Chapter 1: What is the main topic discussed in this episode?
You're listening to a Sharesies podcast. Luxury goods, when I looked at the market last week, you know, the likes of LV, MH, Kering, Hermes, they're all down like four, five, six, seven, eight percent. It's a market where people are making some hard choices. So how is that hitting at the moment?
Chapter 2: What factors are contributing to the slowdown in luxury sales?
Yeah.
So a couple of things in there. We are a discretionary category by all means. It is a choice more than a necessity in a lot of ways. You look at what's happening in the macro world of luxury right now, a lot of that's just being driven by the Middle East.
And so a lot of those numbers that you're quoting are largely due to just the market in Dubai, mainly kind of drying up and of course, discretionary spending. And airports around the world, I imagine being a little lighter.
Exactly right.
Exactly right. So if you kind of look through some of those like really pointed kind of components of the numbers, luxury is still a very excellent and strong category when you get it right. You bring that back to us in Sir Michael's DNA and the foundation that he laid for us. He believed that everybody deserved to have nice jewelry, to have access to an incredible shopping experience, right?
He took stuff out of the good room and made it accessible to everybody. Making modern luxury accessible is exactly what we're focused on. And if we can get that right, we win.
Gold prices, I mean, it's through the roof. Does that squeeze margins? Are you able to pass some of that through? How does that hit? They move a lot.
You're not wrong.
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Chapter 3: How is the Middle East influencing the luxury market?
Silver's right along there with gold, unfortunately. But what I would say is this is a business that over time has always managed through that. This is not the first year that gold's been up. It's crazy up, though. I mean, it's double in the space. It was at 4,800 last I checked, but it was 5,500 a couple weeks ago. So, like, weirdly, it's down. But you're not wrong, right?
Long term, it's gone up quite a bit. And the business has always managed somewhere in that 60% to 62% gross margin rate along the way. And so I think what we see in that is that, yes, gold is increasing in value. People see that value. They're willing to pay for that value.
And you, I mean, just so people can understand, are you sourcing it from suppliers? Are you having it contract manufactured? Are you making it yourselves?
Yeah, so we've made a couple changes to the brand over the years. And Daniel Bracken was a huge part of kind of leading a lot of this in that we are now a fully private label brand. So we design and kind of make everything ourselves. Our headquarters is in Brisbane. We have a manufacturing facility in the basement of that building.
If you were to stack rank our manufacturing partners, we'd be somewhere in the top five for ourselves. The remainder, we really do partner with the best of the best. And so there are certain categories where you actually want to make sure, for example, chains come from Italy. You want to make sure that you're getting your diamonds from India because that's where most diamonds are cut and polished.
There are other products that make a lot of sense to get from places like Turkey or places like Thailand. It just depends on the craftsmanship you're really trying to source and then the design and acumen that we're trying to layer on top of it. But everything we do is designed by us.
Throwing that all together then, you've got a bit of control over your supply, you're trying to make luxury affordable, accessible. Have you really had to, I suppose, rethink some of the pricing, some of the promotional stuff, squeeze things down a little bit to meet this market?
Yeah, you know, and it's been changing, as you can imagine, quite rapidly, right? There's probably two big changes that we've made since I've joined, again, in the last seven months. The first is we no longer feel the need to have the same pricing strategy everywhere around the world. We operate in three markets. Australia is our biggest. Canada is our second biggest and our fastest growing.
And then obviously here in New Zealand, we have about 15% of the brand. Um, all of those markets have different consumers. They have different contexts. They have different tax structures. They have different relationships with jewelry. Um, so we are allowing ourselves to provide similar product, but at differentiated price points when it makes sense.
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Chapter 4: What strategies are brands using to adapt to rising gold prices?
I'm really happy with the footprint we have. I think if it wasn't a profitable footprint, I'd feel differently. But it's a profitable footprint. There's probably actually one or two places in New Zealand I wish we were.
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