TheChek News Flow

Most tightening cycles historically ended in recessions. Whether this shows the power or powerlessness of central banks, it isn’t good news.

“Soft landings” are easier to find in the legendarium of central banks than in historical reality.

It was a big week for interest rates. The Federal Reserve’s supersize rise was followed by the Swiss National Bank’s move to increase borrowing costs for the first time since 2007. Both went further than was expected a week ago. The odd one out was the Bank of England, which nudged rates up less than expected after forecasting a 0.3% contraction in British output in the second quarter.

Consumer sentiment indicators are plummeting across most developed countries. After data showed U.S. inflation hitting 8.6% in May, expectations of inflation a few years down the road actually dipped further. Stocks have plunged into a bear market, and investors have appeared to give up on the notion of a more aggressive Fed bringing down inflation without damaging growth—the famous “soft landing.”

They have an empirical point: This is, being generous, a rare event.

Of the Fed’s previous 12 big tightening cycles since the 1950s, nine ended with a recession, official figures show. Among the exceptions, rates rose consistently between 1961 and 1966 without any downturn, but inflation eased only temporarily and recession eventually struck in 1970. Perhaps the most successful soft landing was in 1983 and 1984, though the economy had just rebounded from two recessions. And then there is the 1994 to 1995 cycle, where there was no surge in inflation at all: Alan Greenspan’s Fed acted for no apparent reason other than to validate the bond market’s forecasts.

The BOE has a better record, but roughly half of its rate-increase campaigns since the 1950s still ended with a U.K. recession.

Investors struggle to measure this risk because central bankers don’t seem to have a consistent theory on how they are supposed to micromanage inflation. Modern views are more conducive to the optimistic idea that the economy can be slowed in a “nominal” sense without affecting employment or inflation-adjusted wages. They often focus on how steering the psychology of inflation expectations can restrain price setting in the present. But this has weak backing in data.

Indeed, officials often appear to fall back on 1960s-style explanations, which see cooling the labor market as a necessary step. Fed Chairman Jerome Powell, for example, recently described it as tight to “an unhealthy level,” whereas BOE Gov. Andrew Bailey emphasized the need for pay restraint.

If monetary policy does work, then something needs to give—be it weaker credit growth, lower asset prices or a gloomier business climate. That this can happen without affecting anyone’s “real” material conditions is wishful textbook thinking.

To be sure, the power of interest rates over unemployment shouldn’t be overestimated either. Yes, there is a historical coincidence between monetary and business cycles, but this is only natural: Officials tend to raise rates as economies flourish, only to stop when a downturn ensues. The mid-1990s experience is a rare case of monetary tightening without a tightening economy, and the impact was limited.

The overall impression is that extreme rate moves like those in the 1970s and 1980s are likely required to have a meaningful effect. Even if central bankers did initially manage to do just the right amount of tweaking, this would only fix the small component of today’s inflation that isn’t commodity-driven. Headline numbers would remain high, creating an irresistible pressure for officials to keep tightening.

Investors had better hope that a soft landing happens on its own, because central banks’ chances of engineering one don’t look good.

Virtual fashion try-ons are coming to Cannes — and Snapchat — with runway looks from Balenciaga, Gucci, Stella McCartney, Dior and more.

Snap is about to unveil a wave of augmented reality lenses at Cannes Lions that casts some of the latest high fashion runway looks in virtual form, the company told WWD in a new exclusive.

The exhibition, titled ”Redefining the Body,” will feature a new virtual fashion try-on experience with select pieces from Balenciaga, Dior, Gucci, Kenneth Ize, Stella McCartney, Richard Quinn, Stella McCartney and Versace. The tech company, in a collaboration with Vogue, worked directly with the design houses on the lenses, and plans to make them available to visitors of the Centre d’art La Malmaison, as well as Snapchatters around the globe. The experience will be accessible in mobile app through the Cannes Map Marker in the Snap Map or Dress Up tab in Lens Explorer.

The project is “a true creative collaboration,” Betsy Kenny Lack, Snap’s vice president of global brand strategy, told WWD, with the teams working to translate the physical garments into digital wearables. The effort puts the work of top designers front and center — to “push the boundaries of fashion’s changing form,” added Vanessa Kingori, British Vogue’s chief business officer — but for Snap, the exhibit was also meant to showcase something else: its AR tech. The company wanted to show “how expressive and immersive [it] can be for the fashion industry,” explained Lack.

