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Business of Fashion
01-08-2025
- Business
- Business of Fashion
Are Luxury Brands Responsible for What Happens in Their Supply Chains?
Until the end of 2023, Z Production, a leather goods factory located in an industrial suburb of Florence, made bags and backpacks for Richemont-owned luxury pen and leather goods maker Montblanc. The items were made by workers who earned as little as $3 an hour, working 12 hours a day, six days a week, according to local union Sudd Cobas, which led a months-long campaign of strikes that succeeded in securing better hours and wages at the factory for its members in early 2023. Within weeks of the agreement, Richemont's local manufacturing unit announced plans to terminate its contract with Z Production, pointing to consistent infractions against its code of conduct. Sudd Cobas alleges the move amounted to a form of union busting and ultimately led to the dismissal of six of its members in October last year. Now it is helping the workers take the Richemont unit to court, hoping to hold the luxury giant legally accountable for damages to workers in its supply chain. Montblanc contests the claims laid out in the case and is separately suing the union for defamation. The company said the manufacturing unit ended its relationship with Z Production after audits turned up persistent issues, including a case of unauthorised subcontracting. Any dismissals took place months after its contract with the supplier ended and its inspections uncovered no evidence of the kinds of labour abuses alleged by Sudd Cobas, it added. 'We categorically reject these unfounded and defamatory accusations,' Montblanc said in an emailed statement. 'The termination of the supply relationship with Z Production has, for months, been extensively exploited… based on numerous inaccuracies, falsehoods and conjectures.' The litigation is the latest move in a high-stakes debate over how much responsibility big brands should have for what happens in their supply chains. With the case, Sudd Cobas is aiming to set a new legal precedent in Italy, where roughly half of the world's luxury goods are made. If successful, 'the ruling could represent a turning point for thousands of exploited workers across the 'Made in Italy' supply chains,' Sudd Cobas said in a press release it jointly issued with Abiti Puliti, the Italian branch of labour rights campaign group Clean Clothes Campaign, earlier this month. 'It would be the first time a fashion brand is held directly responsible for working conditions within its supply chain.' Limited Liability Business Models Most fashion companies — even high-end, luxury labels — don't make their own products. Instead they outsource production to a complex and often opaque network of third-party suppliers. That means they don't have direct control, or even real visibility, over working conditions. Critics argue it also allows them to sidestep legal liability when things go wrong. Labour rights advocates have pushed against this framing for decades, campaigning to bring more accountability to a system that they argue is deeply flawed and ultimately exists to boost the profits of big, multinational corporations. It's the constant pressure big brands place on manufacturers with much tighter margins to provide cheaper, faster, more flexible production that ultimately leads to cut corners and labour exploitation, they say. Brands use 'these subcontracting companies to save money on production,' said Francesca Ciuffi, an organiser with the Sudd Cobas union. 'They externalise everything.' Regulators have flip flopped on the issue. Over the last decade governments around the world have introduced a number of policies that require companies to get a better handle on where and how their products are made, often in response to scandals like the Rana Plaza disaster in Bangladesh and an alleged government-backed scheme of forced labour in China's cotton-producing region of Xinjiang. But often these measures have lacked teeth or been weakly enforced. Shifting political winds mean some of the most progressive rules on the table now look likely to get drastically pushed back. Litigation is seen by labour and human rights advocates as one tool to help shift the paradigm, moving the pressure on brands from one of moral accountability that impacts their reputations to one of concrete, legal consequence. Climate and human rights cases against big companies have increased alongside regulatory changes and growing investor engagement with environmental, social and governance issues. Often such cases take years and may not result in a straight win for either party. But the attention they bring to the issues and even incremental changes to the way the law is applied can make a significant difference, advocates say. 