Impacts of the Financial Crisis on Luxury Apparel and Mass Apparel Companies from 2008 to 2011

The world financial crisis that started in 2007 had a profound impact on the global apparel industry, but at the firm level, the impact of the financial crisis seemed to be unevenly distributed. Several luxury apparel companies, such as Louis Vuitton, achieved stable net sales whereas quite a few mass apparel companies, such as GAP, experienced significant drop of sales and profits. The study intends to systematically compare the financial performance of luxury apparel companies with mass apparel companies from 2008 to 2011 to see whether a general pattern of differentiated performance exists between these two types of companies as a result of their respective business models and the specific impact of the 2008 financial crisis. MANOVA test was conducted based on six indices developed under the Dupont Strategic Profit Model (including annual growth rate of net sales, annual growth rate of cost of goods sold, gross margin percentage, net profit margin, asset turnover, and return on assets). Eight luxury apparel and eight mass apparel companies were selected for the purpose of the study. The results showed that first, the overall financial performance between luxury apparel and mass apparel companies was statistically different from 2008 to 2011. Second, luxury apparel and mass apparel companies had different gross margin and asset turnover from 2008 to 2011. Third, there was no evidence showing that luxury apparel and mass apparel companies achieved different growth of net sales, growth of cost of goods sold and return on assets (ROA) from 2008 to 2011. Fourth, luxury apparel companies outperformed mass apparel companies starting in 2010 in terms of net profit margin, indicating more robust post-crisis recovery. The results of the study confirmed the differentiated performance of selected luxury apparel and mass apparel companies’ business models. The findings also suggested that luxury apparel companies achieved a more robust post-crisis recovery. Additionally, the results suggested that mass apparel companies should not enter the luxury apparel market because ROA of luxury apparel companies did not appear to be better than mass apparel companies.


LIST OF TABLES
The economic crisis that started in 2008 had a profound impact on the global apparel industry (Newbury and Ter Meulen, 2010). As a result of the financial crisis, consumer spending slowed down, which led to a significant decline in retail sales, followed by deterioration of financial performance of apparel retailers (Gereffi and Frederick, 2010;Newbury and ter Meulen, 2010). At the firm level, however, impacts of the financial crisis seemed to be unevenly distributed. For example, net sales of some luxury apparel companies such as Louis Vuitton Moët Hennessy (LVMH) seemed to remain stable since the financial crisis in 2008. In comparison, mass apparel companies such as Gap and Limited Brands experienced a significant drop in both net sales and net profits (Barrie, 2009;Hoover's, 2012aHoover's, , 2012bTungate, 2009).
It remains a question whether the apparent different financial performance among several companies is just a random phenomenon or reflects a more general pattern between the luxury apparel companies and mass apparel companies since the 2008 financial crisis.
This study intends to explore whether luxury apparel companies performed better than mass apparel companies from 2008 to 2011 as a result of the financial crisis. Results of this study will contribute to the understanding of the sectoral impact of the 2008 financial crisis on the apparel market, which has seldom been discussed.
It will also illustrate the business models of the luxury apparel companies and mass apparel companies and suggest the best business model for apparel companies in the 2 post financial crisis era.

CHAPTER 2. REVIEW OF LITERATURE
This chapter provides the literature review that leads to the conceptual model for the study. The first section provides definitions and theories. Next the differences between luxury apparel and mass apparel companies and their different business models are suggested. Lastly, their respective impacts from the financial crisis are highlighted.

