, of course today, we're going to be talking about the luxury industry. I wrote a research report on LVMH. So that is going to be a little bit of the focus. But there's a lot of other luxury players that people are curious about. And so generally speaking, when people talk about luxury, they're usually thinking, Hermes is up here, then you have Chanel, then you have LVMH, and then Gucci kind of way down there, which is owned by Caring. And so just to kick us off, I was wondering if you could kind of give us just an overview of the luxury sector and some of the big players, how you would kind of play some. Well, the luxury sector has changed enormously since I started researching the sector, which was about 25 to 30 years ago. It's very much dominated by the big players. So it's been very much become very polarized over the last 20 years. I would say the strong have got stronger, the weak have got weaker. And so now, I think it's fair to put the power brands. I mean, if we're talking quoted companies, I'd put the power brands as definitely LVMH, Caring, Hermes. But then if you're including non-quoted companies, I'd put companies like Chanel in there. And then further down, you have brands which are strong and very well known. But I wouldn't call them power brands. For example, brands like Amarani or Valentino or Versace. So I'd say like 20 years ago, there wasn't such a distinction between the really power brands that there is today. Would you draw a distinction between luxury and fashion? And who would you put more in kind of the luxury realm versus fashion? The emphasis on, well, two things really. Firstly, how much of the business is a parallel versus leather goods? And secondly, how classic the brand is versus high fashion. I think that with the power brands that we've been talking about, i.e., the Louis Vuittal, the Chanel, the Diors and all that group, they are leather goods. It's really the bread and butter of their business. And a lot of the leather goods is karaoke. So I would really put those into the luxury goods category. Whereas if we're going back to companies, I talked about earlier like Armani and Valentino and Versace, that they're more sort of ready to wear focused. And as I'm sure everyone on the call knows, it's leather goods which command the incredibly high margins. So it's a much more desirable business model to be in leather goods firstly, because there's a lot more carryover, but also because you don't have to worry about sizing and fit, you don't have to worry about weather and seasons. And so for those reasons, the leather goods category has the highest margin pretty much in that universe. Right. And when you are looking at those leather goods, they could carry 40 to 50% plus margins, depending on the exact product. If you do look at someone like Louis Vuitton though, it seems like they do have a lot more collaborations, more iterations, if you will, on their sort of classic bags, where they do add this design element to it. And it's for that reason, would you consider them kind of a mix between luxury and fashion versus maybe Chanel or Hermès, who seems to do that a little bit less? I mean, just to go back to the margins, the gross margins in the leather goods business are closer to 80%. So that compares to about, you know, on average say 65% of the clothing. So that's the margin differential. In terms of, you know, fashion versus luxury, every luxury company needs to have a fashion element just to keep it interesting and to keep it innovative. So one of the real these companies do, you know, catwalk shows and we've just had to bring summer collections in September and October. They do those in order to, for the PR value. I mean, the media value aren't from these shows as enormous because, you know, they have influences there, they have the media there, et cetera. So really, they're to keep the brand interesting and innovative, whereas actually what they really want to be selling is leather goods, you know, because of the margin point. So would it be wrong to think of this fashion element a little bit about kind of being their top of mind awareness, their advertising, but ultimately what they still want to sell, customers on is their, their timeless bags and the classic bags. And a true luxury company is getting most of their revenues to arrive from that with the fashion element kind of just being a little bit of marketing. Correct. And I think the marketing is extremely important. So I don't want to underplay the importance of the catwalk shows and the, you know, clothing, but where the bulk of these companies make their money is through the leather goods understood. And so as we are kind of thinking of these different fashion players and really we want to get at the kind of grip this understanding of which is the best kind of business here because you see companies like Gucci, which some people may not really know the industry in and out may consider it kind of casually as a luxury company. But then when people are actually researching the luxury industry, they always put Gucci way down. Whereas in contrast, they really elevate her mess in part because it seems like they're the most stable in terms of revenue and in pricing power. And so what kind of makes a great luxury brand that has this kind of enduring pricing power? I mean, just to go back to your points, I think, you know, Gucci has been going through a bad couple of years. But I still very much consider that Gucci to be, you know, sort of the highest luxury, maybe not as high as, you know, Chanel or at MERS. But it's certainly up there with the power brands. It's had a difficult time since Alessandro Michelé, the creative director, you know, left in 2023. But, you know, the brand is 100% a luxury brand. Sorry, could you just repeat the question you were asking? Yes, yes. Maybe let's dive into the kind of what you're saying on Gucci first, because it's kind of one of the first times I've really heard someone kind