'These cases are very robustly fought by brands. Very rarely do they resolve quickly, they're always heavily contested,' said Oliver Holland, a partner at UK-based law firm Leigh Day who specialises in corporate accountability litigation. 'As cases become more common won't take as long and won't be as difficult.' Luxury Exceptionalism The case supported by Sudd Cobas comes as luxury's supply chains are facing unprecedented scrutiny. For decades, the sector has tried to pass off reports of labour abuses in apparel and leather goods factories as a fast-fashion problem, isolated to far-flung manufacturing hubs with weak worker protections. Steep prices and 'Made in Italy' labels are wielded as tools in this narrative, designed to signal to consumers that luxury products were made in tightly regulated labour markets by well-paid and highly skilled artisans. And previous scandals largely came and went, without damaging brands. But over the last 18 months, an ongoing investigation into labour exploitation in fashion workshops near Milan has exposed major issues at many of luxury's most established brands. Regional prosecutors have linked companies including Dior, Armani, Valentino and Loro Piana to local sweatshops. (The brands say that they are committed to upholding high ethical standards and the incidents don't reflect the way they operate). The scandal has proved reputationally bruising. And it's landed at a particularly unhelpful moment, when luxury's biggest players are already grappling with a downturn in consumer spending, linked in part to growing criticism of declining quality and rising prices playing out in viral posts on social media platforms. Still, the material impact has thus far been limited, While the court in Milan has been critical, arguing that luxury's links to sweatshops are the result of an entrenched operating model that ignores labour risks in order to maximise profits, sanctions against brands have focused on alleged failings in their monitoring systems and have not held them legally responsible for the way workers were treated at suppliers and subcontractors. Political efforts to address the issues have focused on developing certification programmes companies can use to prevent exposure to illicit actors. A new scheme in Milan aims to establish a database of 'good' suppliers, based on voluntary disclosures and participation. Last week, Italy's Ministry of Enterprise and Made in Italy announced plans to introduce a new law that would ensure the sustainability and legality of companies operating in the sector. Its aim is 'to combat the illicit labour practices of a few, which can compromise the reputation of the entire sector,' the ministry said in a statement, adding that the law would protect brands that have carried out preventative checks on their suppliers from liability. Critics argue such measures fail to address the underlying business practices that they say ultimately lead to exploitation. 'Brand reputations are safeguarded — not workers' rights — by the ethical codes published on corporate websites and the so-called system of 'audits,'' Sudd Cobas and Abiti Puliti said in their statement earlier this month. 'The conflict of interest is clear, and it offers no real accountability to those employed along the production chains.' Who Pays? With the case in Tuscany, Sudd Cobas is seeking to shift this paradigm. According to the argument put forward by the workers' lawyers, Richemont's local subsidiary was Z Production's only client and had active involvement in its day-to-day operations. The factory was in effect an 'empty vessel' for Richemont's Montblanc manufacturing business, making the luxury giant the ultimate responsible employer, the case claims. It alleges the Richemont unit cancelled its contract with Z Production because output dropped after working hours were regularised for union members. The lawsuit seeks to restore jobs and secure at least five months' salary as compensation for the six plaintiffs, who it claims ultimately lost their jobs as a result of the luxury company's actions. Montblanc said the case mischaracterises its manufacturing division's relationship with Z Production and that the six workers involved in the case were dismissed 18 months after the unit announced plans to terminate its contract, and 10 months after it stopped working with the supplier. Its decision to end the relationship was made after audits turned up 'persistent incidents of non-compliance' with the company's code of conduct, including unauthorised subcontracting, Montblanc said, adding that neither its own inspections, nor a third-party forensic audit conducted in early 2023 found evidence of working conditions like those alleged by Sudd Cobas. A judge in Florence's labour court consented to hear arguments in July. The next court date is set for December. Simone Stern Carbone contributed to this story.