Definitions
In this study, a luxury apparel company refers to a company whose business focuses on high quality luxury apparel targeting the wealthy and sold at high price points in order to remain exclusive (Okonkwo, 2007). A mass apparel company refers to a company that is known for carrying multiple apparel categories and targets a wide audience in the middle-market, selling non-exclusive products (Okonkwo, 2007).
First, in terms of social/psychological benefits, the ownership and use of luxury products allow consumers to feel good about themselves and they are able to communicate nonverbally about themselves to their peers and the outside world (Vigneron and Johnson, 2004). Husic and Cicic (2009) suggested that luxury goods bring a sense of esteem to the owner through the display or use of a certain brand deemed as luxury and this esteem is separate from any functional value. Consumers have a sense of pride and power when they carry a Gucci purse or wear Prada shoes and they want to impress others by showing they are able to afford such products (Atwal and Williams, 2009). Therefore, these consumers are concerned with how others perceive them. Vigneron and Johnson (2004) suggested that consumers can fulfill psychological and functional needs through luxury goods and the benefits obtained through the psychological fulfillments are the distinguishing factors between luxury and non-luxury goods. Consumers who buy luxury goods do so because they can, not because those products are the only products that fulfill that function. Some people are satisfied with an inexpensive, no-name handbag because it provides the function of carrying what they need for the day whereas luxury consumers prefer to carry a luxury designer bag because it shows their ability to purchase luxury brands and serves the function of carrying their daily necessities away from home.
The social/psychological benefits of purchasing the luxury goods can also be explained from the perspective of behavior economics. For example, Thorstein Veblen named this ostentatious display of one's status and wealth through fashion as conspicuous consumption in The Theory of the Leisure Class (1899) (Kaiser, 2012).
The study argued that people spent extravagantly on goods visible to others to show that they were financially and socially successful (Veblen, 1899). Veblen's theory of conspicuous consumption correlates with the signaling theory, meaning that the conspicuous consumption is a form of signaling in which the characteristic being signaled is wealth (Bird and Smith, 2005). Signaling in this way, as suggested by Veblen, enhanced social status when one's status was not widely known (Bird and Smith, 2005). This signaling of wealth helped describe a clear difference between those with established wealth who did not need to take part in conspicuous consumption and those with new wealth who needed to show it off (Bird and Smith, 2005).
Second, in terms of price point, luxury products incorporate premium pricing, which means they are typically expensive and not financially accessible to the masses (Okonkwo, 2007;Newbury and ter Meulen, 2010). Prices of luxury products are significantly higher than prices of products that are non-luxury with similar features (Vigneron and Johnson, 2004). Keller (2009) suggested that these high prices are validated by the established image of prestige that is held by luxury products.
Third, luxury is further known to mean high quality. Consumers expect to receive a quality product when making a luxury purchase to justify the high price tag (Brun et al., 2008). Luxury objects are typically durable and can increase in value over time, such as a Louis Vuitton suitcase (Kapferer and Bastien 2009a;Pendle and Stiles, 2009). The high quality of luxury goods is seen in the quality of the materials used and the high level of precision and craftsmanship employed to manufacture the goods (Okonkwo, 2007).