of defend their position as a luxury player. And so what I guess kind of makes them a luxury business? Well, firstly, you know, they have the heritage and they have the history behind, you know, the brand. And they have the craftsmanship. And the fact that, you know, the brand has had an incredible history, which, you know, obviously needed to be revived by Tom Ford in the early 90s. But like prior to that, the company did have, you know, a very, very glamorous and, you know, interesting history. And I'm sure anyone who's watched the film about the Gucci story will have seen that, that the brand, you know, certainly has its roots in being an elegant glamorous, you know, Italian brand. So I really just want to emphasise the fact that you can't sort of say just because the company's had about two years that it's not a luxury brand. I've never actually heard people arguing about this so I'm actually quite surprised about it. Oh, that is interesting because among investors, it is a conversation. And this is why it's important to get an industry's insider's perspective on this. Because Gucci is one of the four luxury brands that has a large leather goods business that has been able to reach over 20 billion euros in sales. However, it was very short-lived. I would say they've had more than a negative couple years. I believe it was somewhere around COVID that they had, you know, kind of that peak. But even before then, they weren't growing the same way they were before. And at least part of the reasons I've seen attributed to that is, you know, after Andrew and kind of Alessandro Michelle, who is there, who I just mispronounced that, he had a very kind of loud aesthetic. He would put the Gucci brand name on a lot of it. And I think there's some sense that that kind of eroded some brand equity value in the name Gucci. And at the same time, they got very big in China. They kind of grew their store distribution network very quickly. They added a lot of stores in Tier 2, Tier 3 sort of areas which may not be sort of the best brand association. And in addition to that, they're one of the only large luxury brands that has their own outlet network. I mean, just to get to the facts, under Alessandro Michele, the business grew from 5 billion euros to 10 billion euros. So to double sales, you know, over his 10 year, which was from 2016, I believe till 2022, that I think that's an incredible achievement. I think like what went wrong was the fact that people tired of his aesthetic. Firstly, it's important to understand the fact that there's a big difference between bringing in high profile creative directors, which is what Karen has tended to do at Gucci, as opposed to our mayors, who number one does not have a single, does not have one over riding creative director. They have different heads of creative for each of their different metiers. So it's a completely different approach. You know, I bet you, if we ask the question to the audience now, who is the creative head of Elmes's love of goods, not one person would know their name. So it's a completely different approach to basically unsafe. We're not going to make our creative director a star. You know, we're going to make, we're just focusing on beautifully elegantly made products, which are all made in France, etc, which is the Elmes, you know, method. And as a result of that, you know, Elmes rarely grows by more than about 8% per year. Gucci, on the other hand, carrying has brought in these very high profile creative designers, where they all, it almost becomes about them, rather than about the brand. I think that that is the fundamental reason why Gucci has had such up and down sales, because carrying almost gives too much power to their creative director. And that is great during a period of doubling sales. But then, you know, when people tire of the brand, which is what happened in sort of 2022, then, you know, things start and then secondly, they make the wrong appointment for his successor with Sabato Dessana, then things start to fall apart. So it's kind of, you know, you will have these ups and downs if you put your, sort of, if you base your strategy on having these incredibly, you know, high profile designers, where, you know, they just almost take over the brand. It becomes about them, rather than about Gucci. Yeah. And I think that's a really interesting answer, because it hits on a couple things. And so, we kind of open this discussion, talking about fashion. And the reason why I was kind of bringing up fashion is that when a luxury brand does have this fashion element, and you could say that usually does come hand in hand with being more dependent on a single creative director and his sort of design aesthetic, it does tend to have more of this volatility in the business. And I think the criticism that people would lay at Alessandro is that, well, yes, he grew revenues a lot during his time at Gucci. It was also, to some extent, because you have this great brand and you want to nurture it. This is what Bernard Arno talks about a lot. And he talks about how he could take more pricing up at Louis Vuitton, but he purposefully wants to build desirability and focuses on that, rather than revenue growth, with revenue growth being an output. And I guess I'm wondering if you have any sense that when Alessandro was at Gucci, if his kind of decisions to have a very loud aesthetic kind of trade it off a little bit of that sort of steady progression of revenue growth over time in favor of a lot of growth up front, because there's a lot of people that were able to get something emboldened with Gucci on them and maybe even get some of the cheaper items they sold with a logo on it. And that could have cost their ability to kind of have this more steady longer term revenue stream that investors do kind of value more. I mean, I think the only thing which was fundamentally wrong with the strategy is that it was so, it was so out there, it was so sort of cheeky. It was