Lanvin Group’s Roller-coaster Wall Street Introduction
Shares of the luxury group shot up and then shot down during its first day on Wall Street.
The Lanvin Group jumped onto the Wall Street roller coaster on Thursday — shooting up and then plunging down in its first day of trading — giving chairman and chief executive officer Joann Cheng a higher profile and a fresh start as she pushes growth at the luxury house.
Lanvin completed its merger with the Primavera Capital Acquisition Corp. SPAC, putting the company onto the New York Stock Exchange just as investors in general worried over disappointing retail sales and wondered just how high the Federal Reserve will ratchet up interest rates.
Shortly after the company officially changed its name and started trading under the “LANV” ticker symbol, the stock shot up more than 130 percent to $22.81. But the run-up was short-lived and the stock reversed course dramatically, falling by as much as 53 percent. Lanvin shares closed down 25.6 percent to $7.37 — a sign of the mixed-up times on Wall Street.
It was a tough day for Lanvin to get its start. The Dow Jones Industrial Average fell 2.3 percent, or 764.13, to 33,202.22.
In an interview, conducted shortly after Cheng rang the exchange’s famous opening bell and while the stock was still rushing higher, the executive told WWD the company was getting a new start and had lots of growth potential.
“We raised more than $150 million in fresh cash,” she said. “So it’s enough for our operations, for the current brands to move towards profitability.”
In addition to Lanvin, the group owns Wolford, Sergio Rossi, St. John Knits and Caruso, and has plans to add more stores and product categories while also sharpening its digital chops.
A major shareholder is also converting a loan into equity, leaving the company debt-free.
“It’s a new start for us for a new journey,” Cheng said. “It gives us very good momentum even though we’re in a very tough macro market.”
The move onto Wall Street gives the Shanghai-based Lanvin more exposure in the U.S. and a new kind of currency — its own shares — as it seeks to bring in new talent, buy additional brands and expand.
Outside of St. John’s Knits, which has a big U.S. base, the CEO said the U.S. represents just 15 percent of the company’s revenues, while China accounts for only 10 percent.
“You can see that in the two largest luxury consumption countries, our brands’ penetration rate is relatively low,” Cheng said. “This is a growth opportunity for us.”
Lanvin, which logged growth of 73 percent in the first half to sales of 202 million euros, is thinking bigger. First, to get annual revenues into the 10-digit range, and then keep going.
“Our dream of the future is unlimited,” Cheng said, laying out a very straightforward path to achieve those dreams. “Everything depends on our day-to-day operations, how we drive the growth of the current brands. Then get the brands to profitability, pull the cash, reinvest into the brands or new brands. Currently there’s so much low-hanging fruit because our retail footprint is quite limited. So we shouldn’t stop opening new stores to get more touch points with our customers. But the digital channel is, in parallel, another key focus.”
As the direct-to-consumer business grows, she said Lanvin would be less reliant on wholesale.
That is in keeping with the general trend in luxury — a sector dominated by giants like LVMH Moët Hennessy Louis Vuitton and Kering that have built real scale by harnessing the power of heritage brands by giving them a high-luxury sheen and updating them for new generations.
Cheng, with her own portfolio of heritage luxury brands, is covering some of the same territory and keeping an eye on their approach.
“There are large groups with mature brands, they are also being very innovative,” she said. “I think I should learn from them. There is a reason why they’re doing well, right? So, for example, every brand is driven by social media, focused on digital channels. That is the innovative way.”
Cheng wants to very much “respect the DNA, respect the heritage” of the company’s brands and serve long-standing loyal customers while also bringing in younger shoppers.
At Lanvin, for instance, that means maintaining the brand’s “Parisian elegance” with tailored evening pieces and also applying some of the components of that elegance to more casual pieces.
It’s a trick Cheng wants to pull off at other brands as well.
But while public companies with a portfolio approach can fall into the trap of promising big growth and relying on acquisitions to fuel the gains — inevitably cutting a bunch of bad deals in the process — Cheng has a measured approach.
“We are building up a pipeline for future acquisitions, but honestly we’re not in a rush,” she said. “Lanvin Group is not a PE fund or investment institution. We just want to be a fashion group. Eighty [or] 90 percent of the growth is coming from organic growth of the current brands and only 10 percent maybe coming from future acquisitions.”
As Cheng looks at dealmaking, she’ll be looking to diversify the portfolio to avoid relying too much on a single product category or just one kind of customer.
While much of the plan comes straight out of the standard luxury playbook, Cheng is giving it all her spin and not charging out to take on the giants.
“We are young,” she said of the company. “We are five years old, so I never compete with a large giant group. We just want to be ourselves. Even though we have all these beautiful heritage brands with more than 50 years … more than 100 years, we are a start-up. We should have a mentality of being a start-up company. That means being innovative and sometimes being disruptive.”
Now, that disruption — Lanvin style — will come under the glare of Wall Street.