Business Models of Luxury Apparel and Mass Apparel Companies
Business models capture the core of how a business will be focused and how it will operate (Morris, Schindehutte, & Allen, 2005). The components of business models include how the business creates value (product mix, distribution), the target market, internal capability factors (production, selling/marketing, packaging, supply chain management), competitive strategy factors (service/product quality, customer relationships), economic factors (pricing sources, margins, volumes), and investor factors (growth strategies, income models) (Morris, Schindehutte, & Allen, 2005).
Because of the unique characteristics of luxury goods, luxury apparel companies adopt business models that are different from mass apparel companies.
These differences are seen in their target markets, pricing strategies, marketing/branding strategies, and different degrees of internationalization.
First, the target markets of luxury apparel companies and mass apparel companies are different. Luxury apparel companies target the wealthy members of society and those signaling wealth who are willing to spend large amounts of money on consumer goods (Keller, 2009). It should be noted that the target market for luxury is changing; the rising number of millionaires worldwide has created a new, youthful, group of global luxury consumers (Okonkwo, 2007). China is now the world's largest luxury goods market, Japan makes up a quarter of the world's luxury goods consumption, India's luxury goods market is growing rapidly, and the luxury goods market in Moscow, Russia is worth more than the market in New York (Okonkwo, 2007). In comparison, middle-class consumers are the main target market for mass apparel companies (Newbury and ter Meulen, 2010;Lasserre, 2007). These consumers are price sensitive and place a high emphasis on value, but not necessarily bargain hunting (Okonkwo, 2007;Driscoll, 2011).
Second, the pricing strategy for luxury apparel companies is much different than that of the mass apparel companies. Luxury apparel companies focus on a premium pricing strategy with minimal discounts and markdowns because too many discounts could tarnish their premium image (Keller, 2009). They even are known to occasionally raise their prices in order to make their products more exclusive and increase demand (Kapferer and Bastien, 2009b). Luxury goods are typically more expensive in China due to local taxes that inflate the prices and because of this, many Chinese consumers travel to Europe to purchase their luxury products (Sanderson, 2013). In response to this rise of Chinese tourists and to increase exclusivity of their products in Europe, some luxury companies are raising their prices in Europe, including Prada, Louis Vuitton, and Salvatore Ferragamo, an Italian luxury goods company (Sanderson, 2013;CPP Luxury, 2013). Mass apparel companies, on the other hand, use markdowns to increase sales and to sell off poorly selling or unsold products (Kapferer and Bastien, 2009a). Often, mass apparel companies need to offer discounts to keep their customers and remain competitive (Great American Group, 2011). Due to their cost cutting strategy, mass apparel companies are prone to price competition (Fratto, Jones, and Cassill, 2006). Luxury companies focus on high price and low volume, whereas mass apparel companies focus on low price, high volume.
Although luxury apparel companies can be small in revenue as compared to mass apparel companies, they are respected globally with distinguishing reputations (Chevalier and Mazzalovo, 2012).
Third, branding and marketing strategies are different for luxury apparel and mass apparel companies. Branding is crucial to the success of apparel companies, but particularly to luxury apparel companies who must uphold their premium images; weak branding strategies can tarnish their image (Okonkwo, 2007). Luxury apparel companies typically have a high level of global brand awareness and an aspirational quality and emotional appeal that set them apart from the crowded mass fashion market (Okonkwo, 2007). It is important for luxury apparel marketing to convey an image of quality and authenticity while also selling an experience and aspirational lifestyle (Atwal and Williams, 2009). Many luxury apparel print advertisements try to evoke sensuality and communicate with their audience that they can feel good about themselves and powerful through the use of luxury goods. On the other hand, mass apparel companies focus more on communicating their low prices and good value, rather than an aspirational lifestyle. Oftentimes, their ads specify low prices and deals whereas luxury apparel advertising does not mention prices (Kapferer and Bastien, 2009a). As companies that focus on price to differentiate themselves in the market, mass apparel companies have intense advertising campaigns that incorporate their price advantage and use their competitive prices as their branding strategy (Fratto, Jones, and Cassill, 2006).
Lastly, luxury apparel companies and mass apparel companies have different degrees of internationalization. Luxury apparel companies are oftentimes well-known by consumers around the world (Okonkwo, 2007). They have been focusing on entering emerging markets where consumer awareness and demand for their products are rapidly increasing (Asaeda, 2012). For example, many luxury apparel companies have grasped the financial benefits from getting access to the lucrative and fast growing Asia and Latin America markets (Adendorff, 2012). Much to the contrary, internationalization efforts of mass apparel companies have been less prevalent, especially in emerging markets (Driscoll, 2011;Asaeda, 2012). International consumers, particularly those in emerging markets such as China, often favor luxury apparel brands over mass apparel brands because the consumption of luxury apparel allows them to display their wealth and social status, which is important to them (Gao, Norton, Zhang, and To, 2009). Postrel (2008) also suggested that consumers with rising incomes in emerging markets such as China and Russia are so drawn to luxury products because "rich people in poor places want to show off their wealth." European luxury apparel companies have had the biggest success in China as fashions from these countries are received positively for their style, quality, and high fashion appeal, whereas apparel companies from the U.S., particularly mass apparel companies, are seen more as casual rather than high fashion, thus they have lower penetration in China (Dickson, Lennon, Montalto, Shen and Zhang, 2004). Entering international markets requires knowledge in selecting appropriate sites and merchandise assortments, as well as the ability to adopt to the local market (Driscoll, 2011). Due to these reasons, mass apparel companies have not placed as high an emphasis on entering international markets as have the luxury apparel companies.

