Saint Laurent Monograms feature heavily in the brand’s new aesthetic

With headlines like retail sales slump here to stay and LVMH Chief Raises Concerns on Global Economy, one could almost be forgiven for a spit-take and incredulity at an article titled YSL Seeks to Almost Double Sales in Next Three Years to which then a concerned reader might ask – Are they high?

According to Business of Fashion, Yves Saint Laurent plans to open 20 stores a year and ramp up in-house production seeking to double sales in just three years. Perhaps YSL Chief Executive Officer Francesca Bellettini has discovered a magic formula for swimming against a global market reality and while news like Macy’s down 4.6%, Nordstrom down 0.8%, Prada’s fiscal 2016 results down 9% to 3.18 billion euros amidst rising inventories and traffic declines, it almost seems like the Yves Saint Laurent Chief is high and betting against the market. Or is she really?

YSL Chief Executive Officer Francesca Bellettini

Luxury Business Science: YSL plans to Double Sales in 3 Years. Are they high?

According to analysts, eCommerce is a particularly hot retail channel right now especially when year-over-year April 2017 Retail Sales figures show Store sales down 3.7% while Online sales have increased 11.9%. While one might surmise that global soft markets and a general economic down-trend is expected to drive dollar-conscious shoppers to discounted online channels, the facts are that restaurant sales are up 3.9% along with furniture sales. The conclusion from that CNBC report is that people are spending, just not in the stores. Furthermore, with luxury watchmakers like IWC debuting online sales channels, LVMH launching a multi-brand e-commerce 24Sevres.com and Amazon gaining business by taking market share from brick and mortar retailers, opening 20 retail stores a year sounds like business suicide especially when Bellentini is targeting YSL to achieve annual revenue of €2 billion ($2.2 billion) in the next three to five years.

But is it really business suicide when luxury retailers like LVMH and Burberry are reporting that Chinese shoppers are slowing shopping online and returning to the boutiques. If that report feels contrary to global shopping trends, it’s because it is. Spending in the mainland improved because of strict Chinese measures which encouraged spending at home rather than overseas or online. Since April 2017, China has been raising fees on packages from abroad and implementing strict border control measures to deter Chinese nationals returning home with suitcases full of luxury goods. These measures designed to encourage shopping at home while blocking a grey market that enables shoppers to shop overseas and avoid paying tax appears to be paying dividends- Prada’s 9% drop could have been worse if not for the fact that the drop was softened as sales in Greater China grew in Q4 2016 buoyed by “double digit” Russian sales growth.

Anthony Vaccarello is an Italian-Belgian fashion designer and currently creative director at Yves Saint Laurent. Prior to this he held the position of creative director at Versus Versace

Nope, YSL Chief Executive Francesca Bellettini isn’t high…

With store openings slated for high growth, high income cities with burgeoning luxury consumption like Shanghai and Beijing, YSL looks set to continue the up-swing in revenue following the phenomenal tripling of sales since 2012 during age of creative director Hedi Slimane’s remarkable creativity. The outlook for positive growth is backed by fruits of designer Anthony Vaccarello’s labours: his YSL-monogrammed women’s pumps became one of the hottest “it” shoes of 2016, spiking demand for YSL. With 159 stores, the 20 additional YSL boutiques will not just appear in China but in mature European markets as well, with two slated for Switzerland.

Anthony Vaccarello’s labours: YSL Opyum Shoe. One of the most popular women’s pumps in 2016

EBIT Margin for YSL: the measure of a company’s profitability on sales over a specific time period; calculated as a ratio of Earnings before Interest and Taxes to net revenue – earned is expected to be boosted by 3% to 25% over the next three to five years. According to Business of Fashion, Bellettini said that this projection follows the 4.7% spurt in 2016. In context, a luxury leader like Hermes enjoys Ebit margins as high as 32.6%.

Amazingly, Bellettini’s plan for aggressive double sales growth doesn’t include more outsourcing, instead, she aims to increase YSL’s in-house production facilities by expanding its Tuscan factory while improving margins and maintaining standards – a tall order but following 3 years of growth, a potentially achievable one. YSL doesn’t seem so insane now do they?

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