DTC Dispatch #028

LATEST NEWS

Footwear brand On posts record quarterly sales with strong DTC growth

On, the Swiss footwear company, posted a strong performance in the first quarter, primarily fueled by a 39% surge in year-over-year sales through its direct-to-consumer channel. According to a recent press release from the company, this segment now contributes over a third, specifically 37.5%, to On's total sales figures.

The company's total sales reached 508.2 million Swiss francs (approximately $562 million), marking a significant 20.9% increase compared to the same period last year. This milestone also signifies the first time the brand has exceeded 500 million Swiss francs in quarterly sales. Furthermore, net income soared by 106% to 91.4 million Swiss francs in Q1, setting a new record for the quarter.

On's executives announced plans to inaugurate a second store in Paris ahead of the upcoming summer Paris Olympics, as revealed during the earnings call on Tuesday. These two establishments in Paris are expected to serve as focal points for the running community during the global event, scheduled from July 24 to August 11.

Our take: On's recent performance is undoubtedly impressive, showcasing remarkable growth in both sales and net income. The surge in YoY sales, particularly through the DTC channel, highlights the company's effective strategies in reaching and engaging with its customer base.

Exceeding the 500 million Swiss francs mark in quarterly sales is a significant achievement, underscoring the brand's increasing market presence and popularity. This milestone reflects not only strong consumer demand but also the company's ability to effectively capitalize on market opportunities.

The decision to expand with a second store in Paris ahead of the summer Olympics demonstrates On's proactive approach to leveraging major events for brand exposure and engagement. By establishing these stores as hubs for the running community during the Olympics, On is positioning itself to further solidify its presence in key markets and capitalize on the heightened global attention surrounding the event.

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TikTok Tests Hour-Long Videos In Select Markets

In the midst of efforts to stop potential bans or sell-offs in the U.S., TikTok, along with its extensive creator community, is taking on YouTube by testing the capability for users to upload videos lasting up to one hour.

The platform, owned by ByteDance, has introduced this feature to a limited set of users in specific markets, extending its maximum video-upload duration by 30 minutes. However, TikTok currently has no immediate plans to roll out this feature widely.

Over recent years, TikTok has progressively increased its video upload duration, transitioning from 3 minutes to 5 minutes and then to 10 minutes in March 2022. These changes aimed to enhance advertising revenue and diversify the range of content available, encompassing areas such as cooking demonstrations, beauty tutorials, educational content, comedy sketches, and even full-length TV show episodes.

The introduction of hour-long video uploads could attract more creators who traditionally gravitate towards YouTube, enticing them to experiment with TikTok's vast global audience of 1.5 billion users. Additionally, this move opens up possibilities for TV networks to release debut episodes of new series on TikTok for free, potentially challenging YouTube's dominance in this regard.

Our take: The move by TikTok to test hour-long video uploads amidst the threat of bans or sell-offs in the U.S. reflects a strategic effort to expand its platform's capabilities and compete directly with YouTube. By gradually extending upload durations, TikTok has shown a commitment to accommodating diverse content formats and catering to the preferences of both creators and audiences.

Gen Alpha parents are learning about brands and products from their kids

While Gen Alpha may not currently be the primary focus for all brands, it's imperative for retailers to start considering this emerging generation and their interests. A recent consumer survey conducted by DKC's analytics group revealed that 95% of Gen Alpha parents discover new products or brands through their children, with 49% stating that their purchasing decisions are influenced by their child's opinions. The survey, which gathered responses from 1,000 American adult parents of Gen Alpha children aged 8 to 13, identified this cohort as the "gateway generation."

Not only are Gen Alpha adept at influencing household decisions, but they also possess their own purchasing power. Approximately 90% of Gen Alpha children surveyed engage in money-making activities, including chores, allowances, and online selling or reselling.

With considerable spending capabilities, Gen Alpha also exhibits distinct preferences for shopping outlets and products. The survey found that 91% of parents reported their children enjoying shopping, and 92% noted their knack for discovering "interesting new products."