Fashion and technology often come together in ways that can vary greatly, from gimmicky to artistic. “Redefining” is clearly shooting for the higher end of the spectrum, framing itself as an exploration of how technology transforms peoples’ experience of culture, creativity and fashion.

For the physical exhibit, all six of the rooms at La Malmaison will host custom-designed environments to highlight each designer’s display, with the physical pieces on view along with the AR experience. The lenses will include the virtual fashion, in addition to an AR room experience, allowing the work to extend beyond Cannes to Snapchat users anywhere. In total, seven try-on and in-room experiences will be available.

The exhibit starts Monday and will run until June 24.

• The French maison’s exhibition room is swathed in opaque darkness. Dense black curtains line the space, which houses two spotlit looks from Balenciaga’s 50th Couture Collection, and nods to the design of a historic dressing salon.
• The pieces are part of Balenciaga’s first Couture collection since 1968, the year the maison’s founder retired.
• Attendees can scan the room’s Snapcode to instigate different perspectives of the monochromatic environment.
• There will also be a custom Balenciaga AR experience, with try-on Lenses available to wear the shocking-pink opera coat showcased in the exhibition.

• In the courtyard of the Centre d’Art La Malmaison, a three-metre-high statue of a model wearing the revolutionary Dior New Look of 1947 welcomes guests to “Redefining the Body.”
• Standing on a five-pointed star – a symbol of divine providence that inspired the superstitious founding couturier to open his house in 1946 – she holds the iconic Lady Dior bag, an emblem of elegance for nearly three decades.
• The Snapchat Snapcode reveals Dior petites mains skillfully hand-sewing details on this statue as she steps off her star-edged plinth, unifying time-honed craftsmanship with digital technology.

• In its exhibition room, the Florentine house replicates the white grid and illusionistic funhouse mirror set design of the Exquisite Gucci runway show.
• On podiums, mannequins display looks from this masculinity-exploring collection, which imagined the suit as a sartorial prompt.
• Using the Snapchat Lens, Snapchatters can use their phone screen to warp its dimensions, unearthing colorful portals in a palette that reflects the atmosphere of the Exquisite Gucci show.
• Snapchatters will be able to wear Gucci’s tailoring, faux-fur coat, aviator-style sunglasses and beret, revealed in moving tessellated grids.

• Kenneth Ize – whose 2013-founded brand champions West African craft – has collaborated with Nigerian multimedia artist Jelili Atiku on an exhibition space featuring vivid reproductions of his paintings and public performance pieces.
• Within this exhibition room, colorful wall hangings and upholstery are created using Aso oke – a handwoven Nigerian fabric pivotal to Ize’s designs.
• Mannequins display vivid one-off gowns, which reflect Ize’s commitment to craft.
• Through the Snapchat AR experience, viewers can experience Ize’s West African story, brought to life through sound, and wear his tactile creations, which will ripple and unfurl before their eyes.

• A geometric grid of florals and polka dots, the exhibition room of British designer and this year’s BFC / Vogue Designer Fashion Fund winner Richard Quinn is swathed in the prints idiosyncratic of his 2016-founded brand.
• Lenses will reveal a magical garden, where blue roses magnify through a mist, growing before your eyes and giving Snapchatters the opportunity to watch as Quinn’s opera coat and wide-brimmed balaclava appear on their bodies in an interactive swirl of sparkle.

• The 2001-founded British house’s exhibition room is transformed into a grotto of giant colorful mushrooms, where mannequins display cascading ruffled dresses from the brand’s spring/summer 2010 collection.
• The space is rooted in Stella McCartney’s spring/summer 2022 collection and campaign theme, “Fungi Are The Future Of Fashion And Our Planet,” with the designer having been inspired by these incredible organisms’ potential for offering more sustainable solutions from medicine to material innovation.
• The Big Mushroom will transform to showcase digital bees pollinating mushroom spores using Scan technology, and the try-on AR feature will unveil a headdress garlanded with mushrooms alongside a gown growing from fantastic fungi.