just like, I think he was a create or is a creative genius, but I just think if you go for such extremities that they did, then it's not surprising that people will get bored with the style, because like it's completely, you know, the opposite of what Almez is doing where they just have these timeless classics, which, you know, because they have a weighting list, they can always, you know, grow sales. And the company is not interested in reporting more than about 8% sales growth per year. So it's kind of, it's just a very different strategy. And during the growth years of Gucci, no one was complaining. It's just the fact that it was very extreme. And when you have any sort of extreme look, people just get bored with it. Do you think a luxury business has to resist sometimes the desire to grow more? Yeah, I think it's always a balance, you know, I think one of the things I admire about Van Arnoh is that he is such a long-termist. And I think like that has really made Elvier-Mage great, the long-term strategy. And, you know, even in, you know, 2025, when, you know, we all know China's been suffering, you know, over the past two years, they open, they spend $14 million to open the Louis, the ship-shaped store in Shanghai. Like they absolutely think incredibly long-term. And I think like that really, really pays off. So, you know, I can't remember exactly now what question I'm answering, but I do, but sort of you have to be really, really long-term in any industry to win. Do you think Gucci was, and I'm just keep hitting on Gucci because it's the only really like example we have of a luxury business that is kind of at the extreme of kind of suffering. So that's why it's a counterfactual in this case, but my question is if you felt like Gucci was acting long-term during the period of Alessandro, and also, you know, the store expansions that came alongside. And they also, you know, have their own outlet network as well. I mean, they've made mistakes, and it's undeniable that the brand image in China has definitely been harmed over the past, you know, over the recent past. So they've obviously made mistakes. I don't really put the mistake. I'm not close enough to the company to say who's at fault, but I think that they've definitely been, you know, a mixture of mistakes. But I think like it's not true, that's the only one, because I mean, Balenciaga had their crisis with the, you know, with the using children in a sexualized fashion in their advertising campaign a few years ago. And, you know, that's another care in brand, which has suffered. So I don't think Gucci really is the only one. I mean, you know, I'm sure you don't want to talk about Burberry, but Burberry has also had a lot of problems. So I don't think we can say like Gucci is the only company who's sort of suffered in this way. Everything drew boils down to not understanding your DNA, that that is the crux of any, well, I think that the number one problem when companies, luxury companies go off the rail is failing to sort of failing to appreciate and capture their DNA and just going off in, in a sort of direction which doesn't embrace the DNA. And that's what I think sort of Elmer's and Louis Vuitton have been very, very good at, that they're, you know, everything they do, every marketing campaign, every, you know, everything really revolves in the case of Elmer's around their question routes, everything with Louis Vuitton revolves around the spirit of travel. And I think like and before Josh Schulman went back to Burberry, you know, the company had totally lost the plot in terms of, you know, what its DNA was and what Josh Schulman's brought back is, you know, Burberry is about protecting people from the elements and therefore he's focused on how to wear, you know, rain masks, scarves, etc. But if you forget your DNA and you start trying to be someone you're not, people, people like, it's, it's like a relationship with a person, if you're not authentically yourself, if you're trying to be someone you're not, everyone picks up on it and you're not appealing. So it's like, you know, consumers are just the same, they sense if a brand is not authentic to itself. And that's very, very like unattractive, just as it is in a person, if a person tries to be someone they're not. And that kind of answers my next question, which is how do you ruin a luxury brand? And you're talking about, you know, this not really aligning with the DNA of the business, what does that mean in actual terms? So does that mean the products that they're putting out there, the design just kind of doesn't fit people's expectations? Does it mean that they're expanding too much? How do you ruin your DNA or how do you not act in its interest? Well, the first thing is to understand what your DNA is and to then, you know, cherish it and actually everything you need, you do needs to revolve around whatever you've defined as your DNA. So it affects everything, it affects the products you produce, it affects the quality of the products, it affects, you know, your advertising and marketing campaigns, it affects your influencers, it's just everything is ties in really to the fact that, you know, just going back to Burberry, you know, that the campaign they did about it's, it's all, you know, revolving around British weather and the fact that it's always raining in this country, really like just totally embraced the fact that Burberry is about protecting people from the elements, the prior CEO and management team, which is on a completely, you know, completely different track, they wanted to like elevate Burberry and, you know, make it more like a sort of Chanel or Dior, which it never has been, you can't turn into something which you are not. And how important is owning your own distribution network and your own production as, you know, in order to make sure your product is consistent because one thing that surprised me when I was looking at Hermes was they had all of these concessionaries, which