Something funny happened on the way out of the recession: men started investing in fashion. Industry professionals are speaking of a "renaissance" in the men's apparel and accessories business. Mainstream luxury retailers, notably Michael Kors (NYSE:KORS), are jumping at the chance to make big bucks off this "menaissance." And it gets better.
According to three analysts at HSBC, these men are 20-somethings and wrapped up in all things tech and social media, which is great for tech-savvy Burberry (LSE:BRBY). They are not eager to get married and take on big mortgages, but prefer to spend hard cash on gaudy manbags and hair products.
Well, if that's the case, then the likes of Burberry, Coach (NYSE:COH), and Michael Kors should rub their hands with glee. Is there more than meets the eye, however?
Is that guy ... a Yummy?
HSBC coined a catchy nickname for this new breed of fashionista: Yummy, which is short for Young, Urban, Male.
Businessweek did a story about the report first, sharing the key findings. "The metro-sexual, that cliché from 20 years ago, is now becoming a commercial reality," the HSBC team wrote, thanks to Japanese gentlemen who kicked off this trend.
To cut to the chase, we are talking about the male version of Carrie Bradshaw when she first set foot in Manhattan. These are status-hungry young dandies who want to show off logo-emblazoned brands and are especially meticulous about their grooming and appearance. They get married later in life, pushing 30 by the time they walk down the aisle. They earn a generous income, too, spending most of it shopping for fancy clothes online, not diapers. Since retail has become all about omni-channel marketing, which suggests a strong digital and social media presence, they are well-informed when it comes to what goes down the runway.
Let's get serious
The menswear market in general, as well as the luxury menswear market in particular, are indeed experiencing profound growth.
Research firm MarketLine predicts that the global market for menswear will exceed $430 billion by 2016, an increase of nearly 14% since 2011. Euromonitor agrees and points out that "menswear mania continues to grip the global fashion arena." The segment edged up 4.8% last year, marginally outperforming womenswear's 4.5% rise. Euromonitor expects menswear to grow by an incremental $58 billion by 2018. Consultancy firm Mintel's estimates indicate a nearly 16% increase in luxury menswear sales for the five-year period from 2011 to 2016.
Many designer houses, including Prada, Gucci, and Dolce & Gabbana, took notice of this trend and started rolling out men's-only stores. Coach pins its hopes on its men's business to drive future sales growth, CEO Victor Luis told analysts during the latest earnings call. Michael Kors is also making a significant push into this space by setting its sights on expanding its menswear division in earnest over the next two years.
Burberry has the edge over its peers mainly because of its digital and social media prowess. The fashion powerhouse made history back in 2010 for being the first design house to broadcast its fashion show live in 3D. Recently, it launched "Customer 360," a data-driven shopping experience that enables Burberry to track customers' buying preferences and fashion phobias.
Even so, growth in this market is not fueled solely by young metro-sexuals, who love flashing logos that shout. Thus, retailers should not focus only on luring Generation Y's emerging cultural subset. They should try to see the whole picture, instead.
Is the 'Yummy' really a growth driver?
First and foremost, even though these gentlemen are earning lots of money as HSBC argues and marrying later in life (meaning that they can invest a large part of their discretionary income in fashion), aren't they also saddled with post-"uni" debt? As fellow Fool writer Matthew Frankel aptly mentioned, the annual average cost of attendance at a private institution is around $45,000 while for a public university it stands around $23,000. I am not aware of any college that accepts cashmere sweaters and Prada moccasins as method of payment.
Yummies are getting more and more attuned to the luxury sector, influenced by retailers' omni-channel strategies. Nevertheless, there's also an unfolding logo fatigue (especially on behalf of Chinese consumers, who are the top luxury shoppers worldwide) that's forcing big names in the industry, such as the bastions of signature motifs Louis Vuitton (NASDAQOTH:LVMUY) and Kering-owned Gucci, to turn their focus on more subtle luxury offerings. This evident logo fatigue does not resonate with the Yummy type of customer.
Overall, the ultra-high net worth (UHNW) families – luxury retailers' niche clientele – are getting richer and at a fast pace. Also, the global UHNW population is dominated by men, who account for 88%. However, the vast majority of these people are first-generation, "self-made" upstarts. In other words, their newly acquired wealth didn't come from browsing fashion blogs, let alone going on luxe shopping sprees. It came from working hard to grow their businesses.
Obviously, men's attitude toward fashion has shifted in recent years, favoring blue-chip brands, which have already made steps toward cashing in on this trend. Still, today's affluent consumer profile is highly heterogeneous. Catering solely to one target group will not do the trick.
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Fani Kelesidou has no position in any stocks mentioned. The Motley Fool recommends Burberry Group, Coach, and Michael Kors Holdings. The Motley Fool owns shares of Coach and Michael Kors Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.