A pair of Jimmy Choos or a Marc Jacobs bag is more than a woman's guilty pleasure -- it's a wise investment.
And with demand for high-end shoes and handbags growing, designers and investors are finding a flattering fit in luxury accessories, evident in the runway looks at New York Fashion Week and the recent sale of Jimmy Choo.
The $364 million acquisition of Jimmy Choo by a private equity group led by TowerBrook Capital is just the latest in a series of deals and investments in the profitable luxury market, says Marshal Cohen, chief industry analyst for market research firm NPD Group.
The deal announced Monday is the third sale in six years of the upscale women's shoe designer, which achieved notoriety on the hit TV show "Sex and the City.” Founder and president Tamara Mellon will remain a significant shareholder in the London-based company, whose 60 branded stores worldwide rake in more than $128 million, with shoes starting at about $1,000 a pair.
Luxury is “one of the areas that has proven to be almost consumer-proof, recession-proof, financial-challenge proof and continues to be a good investment and good opportunity,” Cohen says. “Year-after year, and five years in a row now, the luxury segment continues to rise to the top.”
That's obvious at New York Fashion Week, where retail buyers are looking for must-have items from the likes of designers Michael Kors, Anna Sui and Ralph Lauren. The week-long event runs through Friday and produces big money deals in the weeks ahead for the $180 billion dollar industry.
Fashion insiders say growth in the accessories market – which includes footwear, handbags and jewelry – has outpaced that of the apparel market in the last couple years. NPD is launching a new service to track the segment's tremendous growth. Sales of men’s and women’s fashion footwear alone rose 6.4% to $29.5 billion in 2006, while apparel sales rose 4.4% to $157 billion, according to NPD.
Catching Up With Coach
Just look at Coach, which has been riding high on double-digit sales growth each holiday quarter since 2001. The retailer recently reported a 31% surge in fiscal second-quarter profit, fueled by a 26% jump in same-store sales. The stock has increased eight-fold in the past five years and is up 61% in the last six months alone.
The company's success has motivated other retailers, including Kenneth Cole Productions and J. Crew Group, to boost their handbag offerings.
It’s a business model that designer and Nautica founder David Chu is adopting in his new role as equity partner and executive creative director of high-end bag and luggage maker Tumi.
“I want to expand Tumi in the women's fashion accessories market,” he said. “That’s where the growth is.”
And for designers, that’s where the money is.
“Designers sell more fragrance than clothing and more handbags than dresses. That’s just the way it is,” said Fern Mallis, vice president of IMG Fashion and veteran organizer of New York Fashion Week.
Looking Smart, Smart Money
But why the willingness to shell out hundreds of dollars on a handbag or a pair of shoes?
“Accessories is the investment part of the business,” said Cohen, referring to the timelessness and style flexibility of shoes and handbags. “It’s easier to rotate your wardrobe and create disposable fashion and pair it with great accessories."
Cohen was among the 36,000 people at the fast-growing World Shoe Association’s trade show, which showcased more than 350 luxury footwear and accessories designers in Las Vegas Feb. 1-4.
"The luxury footwear and accessories spot [in the show] has grown by 60% over the past two years,” said Diane Stone, chief operating officer of the WSA show, which spotlights the latest offerings from the mass-produced variety up to the “fifth floor at Bergdorf Goodman”.
And celebrities are looking to cash in on consumers’ appetite for accessories. Gwen Stefani’s L.A.M.B. label and Beyonce’s House of Deron are extending their lines to include shoes, which were previewed at the show. Victoria Beckham, wife of soccer player David Beckham, recently signed an $9.8 million deal to design bags and shoes.
“People can’t turn over an entire wardrobe based on changing styles every season and every year, but they can update looks via accessories,” Stone said. “You can buy a couple new things and look like you’re in the latest style.”
“There’s no difference between a $30 and $300 pair of jeans," says Cohen, "but everyone can tell cheap shoes.”
And what a fashion faux pax that would be.