are basically franchises and because it's very commonly believed or at least by investors that one of the reasons why Hermes was such a strong brand is such a strong brand is because they control their distribution network. But it seems like maybe that's not exactly a big factor if they have all these franchisees. I mean, all the power brands pretty much control their own distribution network and the reason that that's so important is it all revolves around having pricing power. If you don't control your distribution network, you don't have pricing power and that basically means that your product can be discounted. And that's one of the reasons why all the luxury companies about 20 years ago decided that they were going to gradually move away from wholesale and they were gradually going to take control of their own network. And one of the reasons why, you know, you can never buy an Hermes bag on sale or a Louis Vuitton bag on sale, they literally it is impossible to ever buy them on sale is because the company controls their own network and they never go on discount that strategy. So, you know, going back to Hermes with the franchises, I mean with franchises, they're still going to tell the franchises what prices they put on the products and that they can't discount them. So it still is effectively controlled even if it's not direct control. Can you say a little bit more about Hermes and how they kind of control their growth? Because, you know, we all hear about how they will limit their Berkins, you know, a lot of their other very popular bags and try to push customers through these hoops in order to get those. And so can you say a little bit more about how they have been able to achieve such steady growth over such a long period? I mean, I think it's really a strategy which they have had since I got to know the company, which is, you know, number one, they make their bags internally and they are constrained by the fact that they make them in workshops in France and every year they open a couple more of these workshops. And the training to make in Hermes bag is, you know, long and arduous and it's just not something, you know, they can't just turn them out quickly etc. There is a reason why, you know, these bag, why there's a waiting list. I'm not saying it wouldn't be, I'm not saying it would be impossible for them to increase capacity, but I just don't think the company has any desire to grow more than high single digits every year, which I think is, you know, it's a sort of, you know, a long-term strategy which just means you don't suffer the same highs or the same lows and you're, you know, you're much more constant. And how would you, I guess, compare that to someone like Louis Vuitton who does still talk about desirability very often, but you can more or less get any baggy want from Louis Vuitton without the same sort of wait list? Yeah, I mean, I think that Louis Vuitton is really interested, you know, I think over the last five years, they've really, really focused on trying to be trying to become like a cultural taste maker. And, you know, their appointment of Farrell Williams as their men's, you know, creative director is a very interesting choice because as we know, he doesn't have an actual design background, you know, he's a musician and a producer and, you know, he's done a lot of colabs with different luxury brands. And I think it just really, really reinforces sort of ban our nose vision for LVMage, but particularly for Louis Vuitton, where, you know, it's not just about selling products, it's about influence and culture. And I think it's, it's, it's very sort of forward-looking strategy because I think like Gen Zedras are interested in experiences and, you know, it's, it's clear that sort of materialism is not as important for Gen Zedras as it was for like my baby boomer generation or subsequent generations. And so I think, you know, that they're very, very long-termists and they're really thinking about how they can actually play a role through art, through music, through all sorts of different culture. And I think it's interesting that, you know, some of the most exciting Louis Vuitton stores have got, you know, cafes and restaurants and, you know, colabs with artists, etc. So yeah, I think it's, it's a different strategy to LNES. And since you did mention Gen Z, have you seen any sort of changes in consumption patterns or relationships with status? I know that there's also been a little bit of this kind of quiet luxury trend going on. And so is there any sort of big shift with Gen Z, do you think just as they get older and wealthier, they're going to kind of conform to the same patterns as their parents? I don't think they will conform to their own to the same patterns as their parents. I'm really convinced that they won't. I think like their attitude to ownership is completely different. I think like social media has just, you know, plays such a massive part in, you know, what influences them. I think one of the most interesting things actually about what's gone on in the luxury world is the fact that even though these luxury brands have become huge and might have sales of between 10 and 20 billion or even more than 20 billion euros, in a way, the power, in a way, they're less powerful than they were because I just think that, you know, in previous generations, consumers like myself were dictated to, you know, we were spoken to through advertising, through traditional advertising, either print advertising or film advertising. But like Gen Z has are not dictated to and they, you know, they create that they influence the dialogue with the brand. And you could really see that with going back to the Balenciaga scandal and the use of children in a sexualized fashion. I mean, without social media, Balenciaga wouldn't have fallen out of favour nearly as quickly as it did. You know, it's just, it really gives the voice, social media gives the voice to consumers and, you