NDTV
03-06-2025
- Business
- NDTV
Victoria's Secret Says Cyber Incident Led To Temporary Website Shut Down
Victoria's Secret on Tuesday disclosed that a security incident relating to its information technology systems had led it to temporarily shut down its website for a few days last week. The company said it shut down corporate systems and e-commerce website on May 26 and immediately enacted response protocols to contain and prevent unauthorized network access. Its website was restored on May 29. The lingerie maker said the breach did not impact its financial results for the first quarter or cause a material disruption to its operations, but the second quarter could be hit by the additional expenses incurred following the incident. It even said it expects first-quarter sales and adjusted diluted earnings per share to meet or exceed the higher-end of its previously issued forecast. Victoria's Secret, however, delayed its first-quarter results, scheduled on June 5, saying the restoration process of its website prevented employees from accessing certain systems and information needed for the release of the results. The cyber incident at Victoria's Secret follows several such incidents at fashion and retail brands including Richemont-owned Cartier as well as Marks & Spencer. Cartier told customers on Tuesday it had its website hacked and some client data stolen, according to an email seen by Reuters. The incident at Victoria's Secret also affected some functions in its namesake and PINK stores, the company said, adding that these have now been restored. Shares of the company were up about 2% in early trading on Tuesday.
Yahoo
18-03-2025
- Business
- Yahoo
Panerai Names Emmanuel Perrin CEO
PARIS — Panerai has named Emmanuel Perrin its new chief executive officer, effective April 1. He will take over from Jean-Marc Pontroué, who held the position since 2018 and revealed his departure from the Compagnie Financière Richemont-owned company on Monday in an Instagram post. More from WWD Sandbridge Capital Taps Lynda Berkowitz for Senior Advisory Role EXCLUSIVE: Cartier Returns to Curate the Women's Pavilion at Expo 2025 in Japan L'Oréal USA Names New Dermatological Beauty Head 'It is with excitement and a deep sense of responsibility that I take the baton handed from Jean-Marc and the teams that have contributed to the development of Panerai to this day,' Perrin said in a statement announcing his new position. 'I am looking forward to being of service to the maison, its colleagues, its clients, its partners and the Paneristi [community] worldwide.' Perrin, who will report to Richemont CEO Nicolas Bos in his new role, has been head of its specialist watchmakers at group level since 2017, overseeing brands including A. Lange & Söhne, IWC Schaffhausen, Jaeger-LeCoultre, Piaget, Roger Dubuis and Vacheron Constantin. The incoming executive counts some 33 years of experience within Richemont. Prior to heading the specialist watchmakers, Perrin was Cartier's executive vice president of sales, international commercial director, and prior to that, served for more than four years as Cartier North America's president and CEO. He joined the jeweler in 2010 from its stablemate Van Cleef & Arpels, where he had spent almost nine years in executive roles. Perrin also served as the president of the Fondation de la Haute Horlogerie, the organizing body of the Watches and Wonders fair. Meanwhile, Pontroué is expected to leave Richemont after 'a distinguished 25-year tenure with the group,' the watchmaking company said. It lauded the departing executive's 'pivotal role in shaping Panerai's strategy and global presence, following his leadership positions at Montblanc and Roger Dubuis.' His future plans could not immediately be learned. Best of WWD EXCLUSIVE: Maje Names Charlotte Tasset Ferrec CEO Nadja Swarovski Exits Family Company Amid Ongoing Corporate Shakeup Aeffe MD Exits Fashion Group
Yahoo
18-02-2025
- Business
- Yahoo
Trump tariffs would test pricing power of Europe's luxury goods makers