• Gilded tiles, Baroque columns, and Versace’s Medusa capture the Italian brand’s feeling of modern opulence within its exhibition room.
• On display are bondage-inspired pieces from the brand’s now legendary autumn/winter 1992 collection, ‘Miss S&M’.
• Snapchat brings the experience to life, letting Snapchatters wear buckled looks which morph into writhing snakes as the mythological Medusa is brought to life, and transforms into the viewer themself.

By 2026, Ferrari aims to double its revenues in its lifestyle division through luxury goods, the brand’s experiential parks and museums and collectibles.

FIORANO, Italy — The appeal of Made in Italy is strong — and Ferrari plans to capitalize on that.

The intention to further build the brand’s luxury lifestyle offering was clear during Ferrari’s Capital Markets Day on Thursday, on the eve of Milan Men’s Fashion Week.

The event outlined several initiatives, from developing electric cars to looking into hydrogen fuel and reaching carbon neutrality by 2030, but building a luxury lifestyle brand was also addressed by chairman John Elkann and Ferrari’s chief executive officer Benedetto Vigna.

“Ferrari is at its core a luxury company and the most distinctive and innovative luxury brand, and we see huge opportunities lying ahead in further developing its lifestyle,” said Elkann, as he underscored the importance of “never compromising to be the unmatched expression of Italian excellence.”

To be sure, Vigna said that by 2026, Ferrari aims to double revenues in the lifestyle division through luxury goods, the brand’s experiential parks and museums, and collectibles, compared with 2019, while not providing a breakdown.

“We only touched the surface, and our lifestyle pillars can be used to delight customers in different ways and in different moments. We have a strong legitimacy,” Vigna enthused. “Either you are fully committed or you are not — and we are. We are serving only a fraction of the $300 billion market. This is a unique opportunity to make the brand relevant for a wider audience. Focus is key and we must address this with the right partners and talents to make it happen. It’s a new world.”

During his speech, the executive gave a shoutout to former Giorgio Armani and Pal Zileri designer Rocco Iannone, who was appointed creative director of Ferrari’s new luxury apparel and accessories collections in 2019, and to the former Pandora and Bulgari executive Carla Liuni, who was named chief brand officer earlier this week, as reported.

In an interview on the sidelines of the event, asked about the importance of fashion to convey this lifestyle message, Vigna said it can reach “a very large public and it affords expansive visibility.”

Ferrari has been seeing a rejuvenation of its loyal customer base in the 2018 to 2022 period, and a 60 percent growth in new collectors, with a 25 percent gain in the average number of cars. This is seen as a potential new customer pool for the brand’s luxury fashion, too, as are key regions such as Asia. “Women are also increasingly more interested, they become our ambassadors and help influence the purchases,” Vigna said.

The global appetite for luxury is growing, he said, but he insisted that Ferrari produces “unique cars and unique products,” and he is adapting founder Enzo Ferrari’s motto of delivering “one car less than the market demands” to the lifestyle division to maintain exclusivity.

Ferrari has been repositioning its fashion brand, streamlining its distribution, opening two stores in the U.S. and cutting back on its licenses. It is also further emphasizing its theme parks, such as the Ferrari World in Abu Dhabi, and its storied and recently renovated restaurant “Il Cavallino” — named after the symbol of the brand’s prancing horse and opened by the founder in 1950.

Vigna realizes the core Ferrari fans who perhaps merely want a cap with the brand’s logo should not be neglected. “We must be inclusive and exclusive and make sure that the offer is consistent with the brand.”

He pointed to the importance, “in any business, of creativity, resources, execution and focus,” and waved away the concept of brand differentiation. “What is that? It’s a dead concept. Ferrari is lifestyle.”

This consistency was also emphasized by Iannone. “After streamlining our licenses now it’s time to build with a strategic focus and consistency in creativity and design,” he said in a separate interview with Liuni. “But we all know it’s a long journey that requires time and patience.”

Liuni touted the importance of a full-fledged Ferrari fashion collection, saying that “fashion has a fundamental role, it acts as an amplifier, it allows to speak of creativity, identity and values in a way that no other sector allows.”

She admitted this was “a very ambitious project, although there is a side of glamour that helps us in this project.” In accepting the job, she was attracted by “the power of the brand in the collective imagination. I think there is a culture behind, that was never really fully explained. A luxury lifestyle brand can’t be identified with a single product and I am here to help in the orchestration, planning synergies and to communicate in a consistent way. I am obsessed by consistency of thought, style and discipline. This is as important as creativity and the excellence of execution.”