know, they have been able, for example, over the last year, they've been so much talk on social media about sort of unethical manufacturing practices at luxury companies and, you know, all the sort of things being uncovered about how these sort of Chinese operated factories in the outskirts of Milan are making luxury products at a fraction of what they retail out. And what at the point I'm really trying to make is, I just don't think that Gen Z can behave the way previous generations did just because they are so, so influenced by, you know, what they see on their phone and they play a part in it. I guess at the core though of all of these luxury brands is this idea of status and that people are going to continue to care about the logo because you can get, you know, a high quality leather bag for much cheaper than going for the Chanel bag. And I guess the question is, do you see that element of Gen Z changing where they will still care about the status that it is a Chanel bag versus just it is a high quality, you know, humanly sourced leather goods bag? I mean, I think, you know, that things go in cycles. So we might be going through a quiet luxury phase or we might have gone through a quiet luxury phase over the past, you know, two or three years, but like things don't remain constant, things are always evolving. I definitely think though that while status, you know, is bound to remain important especially for, you know, Asian consumers, I definitely think that consumers are much more sort of, what should I say, they don't want to be like fooled into like paying more than what they think is a reasonable price. And I think that that's really, you know, that that whole way of thinking is very, very different, you know, Gen Z try to research like what a product could have cost to make. And there's a lot, you know, I would say, so in answer to your question, I think status will always remain important, but I just don't think consumers will allow themselves to be legged over or will pay more than they think is reasonable for a brand, regardless of the status. And I think that that's, you know, I think one of the reasons you've seen, you know, such strong growth for brands, you know, which are sort of lower price tier, whether they're up and coming brands like, you know, Polen or D'Amelier or whether they're like coach and Ralph Lauren, I think one of the reasons you've had strong growth from those sorts of companies is because Gen Z does, I'd just say enough is enough with price and they're either buying dupes and showing off that they bought a dupe or they're actually, you know, downgrading to a slightly less luxurious product. So, you know, fake, fake mimics of the real thing have always been kind of common. Is there any difference though with Gen Z's behavior there as being a little more proud that it's a fake? Yeah, massive, massive difference like definitely previous generations would be, you know, embarrassed to admit something was a fake. Now it really is something which people are quite proud of and that is just such a different mindset and I don't really think that that's going to change. I think the Duke culture, I think just people want to feel like they're smart and they're not going to be sort of dictated to by companies. And so, do you think that that hurts them long term because now you just have less demand for the real genuine good basically? No, I mean, provided companies take on board the fact that they can't increase pricing without they're being a commensurate, you know, increase in quality. I think that, you know, it's fine and I think they have taken that on board. I mean, I've heard companies talking about that on conference schools recently, which they never talked about in the past. So, I think like they've understood that people feel prices have gone up too much. And so, I think for example, in the US, you know, if they increase prices, it will be by a couple of percent. It's not going to be, I mean, some companies increase prices by 80, 80 percent over the past five years. So, that's just been like almost a doubling of the price. And, you know, I can 100% say that when I was in my sort of 30s or 40s, I could buy a bag for, you know, less than a thousand dollars, a very nice luxury bag. And now, it's scarcely worth going in the story, unless you have like three or four thousand dollars in your pocket. And salaries have not tripled. So, it's just like it's out of proportion to earnings. Is a lot of these price increases just during COVID? There's a lot of stimulus. They kind of misgage what the long-term demand was and they kind of had scarcity. And so, they kind of solve for that by increasing prices. And is that kind of why that happened? Because I know a lot of these brands otherwise tend to be pretty steady with their price increases, but it did seem like there was quite a jump in that period. I think it's a combination, actually, of the fact that there definitely was, you know, inflation for raw materials. So, I think it's a combination of the fact that raw materials were going up in price. But then I do think that companies increase prices by more than the sort of raw materials went up. So, I think it's a sort of mixture of like, you know, maybe sort of false understanding of demands after COVID combined with the inflation on the raw materials. Was anyone a particularly bad offender on this? That was that maybe more of an extreme than others? I mean, based on research I've seen, I believe, you know, Chanel and D or both increase their prices by 70 to 80% or five year period. Okay, that's interesting. And just kind of going a little bit back to quiet luxury as we're talking about this. Obviously, you know, for a very logo heavy brand like Gucci, probably not the best. Louis Vuitton will kind of talk about how they have a range of different products that don't have the logo. But if someone is going to go for something that's quote-unquote quiet luxury, do you think they're going