By Tassilo Hummel and Mimosa Spencer PARIS (Reuters) - European luxury goods makers say they could draw on pricing power to offset the cost of any tariffs imposed by U.S. President Donald Trump, but analysts say some brands may have limited room to hike prices. Famous brands like LVMH's Louis Vuitton or Kering's Gucci are counting on a buoyant U.S. market this year as China lags. However, Trump has threatened new tariffs on the European Union due to trade surpluses it had with the United States, in a widening offensive that economists say could trigger a global economic slowdown. Executives at Hermes and Kering, which make handbags and loafers that sell for thousands of dollars, said last week they could leverage their brands' cachet to absorb any additional duties. "If duties increase, we'll increase our prices accordingly," Hermes Executive Chairman Axel Dumas said on Friday after reporting results. Kering CEO Francois-Henri Pinault signalled the same commitment earlier in the week, saying his brands, including Gucci, Balenciaga and Yves Saint Laurent, would "review (their) pricing strategy" in the event of tariffs. "We know how to manoeuvre that," he said. PASSING ON COSTS Yet, years of aggressive price hikes, particularly during the post-pandemic boom, could make it harder for some brands to pass on higher import costs. Most brands lifted prices by their most ever in recent years, analysts from firms including UBS, Citi and Bernstein said. Chanel's classic quilted flap bag has more than tripled in price since 2010, while the Lady Dior bag and Louis Vuitton Keepall travel bag have more than doubled, according to UBS. "We've talked a lot about 'greedflation' for the past 12 months, the idea that you've gone too far, too high, too quickly. And at the end of the day, you've basically cut yourself off from that aspirational consumer," HSBC analyst Erwan Rambourg said. CAUTIOUS PRICING A significant price rise would counter a recent trend for more cautious pricing policy, especially in the U.S. market. Dior, for example, kept U.S. prices flat last year, while Louis Vuitton increased them by a little more than 2%, according to Paris-based market intelligence firm Data & Data, which monitors online retail prices for brand catalogues. Chanel raised prices by 5.4%, a moderate move compared with previous years, while jewellers Tiffany and Richemont-owned Cartier and Van Cleef & Arpels slowed the pace of U.S. increases to 4% to 6%, from over 8% in the previous year, the data showed. "I think that the major brands' room for manoeuvre in terms of price increases in the United States will be fairly limited in 2025," Data & Data CEO Zouheir Guedri said. "This would risk accentuating price differences between different regions and jeopardise costly efforts undertaken over the years to harmonise prices on a global scale." Morningstar analysts said in a recent note: "A 10% to 20% tariff on European luxury goods could depress luxury sales in the U.S., especially for companies like Burberry and Kering that focus more on an affluent and aspirational clientele as opposed to the ultra-rich patrons." CHOPPY OUTLOOK As Chinese demand stays subdued, Europe's luxury companies are pinning their hopes on Americans in 2025, boosted by roaring equities and crypto markets. Even though business with American customers is expected to grow fastest this year, at 6%, buoyed also by a strong dollar, sales to Chinese customers are set to drop 1%, UBS has forecast. But the outlook remains uncertain. U.S. consumer sentiment dropped unexpectedly in February to a seven-month low and inflation expectations rocketed as households feared they could pay the price for Trump's trade policies. Analysts at Citi noted spending habits of aspirational shoppers - consumers who stretch their budgets seeking to elevate their social status - remain choppy. LAND OF CONQUEST Hermes CEO Dumas last week said he still saw the United States as a "land of conquest" to generate growth, pointing to his group's retail expansion into second-tier U.S. cities, with upcoming openings in Phoenix and Nashville. LVMH hinted it could further bulk up production there. CEO Bernard Arnault and his family have cultivated personal ties with Trump, with four of them attending the president's inauguration last month. "We believe the group is positioning itself to be able to negotiate with the U.S. administration on potential tariffs by offering to produce more in the U.S., as is already the case for Louis Vuitton and could easily be done for other brands," said analysts at HSBC. Asked how he viewed lobbying efforts from Arnault in the United States, Kering-owner Pinault told Reuters "it's certainly a good thing" if it helps the European luxury sector avoid additional duties. However, like some other European luxury executives, Pinault ruled out any shifts of production to the U.S., saying that could dilute his group's 'Made in Europe' image and would "make no sense." Sign in to access your portfolio
Zawya
18-02-2025
- Business
- Zawya
Trump tariffs would test pricing power of Europe's luxury goods makers
