Italian fashion designers Domenico Dolce and Stefano Gabbana were convicted today, June 19, 2013 of tax evasion for hiding $1.3 billion and given a suspended jail sentence of one year and 8 months.
This came through after the second time they’ve been brought to court. The first resulted in the designers being charged a $440 million fine by Italy’s Tax Commission from the problem arising in 2008.
Apparently, Dolce & Gabbana channeled their money to a Luxembourg company in order to deter paying Italy’s high tax rates on profits.
The case was dismissed in 2011 as though the designers were too important to Italian fashion and the industry as a whole—think “too big to fail.” But it wasn’t over. Italy’s high court ruled that tax evasion was a problem in this case and the problem surfaced again.
Today, the Milan court convicted the designers, both of whom have denied the charges.
How this effects the fashion industry will soon be determined. Fashion and retail have already been under extreme duress especially in Europe within this challenging economic climate. This may just be the beginning of another 2008 recession, or worse.
H&M is Down, Plans for Online Push in U.S.
H&M reports sales in comparable units down by 4% and profits were down 11%. The continued substantial negative currency translation effected profits as a result of the continued strengthening of the Swedish krona against most sales countries’ currencies. The good news for the brand is that it’s & Other Stores and COS are performing well.
According to H&M CEO Karl-Johan Persson, “The second quarter has been a period of intense activity, with the opening of nearly 100 new stores. We have for example, opened our first store in the southern hemisphere in South America – in Santiago de Chile. The store has had a fantastic reception from customers. We are continuing our strong expansion in Asia where we now have 200 stores and where we are now starting to establish our newer brands like COS and Monki.
This quarter has been marked by substantial negative currency translation effects, which have had a negative impact on both sales and profits in SEK. Sales in local currencies increased by 5 percent. Although sales remained strong in Asia, overall sales were not satisfactory mainly due to the continued challenging situation for the fashion retail industry as well as unfavourable weather in March and a couple of weeks into April in many of our big markets.
At H&M we take a long-term perspective and we are continuing with our investments in IT, online sales, new brands and broadening the range. Although most of these long-term investments have not yet generated revenues, we see them as wise and necessary – all in order to build an even stronger H&M. The fantastic response that our new brand & Other Stories has had from customers is one example of an investment that has already borne fruit. During the quarter we opened our first seven stores of this new brand, in cities such as London, Paris and Milan. COS continues to perform very well and the strong expansion of the brand continues both in existing markets and in new markets such as Turkey and Switzerland, where we will be opening COS stores in the autumn.
There is great potential in the growing online market. We are looking forward to launching our online sales in the US in August. In parallel, we are continuing our work on the global roll-out of H&M’s online store, with the aim of adding several new online countries during 2014.”
Volcom Leaves Motocross
On Monday of this week, June 17, Volcom released a statement saying that they would be pulling out of motocross to focus on their “foundational core sports upon which the brand was founded over 20 year ago.” These include surfing, skateboarding, snowboarding, music, and art.
The company officially launched its motocross program in 2009 and amassed an impressive riding team of world-class athletes, including superstar Ryan Villopoto, the 2011, 2012 and 2013 AMA Supercross Champion. As the first company to formally blend the 3 primary board sports together from day one, Volcom will remain devoted to skate, snow and surf, along with music and art. “In an increasingly competitive and specialized global market it is imperative that we continue to simplify the Volcom brand message so that we can achieve maximum differentiation and voice amplification,” said Jason Steris, Volcom’s CEO. “We have been extremely proud to have been a part of the motocross family for several years. However, pressing forward with all of our emphasis on board sports is the right direction for Volcom for the long term.”
“I am very proud to have been part of the Volcom motocross program from the beginning and am grateful for the warm reception and regular acceptance from a world-class community of athletes, teams, media, agents and promoters,” said Troy Powell, Volcom’s MX Marketing Senior Manger.
“I understand this was a difficult decision for Volcom but I support the company’s vision and the need to retain its focus on its core boarding sports. Combined with my earlier years in the Volcom surf program, it has been a tremendous experience being part of an amazing company and I now look forward to new ventures.” Powell joined Volcom in 1996 and will always be a part of the Volcom family.
“The motocross team has done an exceptional job helping our company gain an admirable standing in this sport,” said Ryan Immegart, Volcom’s Senior Vice President of Marketing. “With Troy at the helm, our accomplishments are many and I am thankful for his stewardship and relentless passion toward making an indelible mark in motocross. As well, we could not have achieved so much without Ryan Villopoto and the rest of our team riders.”
Skullcandy Closes San Clemente, CA Office
June 18, Skullcandy announced major changes were underway including the relocation of its marketing and creative teams from their office in San Clemente, CA, which includes 30 people, to their headquarters in Park City, UT. This is part of their overall realignment plan for their product, marketing, and sales efforts.
Skullcandy used to be the leaders in the designer headphone category, but have since lost that momentum among youth culture, as we’ve witnessed within our Youth Culture Studies over the past few years.
The changes at Skullcandy also mean that a new Chief Financial Officer search is underway for the Park City, UT office as Kyle Wescoat decided not move.
Hoby Darling, President and Chief Executive Officer commented, “Bringing together our teams in Park City will allow us to better focus our go to market process and ensure that our products, messaging and distribution are aligned with our target consumer. It will be fantastic to have these three critical functions collaborating under one roof and represents an important step toward executing our overall long-term strategic plan. It will also enhance our ability to attract top talent and build an even stronger culture, as we look to be one of the most desirable employers in the audio and youth culture segment. With three world-class mountain resorts, hundreds of miles of trails and significant technology and creative influences, Park City provides us a fantastic base that is rooted in our authenticity as an active and creative brand born on the mountains and in skate parks.”
The restructuring charge will be in the range of $3 million to $3.8 million.