Ann Demeulemeester to Exit House

[Shucks]

Perhaps in a sane market, but as Geoffrey clearly argues, in a bubble, or irrational market, ratios go out the window. Google, Twitter or LinkedIn don't trade on earnings multiples.

no, but valuation of tech 'bubble' firms isn't done on turnover either, but on expected future earnings and on goodwill / brand equity.

[keilani]

This is depressing, but I'm eager to see whats to come.

[mrbeuys]

no, but valuation of tech 'bubble' firms isn't done on turnover either, but on expected future earnings and on goodwill / brand equity.

Precisely. No one will value a company on turnover. The only thing that gets silly is the multiplier.

[snafu]

Geoffrey has known most of these designers he referenced personally and has been in the game for decades, he also has business/economics degree from (Boston if I'm not mistaken) he far more than just an artisan. He has ran trades shows while managed his own label, delt with licence agreements etc etc.

I wouldn't compare fashion to other business, its very much in its own unique field. Companies are valued on unique aniti laws of marketing, a brand may be making a huge profit for a couple of years but will actually be valued low because it does not have the prestige or the longevity to last in the market. A brand might be doing terribly but still have a fair valuation because it has the history that cannot be bought or manufactured.

Brand identity vs Brand Equity are things to consider, think about why LVMH buy these companies that are not doing terribly great today but they have history in a market.

i really think i have explained this terribly (sorry i'm cooking currently) but i have no doubt Geoffrey knows this all so well.

Wait for his reply, but i really think the fashion/luxury business is unlike any other.

[Fuuma]

no, but valuation of tech 'bubble' firms isn't done on turnover either, but on expected future earnings and on goodwill / brand equity.

Jewish joke:
Eli calls his friend Amos and says "hey dude I got an excellent deal, a truck full of pants, only 2$/unit", Amos jumps on it and calls his friend Yitzhak and says "hey dude I got an excellent deal, a truck full of pants, only 5$/unit", Yitzhak seals the deal and calls his friend Benyamin and says "hey dude I got an excellent deal, a truck full of pants, only 10$/unit", Benyamin acquires said truck and so it goes in the community, the price rising with every transaction and everyone making a profit. In the end Noam calls his goy friend Patrick and says "hey dude I got an excellent deal, a truck full of pants, only 40$/unit". Patrick pays, goes to inspect his truck and calls back his friend Noam, totally panicked: "Noam, you sold me a truck full of one-legged pants, I can't do shit with this!!!". Noam answers him "Don't be silly, the pants themselves don't matter, the fully loaded truck exists to be bought and sold, bought and sold, bought and sold etc.".

[Shucks]

Jewish joke

bit overly simplistic analogy, no? and i really do hope ur jewish...

[Fuuma]

bit overly simplistic analogy, no? and i really do hope ur jewish...

These companies have no value from a non-capitalistic analysis, all they serve is to provide a captive audience for targeted ads and information gathering for big data, furthering our alienation. The fact that we think it is worth a high price is an indictment of our way of life. Their only value reside in the way capitalists think value is determined through exchange value and nothing else.

[Geoffrey B. Small]

Dear Friends, getting back to you on my valuation points.... I was not referring to the smaller, younger designer type Kirkwood or Andersen type of deals as those acquisitions are far more riskier and I am sure they got nothing like that in their deals. I am talking about the real deals like Loro Piana which sold 80 percent of its family shares to LVMH for 2 billion euros, Brioni, Bottega Veneta and again, Cucinelli which is now valued on the stock exchange at over 1 billion with sales of only 200 million a year. Brioni was purchased by Kering for over 350 million euros and its annual sales volume was 70 million. People at LVMH and other financial firms involved in the luxury sector have been quoted as using the 5 times multiple of sales recently as the current rule of thumb, just read all those BoF articles they are pumping out every day in their emails.

Yes, it is insane and frankly, fuuma's got it about right. It has nothing to do with the actual value of the firm's ability to generate profits, let alone a decent product, and everything about what a buyer can turn around and sell it for asap. For the old fashioned financial types, you can still look at it from an earnings multiple view... basically Brioni was bought at over 40 times earnings, Loro Piana at around 30 plus. Peter Lynch would turn over in his grave (figuratively speaking-he is retired but not dead) and of course, I don't think Warren Buffet would go near it with a ten-foot pole.

As for smaller deals, Kirkwood and Andersen ain't no Ann Demeulemeester, and I believe they gave up probably everything for a pittance and a prayer or two, she however, would represent the possibilty of a decent franchise and revenue stream for the right purchaser and could get the fiver of sales, especially from a desperate buyer trying to keep up with the Arnaults, Pinaults and Ortegas of the world. How do you say "red" in Italian?

For any of you who know about the Silicon valley and Route 128 Massachussetts high-tech experiences of the 80's, the 90's dot.com, and the current online retailer financial craze with 1st, 2nd, and 3rd rounds of capital raising and still not even hitting breakevens, this scam and madness is really nothing new. The vulture capitalists... oops I mean venture capitalists have never gone away.

