Last week, a number of fashion brands saw their share prices drop even as their revenues started to return to normal after a slow 2023. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, and the Glossy Beauty Podcast for interviews from the beauty industry. —Danny Parisi, sr. fashion reporter
Investors are still nervous about publicly traded fashion companies’ weaknesses
Last week, some major publicly traded fashion brands reported that they’d clawed back some of their lost revenue from 2023. Birkenstock, which went public in October, had a disappointing first few weeks after its IPO in which its stock dropped 13% on the first day.
But on Wednesday, the company reported its earnings showing the potential for its 2024 revenue to reach nearly $2 billion, above analysts’ expectations. And yet its stock slid 12% after revealing this forecast, which UBS analysts attributed to the report’s lack of any stellar, confidence-boosting metrics. The price slump indicated that investors are still jumpy about brands that have newly entered the public market.
Richemont also reported a comeback in sales, with its revenue increasing 8% year-over-year for the quarter ending on December 31, exceeding $6 billion for the three months. Unlike Birkenstock, the higher revenue coincided with an increase in investor confidence, and its share prices went up 10% at the news.
Both companies identified China as a market that is helping them get back in the saddle. Richemont reported that its sales increased during the quarter by 25% in China and 18% in Japan. Birkenstock is also hoping that China will continue to be a growth driver.
“We managed to implement premium distribution through partner stores all over [Asia],” said Klaus Baumann, Birkenstock’s chief security officer, on the company’s earnings call. ”We grew in underpenetrated countries, like Greater China marketplaces, by more than 60%. India’s digital [business] grew by more than 70%, and Japan’s digital [grew] by more than 50%. So let me remind you at this stage that our DTC expansion is not at the expense of B2B growth. It is all incremental.”
Hugo Boss also saw a sales increase driven by profits in Asia. The company’s global sales rose 13% last quarter and 33% in the Asia-Pacific region. And yet, thanks to profit margins that were just middle of the road, its shares dropped by 11% after the news.
Meanwhile, Watches of Switzerland, one of the biggest watch companies in the world, did not fare so well. The company severely cut its revenue forecast from around 8% growth to 2% for this year, the company reported on Thursday. Its revenue was originally expected to be around $2.1 billion but is now down to $1.9 billion. Investors reacted accordingly and the company’s shares dropped 33%.
In an environment where interest rates are high, investors are obviously still nervous about publicly traded companies showing any signs of weakness even as their revenues start to return to normal.