Impact of the 2008 Financial Crisis on the Apparel Industry
The 2008 financial crisis had a significant impact across all industries, but particularly had a significant impact on the apparel retail industry (Staritz, 2011). The immediate cause of the financial crisis was the subprime lending by banks and the burst of the housing bubble (Friedman, 2011). Bankers who used borrowed money to buy risky subprime securities also caused and accelerated the crisis (Friedman, 2011;Bragues, 2010). The U.S. was heavily affected by this financial crisis; unemployment in this country increased, and reached a peak of 10.1% in October 2009 (Driscoll, 2011). This caused the apparel industry to suffer by leading to diminished consumer spending and a decline in international trade. As retailers experienced reduced sales, global suppliers were negatively affected due to reduced demand. Apparel imports to the U.S. decreased by 3.3% in 2008 and 12% in 2009 (Staritz, 2011). Apparel imports to the European Union were also negatively affected and decreased by 5.2% in 2009 (Staritz, 2011). Apparel retailers in the U.S. in particular experienced decreased revenues, slow inventory turnover, and tight cash flows (Staritz, 2011). In 2008, U.S. department store sales declined 13.3% and specialty apparel retailer sales declined 10.4% from November 2007-November 2008 (Rosenbloom, 2008). U.S. apparel companies experienced from 3% to 15% decline in sales in 2009 (Driscoll, 2011).
In addition to the general decline, there was also a widening income gap, a change in consumer behavior and purchase intention, and dual speed recovery in developed and emerging economies. Luxury apparel and mass apparel companies were affected differently from these suggested impacts of the financial crisis.
First, the financial crisis strengthened the widening income gap (Lowrey, 2012). From 2007 to 2009, those with the top incomes experienced a drastic 15.6% decline, but from 2009 to 2011, the annual wages of the top 1% grew 8.2% (Mishel and Finio, 2013). The annual wages of the bottom 90% have continued to decrease since the financial crisis (Mishel and Finio, 2013). From 2007 to 2009, the income gap became less apparent, but then widened again from 2009 to 2011 during the recovery (Mishel and Finio, 2013). The income gap between the richest 20% in the U.S. and the rest of the country is growing (Tavernise, 2012). A cause of the widening income gap is consumers in the middle class have suffered more than the luxury consumers throughout the post-financial crisis recovery (Driscoll, 2011). The luxury consumers have bounced back from the recession and are even getting richer, whereas the middle class is declining, thus shrinking the customer base for mass apparel companies (Tavernise, 2012). Despite the slow economic growth in developed countries, the luxury apparel market is growing and is expected to continue to grow as consumers in emerging markets, particularly China and Brazil, experience rising incomes and growing desire for luxury goods (PR Newswire, 2012).
Second, the economic crisis caused a change in consumer behavior and purchase intention. Consumers have become more sophisticated and retailers have needed to change strategies in order to please these more discerning customers who want lower prices and better value; since the recession, customers have realized that they can survive off less, thus it is crucial for companies to market themselves as having the best value to please their target market (Apparel Online, 2011). Across all sectors of the industry, consumers have become more restrained in their spending and the industry is experiencing a "new normal" (Driscoll, 2011). Luxury apparel customers, however, are not as affected by price as middle-income customers, who were more negatively affected by the financial crisis (Driscoll, 2011). The mass apparel retailers which target the middle market consumers have been at risk as consumers have been shopping for either discount goods or luxury goods (Asaeda, 2012). Although luxury apparel consumers still purchased during the recession, they did not purchase multiple items, but very selectively bought single items (Reyneke, 2010). Luxury consumers cut back, but did not completely disappear during the financial crisis.
Third, dual speed recovery refers to the phenomenon that some emerging market economies are recovering more quickly than developed economies that are still struggling, with some even declining (Pardede, 2011). In 2010, developing countries grew 7.3%, whereas high-income countries grew only 3% (Canuto, 2012). Emerging markets are becoming wealthier and spending their money on luxury products. Chevalier and Mazzalovo (2012) suggested that the substantial growth of the luxury fashion business in the developing countries of BRIC (Brazil, Russia, India, and China) is due to their increasing number of wealthy citizens and the rising awareness and availability of luxury brands. Chinese tourists in particular are driving the demand for luxury goods as their economy increases (Driscoll, 2011). In 2011, Chinese consumption of luxury goods accounted for over 20% of the global luxury market (Asaeda, 2012). Luxury apparel companies looking to expand their business 13 are entering emerging markets and tapping into the growing wealth of consumers in these countries. These impacts of the financial crisis helped lead to different financial performances between luxury apparel and mass apparel companies.