European luxury goods makers say they could draw on pricing power to offset the cost of any tariffs imposed by U.S. President Donald Trump, but analysts say some brands may have limited room to hike prices. Famous brands like LVMH's Louis Vuitton or Kering's Gucci are counting on a buoyant U.S. market this year as China lags. However, Trump has threatened new tariffs on the European Union due to trade surpluses it had with the United States, in a widening offensive that economists say could trigger a global economic slowdown. Executives at Hermes and Kering, which make handbags and loafers that sell for thousands of dollars, said last week they could leverage their brands' cachet to absorb any additional duties. "If duties increase, we'll increase our prices accordingly," Hermes Executive Chairman Axel Dumas said on Friday after reporting results. Kering CEO Francois-Henri Pinault signalled the same commitment earlier in the week, saying his brands, including Gucci, Balenciaga and Yves Saint Laurent, would "review (their) pricing strategy" in the event of tariffs. "We know how to manoeuvre that," he said. PASSING ON COSTS Yet, years of aggressive price hikes, particularly during the post-pandemic boom, could make it harder for some brands to pass on higher import costs. Most brands lifted prices by their most ever in recent years, analysts from firms including UBS, Citi and Bernstein said. Chanel's classic quilted flap bag has more than tripled in price since 2010, while the Lady Dior bag and Louis Vuitton Keepall travel bag have more than doubled, according to UBS. "We've talked a lot about 'greedflation' for the past 12 months, the idea that you've gone too far, too high, too quickly. And at the end of the day, you've basically cut yourself off from that aspirational consumer," HSBC analyst Erwan Rambourg said. CAUTIOUS PRICING A significant price rise would counter a recent trend for more cautious pricing policy, especially in the U.S. market. Dior, for example, kept U.S. prices flat last year, while Louis Vuitton increased them by a little more than 2%, according to Paris-based market intelligence firm Data & Data, which monitors online retail prices for brand catalogues. Chanel raised prices by 5.4%, a moderate move compared with previous years, while jewellers Tiffany and Richemont-owned Cartier and Van Cleef & Arpels slowed the pace of U.S. increases to 4% to 6%, from over 8% in the previous year, the data showed. "I think that the major brands' room for manoeuvre in terms of price increases in the United States will be fairly limited in 2025," Data & Data CEO Zouheir Guedri said. "This would risk accentuating price differences between different regions and jeopardise costly efforts undertaken over the years to harmonise prices on a global scale." Morningstar analysts said in a recent note: "A 10% to 20% tariff on European luxury goods could depress luxury sales in the U.S., especially for companies like Burberry and Kering that focus more on an affluent and aspirational clientele as opposed to the ultra-rich patrons." CHOPPY OUTLOOK As Chinese demand stays subdued, Europe's luxury companies are pinning their hopes on Americans in 2025, boosted by roaring equities and crypto markets. Even though business with American customers is expected to grow fastest this year, at 6%, buoyed also by a strong dollar, sales to Chinese customers are set to drop 1%, UBS has forecast. But the outlook remains uncertain. U.S. consumer sentiment dropped unexpectedly in February to a seven-month low and inflation expectations rocketed as households feared they could pay the price for Trump's trade policies. Analysts at Citi noted spending habits of aspirational shoppers - consumers who stretch their budgets seeking to elevate their social status - remain choppy. LAND OF CONQUEST Hermes CEO Dumas last week said he still saw the United States as a "land of conquest" to generate growth, pointing to his group's retail expansion into second-tier U.S. cities, with upcoming openings in Phoenix and Nashville. LVMH hinted it could further bulk up production there. CEO Bernard Arnault and his family have cultivated personal ties with Trump, with four of them attending the president's inauguration last month. "We believe the group is positioning itself to be able to negotiate with the U.S. administration on potential tariffs by offering to produce more in the U.S., as is already the case for Louis Vuitton and could easily be done for other brands," said analysts at HSBC. Asked how he viewed lobbying efforts from Arnault in the United States, Kering-owner Pinault told Reuters "it's certainly a good thing" if it helps the European luxury sector avoid additional duties. However, like some other European luxury executives, Pinault ruled out any shifts of production to the U.S., saying that could dilute his group's 'Made in Europe' image and would "make no sense."
