skip to Main Content

BENCHMARK

Luxury Apparel Industry Brief

Luxury apparel retailers design, produce or distribute ready to wear clothing, shoes, or accessories which are marketed under a luxury, an aspirational luxury or a prestige brand associated with high quality, desirability and price. With an estimated global market size of €249B in 2016 per Bain Consulting, the industry is expected to grow at around 3% to 4% over the next few years with flat or declining sales in North America and Europe but growth in key emerging markets like China or India.

Some of the evolving challenges facing luxury apparel retailers today include:

  1. Rising share of off-price channels or discounted sales
  2. Increasing share of e-commerce purchases, which according to Bain Consulting reached about 8% of the total market in 2016, and
  3. Increased competition from new and innovative brands with more creative, casual or experience centric product and marketing

From a supply chain strategy perspective, successful luxury apparel retailers will continue to focus on:

  1. Maintaining the highest level of customer service and availability targets
  2. Building a truly omni-channel buying and fulfillment customer experience, and
  3. Enhancing digital demand and assortment planning capabilities for both in-store as well as e-commerce platforms

Benchmarking database and methodology:

Our luxury apparel retail industry benchmarking report is based on 28 luxury goods companies with publicly available financial information and includes companies such as LVMH Moët Hennessy Louis Vuitton S.E., Kering S.A. and Burberry Group PLC. Privately held luxury retailers such as Chanel S.A. or Giorgio Armani S.P.A. are excluded from this study due to lack of adequate publicly available financial data.Image Here

Summary demographic profile of the benchmarking database is below:

Demographic Profile

Companies HQ in Europe 13
Companies HQ in NA 8
Companies HQ in Asia 7
Total Companies 28
2016 Revenue (USD M) – Average $3,744
2016 Revenue (USD M) – Middle 80% $7,435 – $258

Supply Chain KPIs Benchmarking Summary:

Table below summarizes the financial performance of the benchmarking pool of 28 companies on five key supply chain metrics:

5 Year CAGR Gross Margin EBITDA Margin Inventory Days Online Sales
Top 25% 3.5% 68.5% 19.3% 138 29%
Median -1.3% 62.5% 13.4% 222 15%
Mean -0.2% 58.6% 11.4%/td> 247 12%
Bottom 25% -3.1% 54.1% 7.5%/td> 287 5%

The 5 Year CAGR is the mean annual revenue growth rate over the last five years (2012 -2016). Gross Margin and Net Income Margin are based on ‘as reported’ financial results. Days Inventory on hand is calculated based of average inventory holding for a period over cost of goods sold.

*Reported Online Sales is based on public disclosures made by approximately 30% of the companies in the benchmarking pool only.

Top 5 Supply Chain Performers in 2016

Rank Company Country Growth Gross Margin EBITDA Inventory
1 Moncler S.p.A. Italy 2 4 1 11
2 Coach, Inc. USA 7 5 4 7
3 Michael Kors Holdings USA 10 15 2 3
4 Kering S.A France 5 11 6 9
5 Canada Goose Holdings Inc. Canada 1 18 5 10

– Rankings based on a scale of 1-28, with 1 being top ranked. UR – Un-Ranked

Gross Margin & Inventory frontier for luxury retailers 5 Year Industry Supply Chain Performance
Image Here Image Here
Overall most luxury retailers are on or within the industry efficiency frontier for managing the trade-off between inventory days and gross margin. Higher margins in the industry clearly demands higher customer satisfaction and inventory holding rates which are to be expected in the industry. Nonetheless, significant opportunity exists for outliers to re balance their inventory strategy based on their current gross margins. While gross margins have held steady over the last five years, both EBITDA margins as well inventory days have performed worse over the time period for our pool of luxury apparel retailers. Increasing marketing as well as other sales and general administrative costs have eaten into EBITDA margins while average inventory holding days have increased 14.6% in the same period – perhaps due to laxer planning.

About Solvoyo

Solvoyo is the next generation planning and optimization platform built for the digital revolution in supply chain. Solvoyo helps companies close the gap between planning and execution. Our all-in-one platform forecasts demand, optimizes inventory, plans production, replenishes networks and concurrently optimizes transportation plans. Solvoyo is the only planning platform that allows companies to plan strategic, tactical and operational supply chain actions in one tool. The scalability, analytical capabilities and short implementation cycles of our true cloud platform help our clients achieve dramatic improvements in performance. We are headquartered in Boston, MA with our R&D center in Istanbul, Turkey. For more information,

please visit: www.solvoyo.com.

Start Your Journey Now!

Blog

4 Keys to a Successful Supply Chain Visibility and Analytics Project

Digital Transformation of Your Supply Chain Network in the Age of AI

Webinars

Success Factors for Retail Supply Chain Analytics Projects

Digital Transformation Of Supply Chains

Supply Chain Analytics for Wholesalers & Distributors

Back To Top