Conceptual Model and Hypothesis
Luxury apparel and mass apparel companies have different business models in terms of their target markets, pricing strategies, marketing/branding strategies, and degrees of internationalization. Effects of the financial crisis, which seemed to favor luxury apparel companies, include the widening income gap, change in consumer behavior and purchase intention, and dual speed recovery in developed and emerging economies. Based on these aspects, as proposed in Figure 1, this study hypothesizes that luxury apparel companies performed better than mass apparel companies in the 2008 financial crisis.

Hypothesis:
It is hypothesized that luxury apparel and mass apparel companies performed differently in the 2008 financial crisis because of their different business models and specific effects of the crisis.

Different business models between luxury apparel and mass apparel companies
• Target market • Pricing strategy • Marketing and branding strategy • Degree of internationalization

Company Selection
Despite numerous research studies on luxury companies, there is no official list of luxury apparel companies that could be used directly by this study. To create such a list, as the first step, names of luxury companies were collected from three sources: World Luxury Association (2012), Interbrand (2008), and Okonkwo (2007). World Luxury Association is the world's largest non-profit organization of research and management for luxury brands; Interbrand has been widely cited in related studies that measure brand value (Kapferer and Bastien, 2009b;James, 2011); and Okonkwo (2007) is a comprehensive study of the luxury fashion industry. As shown in Table 1, 22 companies were included in this preliminary list, which covered most of the wellknown luxury brands in the world.
Because this study focused on luxury apparel companies only while the preliminary compiled list also included companies in other sectors, such as jewelry and automobiles, the second step was to filter the list of companies. This was done based on whether the company fell under the apparel category in the Hoover's database. Due to availability of data, the list was also limited to only publicly traded companies. The Hoover's database was used to access the financial information for the companies because it is considered "the world's leading source of commercial information and insight on businesses" (Dun & Bradstreet, 2012).
In order to make the sample more representative, the competitors of each luxury company were added to the list so long as they also fell under the apparel category and were publicly traded. Altogether, three companies were added: Michael    Table 3.   (2009)

Measurement of Company Performance
This study adopted the Dupont Strategic Profit Model (DSPM) to measure the performance of luxury apparel companies and mass apparel companies. Developed by the Dupont Corporation, DSPM is one of the most popular tools used in the business world to systematically and comprehensively analyze the financial performance of a company (Stapleton, Hanna, Yagla, Johnson, & Markussen, 2002). DSPM served the purpose of this study by analyzing the financial performances of the two categories of companies, specifically their profitability and productivity. The model depicts how return on assets is a function of net profit and asset turnover, which measure profitability and productivity respectively (Stapleton et al., 2002). Stapleton et al. (2002) used this strategic profit model to analyze six athletic footwear companies and how changes to sales, cost of goods sold, variable expenses, inventories, and accounts receivable affected the return on net worth for each company. The strategic profit model was applied to each company to pinpoint their individual strengths and weaknesses.
Based on DSPM, six indices were selected to analyze the performance of companies in this study: • Growth of net sales. Net sales refer to the total sales revenue after deductions for customer returns and allowances have been made (Easterling, Flottman, Jernigan, & Wuest, 2008). However, net sales are also affected by the size of the companies, which may cause biasness in the results, given the various sizes of luxury apparel and mass apparel companies selected in Table 1 and Table 2. Growth rate of net sales was • Gross margin is represented by the difference between net sales and cost of goods sold (Easterling et al., 2008). Gross margin percent was reported in this study as it showed the gross profit rate, again reducing the biasness that may result from the various sizes of the selected companies. It was calculated by dividing gross margin by net sales. Companies aim for a higher gross margin percent as it represents the more money they retain per dollar of sales to cover other costs (Steinmetz & Brooks, 2006).
An increase in gross margin indicates an improvement in performance, whereas a decrease in gross margin indicates a reduction in performance.
• Net profit was determined by subtracting operating expenses, net interests, and taxes from gross margin (Bisetty, Fourie, Günther, Richards, & Smith, 2009). Net profit is the final profit achieved by sales and is referred to as "the bottom line" (Berry & Jarvis, 2006). A higher net profit percent indicated a company was performing financially well; a lower net profit percent indicated a company needed help financially and could be losing too much of their revenue to expenses.
• Asset turnover "indicates how efficiently a company uses its assets to generate sales" (Kimmel, Weygandt, & Kieso, 2011). To calculate this ratio, total assets were divided by net sales. A higher asset turnover indicates a company is selling their products quickly to generate sales, and merchandise is not sitting around for long periods of time. Thus, a higher asset turnover indicates strong financial performance, whereas a lower ratio indicates weak financial performance.
• Return on assets (ROA) results from the interaction of net profit and asset turnover and helps determine a company's financial performance in terms of how assets generate sales (Stickney, Weil, Schipper, & Francis, 2010). It relates the profitability of a company to the value of the assets used (Stapleton et al., 2002). This means it indicates how profitable a company is related to its total assets. As ROA increases, a company's financial performance increases as well, and as ROA decreases, financial performance decreases.
Although researchers have reported that signs of the financial crisis started in 2007, the effects of the crisis were being felt throughout the entire economy by 2008, the starting year for the study (Taylor, 2009