to still go for just a Louis Vuitton without the logo? Or do they want a different brand entirely? That is high quality and never kind of had that, whatever kind of cashier you would call time to it? I mean, first thing to say is I don't think the quiet luxury trend will last forever. And in fact, if you look at the catwalks for spring summer, 26 various brands including like, you know, Versace, Fendi, product, etc. All, you know, were quite, I would say, you know, using vibrant colours and not being particularly quiet luxury at all. So I don't think that that trend will last forever. But I think that in terms of, you know, another tip thing to say is if you look at what customers are buying today, does still signal, it does still signal quiet luxury, like I list, just published their third quarter report showing the sort of most popular brands and the most popular products I just wrote a LinkedIn post about it actually. And it was really interesting because it was, you know, brands like the Row and Costs, which I know is a high street brand, you know, and the products which were in the top sort of 10 were all, I would say, fairly sort of minimalist quiet luxury. So it's, it seems people are still searching for those items and buying those items. But as I say, I don't think it will last forever. Going back to your question about low-goed versus non-low-goed. I mean, both, both Gucci and Louis Vuitton are perfectly capable of producing products which are less heavily low-goed. But I think that, you know, I think if sort of low-go mania came back, they would also like benefit from it. Right. But I guess if you are thinking of kind, and I hear your point, quite luxury is not going to probably be around forever. If you are thinking of the big beneficiaries though, is it someone more like Laura Piana rather than Louis Vuitton's local list designs? Yeah, I mean, Laura Piana has been a good, has been very strong over the past few years. So yes, that the kind of Zenia, the Row, Laura Piana, those sorts of brands tend to benefit most. But, you know, as we all know, the bulk of LVMH is luxury and fashion division comes from LV not from Laura Piana. Right. Right. Of course. And as we talk about LVMH, let's get into kind of this conglomerate model a little bit that they have. And I want to hear your thoughts on how good they are at nurturing and building brands for the long term because Louis Vuitton, that was something, of course, they've been building up for the past 30 plus years. I guess even longer than that since '87, I believe. And then they've did a pretty good job with Dior. But can you just say a little bit more about kind of their opportunity to nurture a lot of their other brands? Also the smaller ones too. I think that the great advantage they have over everyone because of their size is the, you know, nurturing of talent and the ability to move executives and creatives from one brand to the other. And I think like that's just a huge, huge thing which goes on. And, you know, if you look at the head of CEO of Louis Vuitton today, he's been within the group for a long time at, you know, another brand and it's just something that they do all the time. And I think that, yeah, the same is true for their creatives, really. I don't really think any other group. I mean, not even Karen has the ability to sort of attract talent. Like if you are an up and coming executive in the luxury world, of course you'd want to work at LVMH because even if you were going to join Kenzo or, you know, one of the smaller brands, you'd always think, well, maybe I can move to Louis Vuitton. So I just think it's a magnet, really, for talent. Do you think over, you know, I don't know what time period you want to put on it, but eventually Laura Pienna, Celine, some of these other brands could get to the size of, if not Louis Vuitton, maybe Dior? No, I don't. I think that, you know, one of the big differences is the sort of emphasis on leather goods, you know, that there's always going to be, it's always going to be, I think, easier to grow a leather goods business than it is like a clothing business. Is there room for these brands to start their own? I know some of them already have their own leather goods businesses, but to continue to grow that as they kind of nurture the brand? Yes, but I still don't think I mean, you know, I think with Louis Vuitton it's just so much bigger than the other brands and it's also much more profitable than the other brands. So I mean, they're only estimates, but it does, you know, contribute that the sort of major part of the earning, according to estimates, I've seen it contribute, you know, a very, very large part of luxury and fashion divisions earnings. Yeah, and I've seen estimates, you know, at 60% plus between LV and Dior for profits. If you are thinking, though, of again, back to Celine, Laura Pienna, I know they sometimes disclose, you know, they're doing a believer a little over 2 billion revenue each. They have a couple other small brands that are around 1 billion. Where can these kind of end up in 10 years time? Can they get to 5, 10, or is this kind of just going to be a slow slog of single-digit growth on average? I mean, I think a lot of that depends on what you think of the luxury sectors prospects. And I think that takes me on to another point, which is really the fact that even though, you know, their signs of recovery in China and that's good news for the sector, I personally think that we are not going to see the same level of growth. I just don't think we'll see anything like the same level of growth that we've seen in China for the last 10 plus years. So that then begs the question of, and by the way, it does remind me of like the late 90s because at that time, there really is a very, very interesting parallel with like 1997 because just as you've had a big creative reset today with, you know, 15 designers showing that new houses or, you know, showing their first collection