The Top 30 UK-owned* luxury fashion businesses generated revenues of £5.25 billion in the past year, with rising turnover among 'younger' luxury brands being the main driver of growth, shows new research from Boodle Hatfield, the leading private wealth law firm.
The average 7% turnover growth among younger brands those established since 1990, such as Lulu Guinness and Stella McCartney was the main driver of growth in the UK luxury industry.
The UK's 'heritage' fashion brands those established prior to the Second World War, such as Burberry saw just 0.7% average turnover growth over the past year.Younger brands benefit from focus on sustainability and online retail. Boodle Hatfield says that some of the smaller, faster-growing luxury fashion businesses have benefitted from a focus on factors that attract affluent millennial consumers, such as sustainability and their online retail offering.
Sustainability is a core principle for many brands that seek to attract millennial customers, including Stella McCartney, which has never used leather, has stores decorated with shredded paper from its head office, and mannequins made from sugar cane. For younger fashion businesses with less-established supply chains, this approach is easier to apply than for heritage businesses.
Jane Ireland, Partner at Boodle Hatfield, comments: It is exciting to see a group of younger, faster-growing British luxury fashion businesses emerging. If this growth can be sustained, these businesses could change the perception that British luxury brands are a little old-fashioned and conservative.
Boodle Hatfield says that fast-growing British luxury brands could now look to reach the next stage of growth by generating greater international sales.
Slower-growing heritage brands must look upmarket for growth. Boodle Hatfield says that for many of the slower-growing heritage luxury brands, a potential next step is to move upmarket to the 'elite' luxury level, to challenge Italian and French luxury brands such as Hermès, Chanel and Bottega Veneta. This will give them access to the highest-margin markets in the luxury good sector. Marco Gobbetti, CEO of Britain's largest luxury fashion business, Burberry, highlighted the need for the brand to move upmarket to improve margins when he took over the business in 2017. Analysts currently bracket Burberry alongside more 'accessible' luxury brands like Coach and Ralph Lauren, with margins suffering as a result.
Some British heritage luxury brands are also dealing with the legacy of a heavy reliance on a traditional high street presence to generate sales. For examples, the collapse of department store chain House of Fraser resulted in a £2.1m writedown for one luxury goods business. This is in stark contrast to younger brands, which often have a more developed online sales channel, insulating them from the slowdown in high street sales.
Jane Ireland says: Some of the fast-growing young luxury businesses Stella McCartney, for example have benefitted from a commitment to sustainability that resonates strongly with millennial consumers. These brands also lean more heavily on online sales channels, making younger consumers a core demographic. The next few years will be critical as some of them attempt to transition from boutique UK luxury businesses to global brands with substantial sales especially in China and the US. For most luxury goods consumers, the British luxury offering is closely tied to tradition and heritage brands that in some cases have existed for more than 100 years. While they have very broad brand recognition, consumers do not see them as being part of the truly elite group of luxury businesses. Being able to move those brands upmarket and grow sales of higher-margin products is the key target for British heritage brands over the next five to ten years. The aim for them must be to be seen as the equal of Chanel and Hermès that ultra-luxury segment is where the most profitable growth is.