Method of Analysis
This study adopted multivariate analysis of variance (MANOVA) to evaluate the hypothesis, specifically whether the financial performance of luxury apparel and mass apparel companies differed from 2008 to 2011. As shown in Equation 1, MANOVA test compared the mean values of the multiple financial indices to determine whether there were statistically significant differences between the two groups (Huberty and Olejnik, 2006). In this study, MANOVA revealed whether financial performance measured by six indices (namely growth rate of net sales, growth rate of cost of goods sold, gross margin, net profit, asset turnover and ROA) were significantly different in mean value between luxury apparel companies and mass apparel companies.
!"# = !" + !"# (1) Root. If the p-value was statistically significant, the null hypothesis was rejected; if the p-value was not significant, the null hypothesis was not rejected. In this study, a pvalue of less than 0.05 was determined significant.
If MANOVA result suggested that financial performance of luxury apparel companies and mass apparel companies overall was statistically different, between-31 subject test was further conducted to determine which one(s) of the six indices that measure the financial performance of firms led to the statistical significance of MANOVA (Lu, 2012).
MANOVA and between-subject test were conducted from 2008 to 2011 both annually and on average to evaluate financial performance from the beginning of the economic crisis up to the year in which the most recent data was available and to evaluate the overall performance throughout the years. MANOVA was conducted using the SAS statistical software package.
Annual reports for each company were accessed to provide explanations of the strategies used by the individual companies in terms of merchandise mix, domestic and international growth as well as detailed information regarding their financial performance. This information helped provide insight into the strengths and weaknesses for each company.