Ferrari has staged two fashion shows, the first last year at the company’s headquarters in Maranello, followed by one in Milan during fashion week in February. Iannone, who has said the collections will be regularly presented twice a year in Milan, confirmed he his working on his next show slated for September. Again, it will be coed, as he believes this is the format best suited for his design message.

Iannone and Liuni appeared to already be getting along like a house on fire, and the designer sees her arrival as “offering impeccable governance. She will help to discipline” the existing merchandising world with that of the luxury fashion brand and image that he’s been tasked to develop. “She excels in building a brand and creating a narrative of a universe.”

“Ferrari is wow,” Liuni said. “It represents Made in Italy like no other brand also because of its values, creativity, technology, innovation and design.”

Ferrari revenues are projected to grow to 6.7 billion euros by 2026, from the expected 4.8 billion euros in 2022, with earnings before interest, taxes, depreciation and amortization reaching between 2.5 billion and 2.7 billion euros, and a margin of between 38 and 40 percent. In the 2018 to2022 period, Ferrari’s accumulated industrial free cash flow is expected to reach 2.46 billion euros. In the 2022 to 2026 period, this is forecast to reach between 4.6 billion and 4.9 billion euros. Asked about potential M&As, Vigna said the company is strengthening its ties with its suppliers but is currently not looking at acquisitions.

This week, Zalando, one of Europe’s leading fashion e-commerce players, acquired a majority stake in Highsnobiety, the streetwear blog that has established itself as an agency of cool through content, commerce and brand consulting. The financial terms of the deal were not disclosed, though it’s possible that Highsnobiety was valued between $180 million and $250 million.

It’s obvious why Highsnobiety wanted to sell: Zalando offered an exit after more than 15 years, as well as an opportunity to more robustly build out its fast-growing commerce business.

The real question is why Zalando wanted to buy Highsnobiety. It’s clearly not about the money, at least not directly: Zalando generated more than $12 billion in sales in 2021, and neither Highsnobiety’s revenue nor the cost to operate it will have much of an impact on the retailer’s balance sheet. But the value Highsnobiety could generate is significant. Zalando, a mass-market apparel player, has been working to gain a foothold in high fashion. Highsnobiety will essentially serve as an in-house consultancy that can help introduce the retailer to the younger luxury customers it wants to reach. (Over the past few years, Highsnobiety’s creative agency, which advises brands and retailers on content, has become a larger part of the overall business and is growing, according to Highsnobiety co-founder and chief executive David Fischer.)

The fact that Zalando and Highsnobiety are both based in Berlin and run with a German sensibility is another plus.

The deal also reflects a prevailing trend in M&A in the fashion industry, with a spate of established firms snapping up businesses that cater to younger and/or savvier consumers. Just a few weeks ago, Spanish beauty conglomerate Puig bought Byredo in an effort to reach the growing demand for niche fragrance over designer. Management firm Marquee Brands, which owns names like Martha Stewart and Ben Sherman, recently acquired the polarising streetwear label Anti-Social Social Club with an aim to better understand the Gen-Z customer. And a few months back, Farfetch scooped up Los Angeles-based high-end beauty purveyor Violet Grey in an effort to establish authority as it makes a major push into the category.

The reality, however, is that 70 to 90 percent of mergers and acquisitions don’t deliver value, according to Harvard Business Review, because of the way the two companies are integrated after the merger. HBR didn’t single out deals like Zalando’s, where cultural cachet rather than pure revenue and profits was the driving rationale, but the failure rate for these sorts of deals may be even higher.

Oftentimes, the culture of the more innovative business is lost, and the cool factor dissolves. A classic case is Banana Republic. When it was acquired by Gap in 1983, it was a chic outfitter of safari clothes, subsequently transformed into a wear-to-work brand designed to compete with Ann Taylor. But despite some success in the 1990s and more recently, its identity remains blurry and performance is inconsistent. The American beauty group Estée Lauder, which found great success with its purchase of M.A.C., has struggled more frequently in recent years with acquisitions. For instance, five years after buying Becca Cosmetics in 2016, it decided not to resell it, but to simply shut it down, citing poor performance.