One number just to keep in mind for example, LVMH now owns over 60 fashion brands. Sixty. So, if you want to support independence in creativity, expression and fashion, think carefully where you put your money. The designer you back, may be more interested in working for LVMH someday, than for you, and his or her own vision. And very soon, many smart folks are projecting a lot of crashing coming up soon. We are back in the financial community bubble right now, stocks are up and suckers are to be played. But it won't last forever. So in the meantime, the best are focusing on real value, old-fashioned style--both in their designs and their companies. The waters are getting rough, and have already pulled down some good boats. There is a big storm ahead to be weathered.

[Shucks]

Dear Friends, getting back to you on my valuation points.... I was not referring to the smaller, younger designer type Kirkwood or Andersen type of deals as those acquisitions are far more riskier and I am sure they got nothing like that in their deals. I am talking about the real deals like Loro Piana which sold 80 percent of its family shares to LVMH for 2 billion euros, Brioni, Bottega Veneta and again, Cucinelli which is now valued on the stock exchange at over 1 billion with sales of only 200 million a year. Brioni was purchased by Kering for over 350 million euros and its annual sales volume was 70 million. People at LVMH and other financial firms involved in the luxury sector have been quoted as using the 5 times multiple of sales recently as the current rule of thumb, just read all those BoF articles they are pumping out every day in their emails.

thanks for your extensive reply, but i'd be very grateful if you could say where exactly these quotes can be found.

These companies have no value from a non-capitalistic analysis, all they serve is to provide a captive audience for targeted ads and information gathering for big data, furthering our alienation. The fact that we think it is worth a high price is an indictment of our way of life. Their only value reside in the way capitalists think value is determined through exchange value and nothing else.

not really. for example there's also their ability to sell you your margiela sneakers at a profit - aka 'earnings'.

[Geoffrey B. Small]

Shucks, really sorry, I would love to cite you some chapter and verse, but I have no more time available here... I have my own very very busy thing to run, and a mountain of work to deal with. No disrespect intended. Hope you understand. You do not have to believe me... for me, it is no big deal. I just post sometimes here to let people know what I know, see, and hear from the inside. You agree you disagree, it's not really my issue or problem. There is no agenda here. If you look carefully around you though, you can see what is going on. On your own, I suggest you just keep an eye on BoF,Bloomberg, Financial Times, WSJ, WWD etc articles on acquisitions on the luxury and designer sector. There is a boom going on in M&A deals and they are extremely overvalued. If you are able find a deal in this sector in the last 2-3 years that was valued strictly on earnings multiples, then I will gladly send you my white flag. OK? Like I said, it's not a big deal to win or lose some argument here on this. In the meantime though, I gotta go to work--lots of clients still waiting for deliveries. Cheers, G

[Shucks]

no problem. am already following m&a's in this industry. i am not saying earnings are the sole or even best basis for analysis - most valuations are done with a triangulation approach using several of many available valuation tools.

so instead, the onus is on you who claim that simple multiples on turnover are used for determining financial viability of deals, and you so far haven't shown where this has actually been the case.

but of course there are other things one can do with one's time, so i will stop derailing the thread.

[Faust]

Yes, can we please go back to lamenting Ann's departure?

[Peasant]

Damn.. what's next? Harnden e-commerce? Selfies of Carol?

[interest1]

Damn.. what's next? Harnden e-commerce? Selfies of Carol?

One with that ridiculous leather baby bump and the horsetail, please.

I've left my thoughts on Ann's departure in her thread. This one will die out, that one will live on.

[upsilonkng]

no problem. am already following m&a's in this industry. i am not saying earnings are the sole or even best basis for analysis - most valuations are done with a triangulation approach using several of many available valuation tools.

so instead, the onus is on you who claim that simple multiples on turnover are used for determining financial viability of deals, and you so far haven't shown where this has actually been the case.

but of course there are other things one can do with one's time, so i will stop derailing the thread.

hey dude heard of the los angeles dodgers? the team was knee deep in dept as in losing money on a year to year basis and was recently sold to Magic Johnson and a large group of investors for 1.4 Billion dollars(rumored as high as 2 billion), that included cable rights and dodger stadium and the parking lot etc.. but this is a team/company that lost money probably for the last 10 years w/ the owner taking money from the dodgers to live his awesome life as well and as poorly run'd as that team was it still fetched what is an all time record for a baseball team maybe an american franchise, u know why? it has nothing to do w/ current earnings and has everything to do w/ potential earnings, so 5 times any company's earnings is really not even something to blink about, when FB went public did it make 5 times it's earnings? no i think was closer to 32 times it's earnings, when Krispy Creme went public did it earn 5 times it's earnings... not really more like 70 times it's earnings.

Not sure if u follow the this thing called the stock market but it's all perception and recognition and has very little to do w/ earnings. as a dude that worked in that field for a year I saw that multiple times, even when things came in over the estimate they fell and when some companys came in well under... (amazon for example) the stock rose dramatically. There's this thing called stupidity and people w/ money are pretty much stuck w/ it as well...