The top ten favorite retailers among these kids include Walmart, Amazon, Target, Nike, GameStop, Five Below, Shein, Costco, Dollar Tree, and Sephora.

Our take: The rise of Gen Alpha offers retailers a key chance to engage with a powerful consumer group. While they may not be the primary target for all brands yet, it's essential for retailers to acknowledge and cater to their changing preferences.

A recent DKC survey highlights how Gen Alpha children significantly influence household purchasing decisions, indicating the importance of understanding and connecting with this "gateway generation."

Furthermore, Gen Alpha not only impacts household spending but also has its own financial independence, underlining the need for retailers to tailor offerings to their unique tastes.

The survey also shows Gen Alpha's strong interest in shopping and discovering new products, creating an opportunity for brands to secure their loyalty.

Retailers must recognize the influence of Gen Alpha and adapt their strategies to engage effectively with this emerging consumer group, establishing lasting connections and ensuring success in the evolving market.

US beauty sales slow in Q1-2024 but continue to grow, Circana reports

The beauty market in the U.S. remains dynamic, with sales trends showing interesting shifts. Despite a slowdown in the first quarter of 2024, sales within the prestige channels saw a notable increase of 9%, while mass market sales experienced a modest rise of 2%, according to Circana.

Larissa Jensen, Global Beauty Industry Advisor at Circana, commented on the industry's performance, noting that the slight slowdown reflects a stabilization after two years of robust double-digit growth. However, she emphasized that the industry remains strong, with sales growing by over $600 million in Q1.

Fragrance emerged as the standout category within the prestige channels, experiencing a significant 13% increase in sales revenue during the first quarter of 2024. Gift sets, particularly travel-size and discovery sets, showed remarkable growth, outpacing traditional full-size sets.

In both the prestige and mass markets, skincare saw notable growth, with dollar sales increasing by 10% in the prestige channel and emerging as the fastest-growing category in the mass market, according to Circana's report.

Conversely, makeup was the weakest-performing category in both the prestige and mass markets during Q1.

Prestige hair products continued their strong performance, with double-digit growth in sales. The rising importance of hair wellness was evident, with products targeting hair thinning and loss, hair oils and serums, scalp care, and heat protectants all experiencing sales growth ranging from 13% to 25% during the quarter.

Our take: The beauty market in the U.S. is undergoing interesting changes, with sales patterns revealing notable trends. Despite a slowdown in the first quarter of 2024, sales in high-end stores increased significantly by 9%, while those in regular stores had a more modest rise of 2%, as reported by Circana.

Larissa Jensen, a Global Beauty Industry Advisor at Circana, provided insights into the industry's performance, highlighting that the slight slowdown reflects a stabilization after two years of strong double-digit growth. She stressed that the industry remains robust, with sales still growing by over $600 million in Q1.

Overall, these trends suggest that the beauty market in the U.S. is resilient and adaptable, with opportunities for growth and innovation across various product categories.

Luxury fashion retailer Burberry’s profit plummets in FY24 

Burberry, the luxury fashion brand, saw a decline in profit for the fiscal year 2024 (FY24). Compared to £492m in FY23, the profit dropped by 44% to £271m ($342m).

The retailer's profit before taxation (PBT) also took a hit, plunging by 40% to £383m in FY24 from £634m in FY23.

In terms of operating profit, there was a significant decline. The reported operating profit fell by 36% to £418m in FY24 from £657m in the previous year, and the adjusted reported operating profit dropped by 34% to £418m in FY24 from £634m in FY23.

For the period ending 30 March 2024, Burberry reported revenue of £2.96bn, marking a 4% decrease from £3.09bn in FY23.

Comparable store sales saw a 1% decrease over the fiscal year. While the first half showed a strong 10% increase, this was offset by an 8% decline in the second half.

Our take: Burberry faced significant challenges in fiscal year 2024 (FY24), showing a sharp decline in profit, both before taxation (PBT) and in operating profit, indicating broader financial issues.

Burberry's FY24 financial results highlight the need for strategic reassessment and adaptation to improve profitability and revenue generation and ensure future growth.