It is quite possible for a brand to lose its magic once it’s absorbed by a larger entity, and Highsnobiety fans took to social media to express their concerns. “What a bummer,” said @marcjanssenberlin, a personal shopper. “Puh, I don’t know if this is a good deal for @highsnobiety !?! When they can/will do their [independent] business in the future, then okay. If not, then I would call it a fail…” added @sven_moye.

On the other hand, strong brand management can result in success. VF Corp. has managed to build out The North Face and Vans without, for the most part, damaging their reputations with their core customer bases. Perhaps that’s why Supreme, the ultimate “cool” brand, chose VF as its partner when it “sold out” at a $2.1 billion valuation. Thus far, the queues in front of its Lower Manhattan store remain just as long.

There are signs that Highsnobiety will maintain quite a bit of independence from Zalando: not only editorially, but physically. (They are not merging offices.) In the best-case scenario, Highsnobiety will help to polish up Zalando’s brand, while growing the Highsnobiety business and maintaining some of the magic that made it so special in the first place.

Users will be able to buy designs to use with their Meta avatars on Instagram, Facebook and Messenger.

Meta is launching an online store to sell fashion for its virtual avatars, and industry heavyweights Balenciaga, Prada and Thom Browne will be the first brands to join.

In a live announcement on Instagram Friday, founder and chief executive Mark Zuckerberg joined Eva Chen, Meta’s vice president of fashion and shopping partnerships, to share the news and offer a glimpse of what Meta’s new avatar fashion will look like. Chen held up images to the camera showing Zuckerberg’s cartoonish Meta avatar in different looks, including a Balenciaga motorcycle suit, a white anorak and shorts from Prada’s Linea Rossa line and one of Thom Browne’s signature grey suits.

The virtual designs will be available for use on Instagram, Facebook and Messenger. Meta plans to expand them to its virtual-reality platform and to introduce additional brands soon. The Avatar Store will begin rolling out next week in the US, Canada, Mexico and Thailand, Meta said in a press release.

Meta has allowed users to create their own avatars since 2019 and has steadily rolled out updates and new features like the 3D avatars it introduced earlier this year. It currently offers free outfits for users to style their digital selves. The next step, Zuckerberg said today, will be a marketplace Meta is building for them to buy items from a range of designers.

”That way, all different kinds of creators over time are going to be able to participate and design clothing and sell it,” he said during the livestream on Instagram.

How much the items will cost has yet to be revealed.

Zuckerberg has emphasised that fashion will be an important part of the immersive fusion of the physical and digital worlds it’s trying to build. Recently he travelled to Milan to drum up support among Italy’s fashion leaders.

So far, fashion companies seem open to the advances.

”Web3 and Meta are bringing unprecedented opportunities for Balenciaga, our audience, and our products, opening up new territories for luxury,” Balenciaga CEO Cédric Charbit said in a statement.

Shortly after Facebook rebranded to Meta, the tech company tweeted: "Hey @Balenciaga, what's the dress code in the metaverse?" The query immediately brought to mind the prospect of a Meta x Balenciaga collaboration, a seemingly outrageous crossover that now appears to be a reality.

Mark Zuckerberg and Eva Chen, Instagram's VP of Fashion Partnerships, announced that digital outfits from Balenciaga, Prada, and Thom Browne are coming to Meta's soon-to-be-unveiled Avatar Store.

The feature, which Zuckerberg described as a "clothing store for your Meta avatar," will begin rolling out across Facebook, Instagram, and Messenger next week.

Per a press release, digital versions of Demna's biker boots or Miuccia's logo tank top will come at a cost. While the Avatar Store will offer a selection of free clothing options, the designer garms are not among them. (No word on pricing yet.)

"We expect to bring the Avatars Store to VR and introduce more brands soon," Meta added.

While designer fashion has existed in the greater metaverse for a while, its presence on Facebook and Instagram is a new phenomenon.

Back in February, Meta expanded customization options for avatars, and even worked with the NFL to create digitally wearable Super Bowl shirts. Just as we suspected, the move was a precursor to today's news.

The prospect of users shelling out actual money for their cartoon likeness to wear a Balenciaga hoodie in their Instagram profile picture or a Messenger sticker seems like a reach, but hey — every day, people spend thousands of dollars on drawings of apes.