All across Manhattan, palatial luxury flagship stores are popping up with square footage in the tens of thousands. At the same time, layoffs are coursing through the fashion and media industries, and executive salaries are being shaken up. 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
The rise of the luxury flagship
Luxury flagship stores popped up in several cities last week, including a new Thom Browne store — the brand’s 103rd — in Boston. In addition, Tiffany reopened its Fifth Avenue flagship on Friday, and the New York Post reported on Thursday that Louis Vuitton will open a massive new building and flagship store in Manhattan next year.
That’s in addition to Louis Vuitton’s flagship in China and Dior’s renovated flagship on Paris’s Avenue Montaigne, both of which opened last year. In September, Hermès opened a 45,000-square-foot flagship store on Madison Avenue.
These flagship stores are expensive, but they can also drive big revenue. Tiffany’s Fifth Avenue flagship reportedly accounts for 10% of the brand’s global revenue, for example. Luxury brands are clearly seeing major retail investments as paths toward continued growth. Thom Browne parent company Ermenegildo Zegna Group said the brand hopes to get to 115 stores by the end of this year.
More layoffs shake fashion and media
While luxury companies like LVMH are spending big bucks on extravagant new stores, non-luxury brands are cutting costs wherever they can.
Gap went through a second round of layoffs last week, following a 500-person cut in September. This time around, the company is laying off 1,800 people, citing an anticipated reduction in consumer spending throughout the year.
Meanwhile, in media, Buzzfeed News shut down, and Vice went through yet another round of layoffs as it ceased production of its Vice Tonight program.
Glossy has covered the impact of layoffs throughout the last six months, and there’s no sign that these cost-cutting measures will stop anytime soon as brands gear up for continued losses.
Some fashion execs see salaries dip with sales
Sales at Salvatore Ferragamo declined 6.5% in the first quarter of the year, but that didn’t stop the company from approving a new remuneration policy that increased the salary of new CEO Marco Gobbetti. Shareholders voted to approve the change on Wednesday even after two proxy advisers — Glass Lewis and Institutional Shareholder Services — advised against it.
But not every company has gone in this direction. American Eagle Outfitters CEO Jay Schottenstein’s salary came down 34% from last year, commensurate with declining sales, according to an AEO earnings report on Thursday. AEO also reported that its profits were down 12%.
Overall, average executive pay increased by more than 20% between 2021 and 2022. But as brands continue to seek any and all ways to cut costs, those inflated CEO salaries may start to look like a burden on brands’ bottom lines.