this year. In 1997, there was a big creative reset with a handful of designers showing for the first time very big names. And at that period, you know, the luxury industry had was really, really suffering from like, like of growth in Japan and having to like find the next growth market, which, you know, was the US. And we're almost like that's such a similar juncture today with the fact that China, you know, growth are sort of really, as we know, slowed, etc. And I just don't think that the luxury companies can think that China is going to be their savior. I mean, I think it will improve, but it's not going to provide the growth. And that then begs the question of how far some kind of luxury market grow in the future. And I think that, you know, there are pockets of growing markets like the Middle East, you know, various markets with the Asia, you know, like Soviet, normal Singapore, but or Thailand, but I, and also the Zindia, but I just don't see one big market for the luxury sector to turn to. I think that they're already operating in the major markets. And so I think, you know, the sector's going to grow in the future, but it's not going to grow, like, fast. And it relates to your question about selling and the other smaller brands in the algorithm age portfolio that I think that, you know, unless something exceptional happens, I don't really see why they are going to grow way faster than the sector. Okay. And I want to get back to that, but just a real quick one, do you feel like the leather goods industry is generally saturated or is there room for other brands to kind of continue to grow and grow the whole market, not just take market share? It's an incredibly competitive market. And what I find interesting is that there are some real outperformers, you know, even this year in terms of growth, but they're still small companies. So, you know, I mentioned earlier, Paul N, which is owned by, I mean, LVMH is an investor in that anyway and directly, you know, D'Amelier is growing fast, Strathbury, etc. So like there are fast growing luxury companies, but you know, they're in millions, not that they're in the millions in terms of sales rather than billions. I guess the question is kind of how much do you think these new brands are growing the market versus kind of taking share from existing players? Well, they're definitely taking share from existing players with markets, you know, the markets in decline this year. I think they saying the luxury market will decline by 5%, so yeah, they must be taking share. Would you say the same thing, though, if we looked at, you know, a five year horizon kind of going forward? Well, so what's your exact question? Do you think that kind of these new leather goods brands are helping grow the market because they're offering something new that's exciting people, or is it mostly everyone is fighting for a pie that's kind of stagnant as China maybe is not growing that much and consumers are kind of pulling back a little bit? I think everyone's fighting for a pie that's stagnant, definitely. Okay, and I want to switch back to long-term growth drivers, and so you kind of major point that you don't think China is going to be as important going forward, and you didn't seem that excited about India, and I know there's some issues with opening up a store distribution network in India, because I think, you know, if you listen to Louis Vuitton, Bernardo, no, you talk a lot about how India he thinks long-term, there's a very large population there, eventually there's going to be a large middle class there, and also looks at South America, it's like two potential large growth drivers. How much growth do you think if we look at the next 10 years is coming from these new markets versus just selling more to existing markets? Yeah, and I mean, another big positive factor for India is the size of the Gen Z population is huge. I mean, it's really, you know, very, very important. I think it's just, I'm not saying India won't be important, but as someone who's just been recently been to India, it's very, very, you know, polarised between, you know, rich and poor. I wouldn't say like, it certainly didn't seem to me that the entire country was on the up, you know, it's still very sort of polarised between, you know, the people who have money and people who don't. And so I think India will become an important, it will become a good market for luxury goods, but firstly, I don't think it will be quick. And secondly, I don't think that the Indian culture, and I may be wrong, so this is just my opinion. I don't feel that it's so status driven as, you know, parts of Asia. I don't know the reason for that, but I think that there's probably more love for, you know, homegrown brands and the homegrown products. I think that's very different from the sort of Asian mindset, which certainly, historically, has been, you know, to sort of really love Western brands. But as I say, you know, I know I'm not claiming to be an expert on India. Yeah, I've heard something similar too. Do you think there's an opportunity for them to find in Indian, or for, let's say, an LVMH to find an Indian brand and nurture that, or is that just such a long-term game and they probably still want to be owned by someone who's Indian in order for it to really feel like it's a genuine luxury brand? I don't believe that it would be easy. I think they'd have to almost create it if you see what I mean. And I think it would be a very long-term game because I don't think that that sort of brand exists. I think a lot of the Indian culture is probably more to do with like needlework and embroidery rather than, you know, actual sort of leather goods. But I do think you've hit on an interesting point, which is to say another thing that I think's going on in China, which I think the luxury sector should be paying attention to, is the growth of sort of homegrown Chinese luxury brands. And, you know, we've seen in the jewelry sector how