Descriptive Analysis
The average performance of luxury apparel and mass apparel companies from 2008 to 2011 are shown in Table 5, and described as follows. Figures 2 through 7 represent each financial index over the time period studied.
First, neither the luxury apparel companies nor the mass apparel companies showed a clear pattern of net sales growth over the examined period. According to  for luxury apparel and 9.38% for mass apparel companies. This increase was attributable to the rise in net sales. In 2011, it was higher for mass apparel companies, 15.38%, whereas it was 9.50% for luxury apparel companies.
Third, gross margin of luxury apparel and mass apparel companies was noticeably different, specifically luxury apparel companies achieved a higher gross margin on average due to their higher markups. It increased every year for luxury apparel but for mass apparel companies, it increased from 2008 to 2010, and then when the highest gross margin for a luxury apparel company was 72% (Prada), and the highest gross margin for a mass apparel company was 58% (Ralph Lauren). The average gross margin was 61.88% for luxury apparel and 44.50% for mass apparel companies.
Fourth, luxury apparel companies also achieved higher net profit margin than the mass apparel companies during the examined period. It increased every year for luxury apparel companies, whereas for mass apparel companies, it increased from 2008 to 2010, and then slightly decreased in 2011. Urban Outfitters experienced a 5% decrease in net profit from 2010 to 2011 due to increases in expenses and taxes (Urban Outfitters, 2012). In 2008, net profit for mass apparel companies was significantly lower than luxury apparel companies, 2.5% compared to 8%. A contributing factor to this was that Ann Inc., a mass apparel company, reported a -15% net profit that year due to costs associated with the launch of a new strategic restructuring program (Ann Inc., 2009). This company's average net profit for all four years was -2%, as it still experienced costs from the restructuring program. The average net profit percentages were 11.13% and 6% for luxury apparel and mass apparel respectively.
Fifth, asset turnover was higher for mass apparel companies for each year and the average of the years. Asset turnover for each mass apparel company was over 1.00 whereas only three luxury apparel companies had asset turnover over 1.00. These companies were Burberry, which implemented a new strategic plan in 2008 focused on entering under-penetrated markets and accelerating their retail growth, Hugo Boss, and Mulberry (Burberry, 2009). Mulberry had a high asset turnover due to the company's strong expansion throughout Europe and Asia where in 2010, demand exceeded supply (Mulberry, 2010). Another pattern that was apparent was it decreased each year from 2008 to 2010 for both luxury apparel and mass apparel, but then increased for both in 2011, due to post-crisis recovery. The average asset turnover for luxury apparel companies was 0.92, whereas for mass apparel companies, it was 1.65.
Lastly, overall, there did not appear to be noticeable patterns in the mean performance of ROA. In 2008, ROA was negative for luxury apparel companies; referring back to the original data, this became clear because ROA for Burberry in 36 2008 was -53%, due to the high costs associated with the implementation of its new strategic plan (Burberry, 2009). The average ROA for Burberry was -3.75%. This implies the company was not selling their merchandise at a profitable rate to cover the costs associated with its assets. Ann Inc.'s ROA in 2008 was low as well, at -34%, which contributed to the low ROA for mass apparel companies during this year. This low ROA was also due to the high costs incurred from its new strategic plan in 2008.
ROA for luxury apparel companies was lower in 2008 and 2009, but then increased slightly above mass apparel companies in 2010 and remained above in 2011. The averages for ROA for the companies were similar, at 8% for luxury apparel companies and 8.5% for mass apparel companies.   It should be noted that Table 5 only showed the mean value of financial performances of companies. Whether or not the financial performances between luxury apparel and mass apparel companies was statistically different needed to be determined based on the results of MANOVA.

Results of MANOVA
MANOVA was conducted first to determine whether significant difference existed overall in financial performance during each year and the average of the years for the companies. Results of the MANOVA main effect test are shown in Table 6. The study results showed that there was an overall financial difference between luxury apparel and mass apparel companies from 2008 to 2011, including the average of the four years.

Discussion
Results of the MANOVA test can be explained through the following aspects.
First, the results showed the differentiated performance between luxury apparel and mass apparel companies as reflected by the statistical difference in gross margin and asset turnover. Gross margin was higher each year for luxury apparel companies than mass apparel companies. For example, the average gross margin for luxury companies from 2008 to 2011 was 61.88%, whereas it was 44.5% for mass apparel companies. Luxury apparel companies are known to have higher markup than mass apparel companies, and since gross margin is the money that is kept from sales after accounting for costs, companies with higher markups and higher retail prices earn high gross margins (Kapferer & Tabatoni, 2010;Sable, n.d.). Asset turnover was higher for mass apparel companies each year and the average of the years. They have higher asset turnover because of their competitive pricing with lower price tags than luxury apparel. This leads assets to turn over more quickly as merchandise turns over more quickly, thus creating a higher asset turnover. At the company level, there were differences in asset turnover among the companies as variation may exist in terms of prices and assortment mix. For mass apparel companies, average asset turnover ranged from 1.15 (Ralph Lauren) to 2.25 (Chico's). For luxury apparel companies, average asset turnover had a greater variation, from 0.36 (Christian Dior) to 1.65 (Mulberry). Overall average asset turnover for mass apparel companies was 1.65 whereas it was 0.92 for luxury apparel companies. Based on the results, it appeared that luxury apparel companies have a higher gross margin and lower asset turnover, whereas mass apparel companies have a lower gross margin and higher asset turnover.
Second, the results showed that luxury apparel companies achieved a more robust post-crisis recovery than mass apparel companies. Net sales for luxury apparel companies increased significantly in 2010, 21.88%, whereas mass apparel net sales increased 10.75%. Net profit was significantly higher for luxury apparel companies in 2011, at 13.75%, whereas net profit for mass apparel companies was 6.75%. Luxury apparel customers were becoming confident again about making luxury purchases. A major contributing factor to the growth of the global luxury industry was the rising demand from developing markets, particularly China (S&P Dow Jones, 2012; Barrie, 2009 Fourth, luxury apparel companies outperformed the mass apparel companies starting in 2010 in terms of net profit margin, indicating a more robust post-crisis recovery.

