00:00I do want to kind of pick your thoughts not so much on the earnings themselves but some of the
00:04disparity that we've seen in a lot of the reports out of the various big name kind of luxury if
00:10you
00:10will companies that have reported. I mean you wrote a book a few years ago and you talked a lot
00:14about this idea of luxury being about desire and taste and aesthetics yet Bloomberg's been writing
00:21a lot how it's become a lot more tactical for consumers. You got the Gen Zers now you know
00:26going to these secondhand sites trying to try to game out exactly what some of these things should
00:30be worth. You got folks over in China who are checking their portfolios before they go out and
00:34buy that latest Hermes scarf or whatever it is they're buying over there. What exactly is the
00:40trend line now that's happening in the luxury space? I think the rule of thumb historically
00:47was that when the markets are good when housing is good when unemployment is good that people spend
00:53and what I'm seeing in the market and I'm seeing this in really every region is that they spend a
00:59lot more selectively. Obviously when the market conditions are not good they do not spend on
01:04discretionary the way that they would in frothier times but right now because we're seeing at least
01:10here in the U.S. relatively healthy or stable conditions across most of those metrics what we're
01:17seeing is a very discriminating customer. They're discriminating on price and more importantly
01:20they're discriminating on value and they're discriminating on whether they buy stuff versus
01:25whether they invest that in vacations and entertainment in dining. There's a lot of
01:30competing options for those dollars. Well I am curious about that. I mean Bain recently had a
01:35report saying just that that the growth engine of luxury is less on the goods and more on the
01:40experiences. Obviously you have a lot of experience at Bain and then McKinsey had also had an interesting
01:45report out basically saying that kind of this idea of sort of that single monolithic luxury consumer
01:49that maybe we tended to think of and is kind of a thing of the past. Yeah I think so.
01:56I also think
01:56that these conditions are very subcategory specific. So even when you look at the Estee Lauder results
02:03fragrance was a clear-cut winner. It was up double digits 10 percent. Hair care which is another one of
02:09the four segments that they play in was actually negative. It was a drag on the rest of the company.
02:14Fortunately for them it's not as big a portion of their business. Ten years ago we would have seen
02:19the inverse of that. Fragrance used to be a drag on Estee Lauder's income. So now if you are playing
02:25in the right segment in the right markets and geographies you definitely have an edge. But no
02:31matter how well strategically you're positioning if your brand is not strong and by that brand I mean
02:37if the desirability by the consumer for that brand is not strong you will not you will not get the
02:42consumer to come and open up their wallet. I'm curious with regards to the structure of these
02:47companies and we'll just take Estee Lauder. I mean they are kind of quintessentially high and low. They
02:52have a lot of sort of lower price products that are still in the zeitgeist and obviously the really
02:56high-end stuff like La Mer or something like that. How does that stack up against say maybe an LVMH
03:01which
03:02is almost purely more towards the higher end of the price spectrum? Yeah what you're seeing with
03:08LVMH right now is that the strongest brands are the ones that are most inaccessibly priced. So
03:14their jewelry segment did very well. Laura Piana which is inaccessibly priced by most people's estimate
03:20did very very well. And the more democratic brands like a Vitan or Sephora have not as well in this
03:28market. So that is one interesting indicator. In the case of Estee Lauder you're right while
03:35relative to say L'Oreal they are very skewed toward upper end of the market. The fact is if you
03:40looked
03:40at their customer profiles this is not a highly affluent woman who's buying their products. It
03:46really is a woman who wants better cosmetics. So she's more inclined to buy cosmetics when she goes
03:52to Estee Lauder but she might buy the rest of her household goods from Target. There's a lot of
03:57crossover. So you I wouldn't call this the same kind of affluent consumer that we would see with
04:02an LVMH or certainly not with a rich monitor or carrying. And so Pauline with American brands
04:09like Ralph Lauren and Coach they are doing well by capturing this middle income consumer. Do you
04:15think that's going to lead to European the European rivals needing to rethink their pricing models a
04:21little bit. I think they should have rethought I thought I thought that before they actually elevated
04:27it's very hard for a luxury brand to price adjust downward. What they are doing and I think they're
04:33doing this across the board is they're being much more sensitive and conservative in the pricing of
04:39newer products. But that said newer products are a small portion of the total product sold. A never full
04:45bag from LV is not a new product and it's a big portion of their business. So they're not going
04:51to start
04:51reducing or discounting those goods. But I do think that they're aware that that that has been a real
04:58constraining factor on top of other issues like the the tariffs which have hit really all of these
05:05companies in the last few years on top of the fact that there's a proliferation of products and brands
05:12right now in the market more than ever more store openings than ever. So the consumer is a bit fatigued.
05:17I think the reason that Ralph Lauren is is bearing so well is not simply because they're appealing to
05:23the middle of the market. It's because they have been much more disciplined in how they've told their
05:28stories and how they've merchandised and how they've priced their goods. So there's a perception by the
05:33consumer that they are good value relative to some of their direct competitors. Well and that seems to
05:39be playing out in the stock market. I mean we were talking internally earlier today about the idea that
05:45right now LVMH's stock actually trades at a slight discount to Ralph Lauren's stock the first time
05:53that's happened in quite a few years. And you know Bloomberg had a great story about it. Look you can
05:58go in there you can get you know $12 socks buy yourself a $60 baseball hat if you want and
06:02feel like
06:03you got I guess some sort of piece of luxury without necessarily spending thousands of dollars. Is that the
06:10model? I think that has been the model for Ralph Lauren and Ralph Lauren you know if you actually
06:17look at this the breadth of their product line and not just in terms of the number of products that
06:23they
06:23sell but the price points and the different sub labels that they have from the purple label at the
06:28highest end to some of the partnerships they've had over the years with Macy's and Kohl's. I mean they
06:33are speaking to a very broad swath of the population whereas LVMH has even more acutely in the last few
06:41years focused on a very concentrated segment of the population. And that's a vulnerability particularly
06:48in a tight market because not only I mean the very wealthiest people are doing just fine as long
06:54as their portfolios are well structured but every luxury player is pursuing them and focusing and it's
07:01getting more and more expensive to service that customer. So LVMH in this moment in time has I'd
07:08say more challenges and more complexity than more of a pure play like Ralph Lauren.
07:13I mean and in fairness to LVMH I mean they've made a few good moves on the designer front that
07:17seems to
07:17have you know created a lot more attention and a lot more buzz than in the past. I mean if
07:23you had
07:23the Arno's ear to say kind of you know what they should do moving forward do you say continue pushing
07:30in
07:30that direction find these star designers find these younger folks who can sort of create designs that
07:35will generate that buzz is that the storyline? It's it's a requisite for fashion but keep in mind
07:43that fashion is just a piece of the business and it's arguably the most difficult piece of the business
07:48so when you think of an LVMH you still have a huge portion of the business that for example is
07:54in wine and
07:54spirits the dynamics of marketing and merchandising wine and spirits incredibly different but there
08:01too they have had to in order to keep the buzz in order to keep some sort of customer excitement
08:07editorial excitement they've had to engage in a lot of collaborations with artists and designers across
08:13the different wine and spirits brands and it across the board it's getting more and more crowded
08:19uh to play in any one of these segments and it's getting more and more expensive to break through the
08:24clutter
08:25uh but when it comes to fashion to answer your question yes i mean it it it starts with great
08:29talent
08:30uh and then it's about storytelling around that talent and if you cast the talent well and if you have
08:35the
08:35marketing machine ready to go uh and which is what's happening right now by the way at chanel uh which
08:41has had a
08:41brilliant uh upturn um that that is really the formula for that segment of the business yes
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