Lao Poo, you know, is really sort of considered up there with Cartier. And, you know, there's a fast growing luxury, ready-to-wear brand, Chinese, called Ruan, which I think it's R-U-O-H-A-N, I believe, is spelling, which, you know, is also very popular. So I don't rule out that the Chinese are becoming. I think the Chinese are becoming proud of being Chinese and definitely cultural sensitivity is such an important thing. And I think, you know, I don't rule out that a Chinese leather goods brand could emerge. I'm not saying it's going to rival, you know, the Western ones, but I think like we shouldn't rule that out as a development. Interesting. And switching gears a little bit, as we just have a little bit of time left, I'm curious, what businesses do all industry or what brands do all industry kind of insiders really want to work for? Who is the easiest job getting the best talent in the industry? Well, I think, I mean, I think that sort of LVMH would be like the number one destination for the reasons I gave, because it would, you know, if you're ambitious, you're going to be able to move from brand to brand. And I think the company really sort of spots talent in one brand and probably moves the person to a more important brand. And would you say, if someone had offers at like a Hermes, a Chanel in an LVMH, is there one that they'd pick over the other or it's all kind of dependent? I think it would probably would just be dependent on the exact job and the role. Okay. So there is no kind of between those three though, they're kind of you disequals. It's not like people kind of poo poo LVMH a little bit as saying it's not true luxury. Not at all, no. And, you know, I think that I think they'd be different, very, very different career paths. So because I mean, if you, if you went to Hermes, for example, I mean, you'd stay within Hermes, it's not like they own any other big brands. I know they own a few tiny brands, but like there would be nowhere else to go. And I think you'd see your entire future at Hermes. And that's just very different from joining LVMH or caring where you'd be able to, you know, probably leapfrog if you were any good. And just do you have any closing thoughts on who you are most optimistic on and pessimistic on if we look at like the next decade? Oh, that's a good question. I mean, I think that I just think that the giants, that the importance of economy of scale and sort of the, because cultural capital is going to be such an important part of how these companies grow. Like it's no longer just good enough to be focused on the product. You need to pay, pay a role in culture. And, you know, as we know, LVMH sponsored the Paris Olympics at great cost, et cetera, et cetera. That just requires such a huge checkbook. Like it's, it's so expensive to play a role in cultural capital. So I think what I'm really trying to say is I just think that the power between the giants and the smaller companies is just going to increase. And so for that reason, I would say, yeah, that the, I mean, I'm answering it very generally, I think that the very big companies have a huge advantage. When you say big companies, is it just carrying LVMH, Chanel Hermes, or anyone else you want to include in there? I mean, I, yeah, I think that those are the main ones that spring to mind. But it's not that I'm saying the other companies are not going to be successful. I think plenty of them will. It's just the fact that I think if that the ability to, you know, sponsor the Paris Olympics is not something many companies can do. And, you know, that that's that sort of because we talked early about gem zedders and the fact that they're not just interested in materialism, you know, they're interested in meaning behind these products they buy. Because of that, I think culture will just continue to be a very, very big part. And just kind of as a last one, do you think LVMH has a knockoff effect of doing things like having Louis Vuitton, but not LVMH, just Louis Vuitton, sponsor the Olympics? Does that benefit their other brands? Well, the other brands were involved in the Olympics because they were, I mean, maybe not in such a never way, but a handful of different, of their different brands were sort of present in the in the Olympics. I don't think the consumer makes a connection between them. I think it's commonly known that part of one group. So is it that there's maybe a little bit of synergy on hiring and definitely in terms of financial resources and the ability to think for the long term, but by and large, there's not a lot of kind of revenue synergy will say between the different brands because they're all very standalone and the consumer doesn't really know the difference. So it's kind of just a capital allocation decision. Yeah, I mean, I think there are lots of advantages, particularly with, for example, locations in sort of stores, being able to get your second brand next to Louis Vuitton on the ground floor of department store like Harrods. I think there are lots of advantages, particularly in terms of real estate. Yeah, and that makes a lot of sense because it is very expensive and hard to get those real estate. That's very sacred, very scarce in these very desirable areas. And when they do have kind of the negotiating leverage of putting in Louis Vuitton as an anchor or Dior, that does give them a lot of kind of power in that conversation. Yeah, yeah. Well, thank you, Claire, for an absolutely wonderful conversation. I certainly learned a lot. I hope that everyone listening learned a lot. And thank you again for joining this expert insight conversation and AlphaSense for sponsoring today's session. If you want to try AlphaSense for yourself, you can get a free trial by just going to alpha-sense.com/speedwell. And so you could, there'll be a link there and you should definitely check it out because again, there's over 200,000 of these different expert call transcripts. And thank you, everyone, for joining us.