Fighting For Fashion: Profits Plummet, Legacy Fades, Innovation Beckons

Fashion brands, and particularly luxury ones, are in for a tough couple of years. Earlier this month, Royal and celebrity favourite The Vampire's Wife announced that it would cease trading with immediate effect. Even though the brand was doing well with increasing growth and sales, the turmoil in the wholesale market has had significant consequences for it.

According to McKinsey's State of Fashion report, consumer spend towards Europe fashion brands will slow to between 3 per cent and 5 per cent in 2024, compared to 10 per cent in the first half of 2023. That will increase however from between 5 per cent to 7 per cent in the second half of the year.

In the past year, Burberry has experienced a significant 40 per cent decline in profits, reflecting a broader deceleration in the demand for luxury goods. Another British luxury brand, Mulberry, has also reported a 4 per cent decline in sales, also claiming a slowdown in luxury spending in the UK.

But it doesn’t stop at the high end of fashion. Superdry took a hit in the Autumn followed by the exit of its CFO Shaun Wills. Dr. Martens' shares fell by 30 per cent to a record low after the company warned of tough times ahead in the US market and expects its US wholesale revenue to drop significantly in 2025. And Glasgow-born fashion brand Ted Baker has struggled since 2019 having gone into administration earlier this year. It is now due to close 15 stores across the UK.

Fast fashion certainly has a lot to answer for the state of the sector too. Shein and Temu are pushing out products at phenomenal speeds and banking on consumers' desires for goods quickly and cheaply. During the pandemic, the latter saw a surge in online sales and digital adoption rates, more than doubling its market share and in 2022 Shein’s value reached $100 billion as a result of demand.

Despite 26 per cent of UK consumers having shopped at the likes of Shein or Temu in the past 12 months, the continuous concern of fast fashion waste is becoming a big focus, particularly with millennials and Gen Z. They're aware of fashion's major contribution to global warming, and if any brand - be it in luxury, fast, haute couture or economy - is to survive, they need to be prepared for the emerging sustainability regulations ahead.

However, the fight for fashion isn't over. A recent statement from Burberry’s CEO Jonathan Akeroyd explains that the brand is building on the lessons learned over the past year to refine its strategy and adjust to external changes.

“While our full-year financial results underperformed our original expectations, we have made good progress refocusing our brand image, evolving our product, and strengthening distribution while delivering operational improvements,' explained Akeroyd.

Is it time for fashion brands to shake it up? In 2023, the McKinley State of Fashion report revealed that sportswear and sneakers were among the highest-ranking categories that had the greatest growth potential. So it's no surprise to see brands like Adidas thrive. Its operating profit surged to €336 million from €60 million in the prior-year period.

This was aided by a 9 per cent increase in marketing and point-of-sale expenses by the brand, rising to €657 million from €601 million. This produced key investments in the 'You Got This' campaign, a strong presence at major events like the Super Bowl, and launches of the Supernova franchise, Predator boots, and jerseys for Euro 2024 and Copa América.

Adidas CEO Bjørn Gulden stated, "The increased brand heat and the improved sell-through is supporting us in building better relationships with our retail partners and it buys us time to continue to invest in making Adidas again a better brand and company.

"We will continue to ‘over-invest’ into the product, into the brand, into sales and marketing to ensure continued growth. We will not try to optimize short term profit. We know we are not as good as we should be, but I feel that we are making the progress that we had hoped for."

Brand marketing is set to take centre stage and overtake what was the reigning champ, performance marketing. Consumers want emotional connections, so brands are in a rush to revisit their playbooks to build on long-term brand-building strategies.

Consumers’ emotional connections to brands will likely be critical as fashion marketers reorientate their playbooks to emphasise long-term brand-building strategies.

With the fashion world saying brands need to invest more, many are losing their edge. At the end of 2023, even Kering, which owns Gucci and Balenciaga, is struggling to renew the appeal for its iconic brands.

On it's recent revenue report, Kering CEO François-Henri Pinault explained that while it expects to generate a lower operating profit in the first half of this year, it is determined to invest selectively in the long-term appeal and distinctiveness of its brands.

What can fashion brands do when they're falling out of favour?

Abigail Hodges, strategist, Gravity Road 

Hype is obviously crucial, but not enough. Creating a ‘moment’ might attract attention, but it doesn't sustain relevance. The key to coolness is aligning with audience values and cultural conversations. 