Implications of the Findings
Findings of this study have several important implications.
First, the results show that the apparel market has been recovering since 2010 from the financial crisis. Particularly, the robust performance of the luxury apparel companies both in the volume of net sales and in profitability after 2010 implies that the luxury customers could have become more confident in spending and/or the luxury market is growing globally (S&P Dow Jones, 2012).
Second, despite the positive development of the luxury apparel market, results of the study suggest that apparel companies should not rush into the luxury market.
Particularly, ROA of the luxury apparel companies turned out to be no better than the mass apparel companies from 2008 to 2011, even in those years that the luxury apparel companies achieved higher net profit margin. This is largely because the asset turnover ratios of the luxury apparel companies were much lower as a result of much higher investment in total assets (such as inventory and fiscal property). On the contrary, to keep growing its business, the luxury apparel companies might consider purposefully expanding into the mass apparel market so as to reach more consumer bases and improve the performance in asset turnover. Some companies have already taken action. For example, Missoni, a privately-held luxury apparel company, collaborated with Target, a discount department store, for a collection that was available for only a limited time (Felice, 2011). The collection was created under the Missoni name and featured menswear and womenswear with average price points from $30 to $60.
Third, findings of the study suggest diversified business models within the group of luxury apparel companies. For example, the financial performance of LVMH, Hermès and Prada appeared to be very different from Burberry in terms of net profit margin, asset turnover and return on assets. It is unclear yet whether the differences were due to their specific market focus or product specialization, which can be further studied.

Limitations and Future Research Agendas
Despite the meaningful and interesting results, this study also has several limitations that might be overcome in future studies.
First, due to the availability of data, only publicly traded apparel companies were included in the study, although several well-known luxury companies such as Chanel, Versace, and Giorgio Armani are privately held. Reliability of the study could be improved if more companies could be included in the analysis. Additionally, PPR and LVMH reported their financial data for the companies as a whole and not their fashion and luxury divisions which could affect the results.
Second, country or market-specific data was not available. Complete financial data for each company per country or specific market is not reported. This is a limitation because studies suggest that a majority of business for luxury apparel companies is coming from the growing wealth of emerging markets whereas the majority of business for mass apparel companies is coming from the U.S. Some luxury apparel companies may have more global presence than others. This could affect the result by not being an even comparison.
Third, the diversity of luxury apparel companies may affect the MANOVA results which are sensitive to within-group differences. For example, Mulberry appeared to be much different than the other luxury companies, particularly in terms of sales growth, cost of goods sold growth, and asset turnover.
From this study, future studies can be conducted to analyze and compare the financial performances of apparel companies. As statistical financial performance did exist between luxury apparel and mass apparel companies from 2008 to 2011, future studies can research whether a statistically significantly difference continues. Case studies can be performed on individual companies to analyze their financial performance. These case studies could study a particular company over a specific period of time to analyze its business model, strategic growth, and financial performance. Other studies could focus on apparel companies within individual countries or regions to determine their performance per region. This could provide information as to what types of apparel companies perform best in what region, for example, whether luxury apparel companies would succeed in a particular region or whether the consumers in that region would respond better to mass apparel companies.
Additionally, a study could compare and contrast luxury apparel companies to other retail formats, including department stores or discount stores to determine whether there was difference in financial performance from 2008 to 2011 between other retail formats.