For Ted Baker, embodying their values of “authentic” and “curious” in 2024 should mean resonating with an audience that sees raw content as pimple popping videos. Instead, Ted Baker's polished Instagram feels disconnected. Floral for spring? Groundbreaking.  

Brands like UGG and Diesel successfully embody these values through value-led campaigns; while UGG embodies authenticity by using TikTok to hilariously react to the ‘ugly’ rhetoric around their product, Diesel sees ‘curiosity’ as a bold exploration of new technologies like the metaverse, capturing highly coveted younger audiences by embracing cultural shifts.

Adidas leads the way in aligning with audience values through focusing on ‘tribe-building,’ maintaining relevance through values of ‘individuality’ and ‘sports passion.’ They influence cultural conversations by creating and disrupting trends, not following them. As seen in the Adidas AE 1 Ant Man campaign, which leverages Anthony Edwards’ hype to mirror sports fans' interests, while maintaining individuality with a bold surrealist creative direction. 

In an era where deeper authenticity and purpose are crucial, brands must realign messaging to meet audience needs. By empathising with their emotions and providing a clear lifestyle direction, rather than just hyping products, brands can maintain relevance and appeal, ultimately keeping their cool. 

Asad Shaykh, head of strategy, Grey London

Fashion is going through the same thing our UK High Street has been going through for the past few years. The slow death of many middle-of-the-road brands. From Strada to Debenhams, these brands served necessity more than desire. Post-Covid people got used to having a reason to leave the house. Not providing one to the consumers, these brands slowly faded into blandness through the lack of a unique pull.

Fashion is going through a similar purge. Legacy doesn’t work anymore. Distinctive does. You must stand out in the sea of same and edginess is found at the fringes of popular culture. Brands like Adidas access this by tapping into subculture communities by collaborating with them, keeping them ahead.

Even GAP did it recently with musical darlings, Jungle.

But let’s not forget… Adidas learnt it from the centuries-old couture fashion houses like Chanel, Louis Vuitton and Lanvin. Led by creative directors of their times who continuously harvested modern culture to create both hype and products living up to it. This is what has kept these juggernauts alive.

Others like Ted Baker and Dr. Marten have gotten older, just like their consumers who needed them at a particular time in their lives. And the kids, the new consumers, will always associate them with their parents, further limiting their lives.

Either stand up for something or stand out with something.

Nici Hofer, founder and artistic Director, NCA

A new visual chapter for a fashion brand is crucial for staying relevant and connecting with a new generation of consumers.

The move from outdated to inspiring requires change and an appetite for reinvention - in both the online and offline world.

I believe in evolution instead of revolution: a fresh interpretation of a brand's visual expression. It’s a careful balancing act, as removing all nostalgia can quickly feel inauthentic and leave the consumer without anything to connect with. An interesting example is the reintroduction of Burberry’s Prorsum knight logo, an archive-inspired logo setting the tone for a new era. Fittingly, Prorsum being Latin for ‘forward’, illustrates that celebrating the brand's heritage can be the revitalising element the brand needs.

Gémina Gil Flores, creative, McCann London

‘We gave you an Original. You gave us a thousand back.’ This great line by Adidas Originals accompanying its new global brand platform brilliantly outlines its success: it is owned by culture.

Since its most original collab with Run DMC almost 40 years ago, it is what’s happening inside culture that has informed what direction the brand takes, rather than trying to force itself into it the other way round.

Today more than ever, it seems that success for fashion brands comes through generating cultural relevance.

For the ones falling out of style, increasing cultural relevance starts with social listening and an acknowledgement of the brand's current perception amongst culture. With a 15 per cent increase in revenue between 2021 and 2022, Desigual shows us that turning around brand perception is key to achieving growth. Widely commented on TikTok under #DesigualGlowUp, the brand’s unconventional strategy to acknowledge via influencer partnerships its own ‘glow up’ successfully resonated with audiences by creating a moment online.

In a ‘social media era’, finding ways to create social moments is vital, but shouldn’t be at the risk of damaging the brand’s reputation as we saw last year with the controversy around Balenciaga. Provocation had been at the heart of the brand's strategy for some time, and although it contributed to its success at the start, it meant that the brand came under fire.

A reminder that authenticity is also crucial to becoming more fashionable. The ones in decline must not only find new ways to tap into culture but also positively contribute to it. For fashion brands that might mean increasing environmental commitments, as consciousness amongst the younger generation awakens and the war against fast fashion seems to be gaining in popularity.