· Nike retains top spot in the annual Brand Finance Apparel 50 ranking despite brand value dropping to US$28.0 billion.
· H&M defends second place with a brand value of US$19.0 billion but Zara is closing the gap following 21% brand value surge.
· Hermès overtakes Louis Vuitton as the most valuable luxury apparel brand, following 36% growth to US$11.3 billion.
· Under Armour falls back to earth recording largest brand value drop in the league table at -36% year on year.
Nike remains the world’s most valuable apparel brand despite a significant drop in brand value down 12% to US$28.0 billion, according to a new report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy. Nike experienced a tough year, especially in the North American market correlated with reduced popularity among teenagers. It now also faces challenges connected to inappropriate behaviour among executives and managers. Failure to effectively address these issues may result in a further decrease in the brand’s strength and value next year. In addition, Adidas (up 41% to US$14.3 billion) played a key role in the struggles faced by Nike, with the German-based apparel brand growing rapidly across both sporting and casual categories.
H&M struggles as Zara closes the gap
In second place, the brand value of H&M (down 1% to US$19.0 billion) remained relatively stagnant over the last year, with significant pressure upon its bricks and mortar retailing strategy from online competitors. What is more, in the past few months, the brand has struggled to maintain a positive image which may jeopardise its brand performance in the future. In January, a children’s hoodie listing on the retailer’s website was criticised for racist undertones, sparking a global social media backlash and street protests in South Africa. While in March, H&M was engulfed in a controversy surrounding intellectual property rights of street artists as it decided to pursue a court case against the author of a graffiti used in one of the brand’s adverts. If the Swedish giant’s problems continue, it can be overtaken by Spanish Zara (up 21% to US$17.5 billion), which significantly narrowed the gap between the two brands, following a successful year.
Richard Haigh, Managing Director of Brand Finance, commented:
“The top four brands in apparel are here to stay. However, steep competition to maximize on the sporting apparel trend, coupled with increased choice and information for the consumer could threaten Nike’s future position in the rankings. This year, Adidas’ brand value is further encroaching on the incumbent champion, which has suffered significant loss to brand value. Empowerment to the consumer is having a wide-spread impact on the industry, allowing fast-fashion retailer Zara to reign supreme on the high street, challenging H&M and leveraging both online and offline sales platforms to meet consumer demands for variety, fashion and low prices.”
Hermès overtakes Louis Vuitton in luxury
The top four luxury brands, Hermès (up 36% to US$11.3 billion), Louis Vuitton (up 17% to US$10.5 billion), Cartier (up 45% to US$9.8 billion), and Gucci (up 25% to US$8.6 billion) each recorded very strong brand value growth as consumers in emerging markets are increasingly reaching for luxury products over commoditised ones.
While each of these four luxury brands grew in value, Hermès has taken a leadership role as a consequence of its brand focus on product and independence. In doing so, Hermès has developed a brand perception that is impossibly exclusive but still widely available, and thus capable of achieving strong revenue growth.
Cartier (up 45% to US$9.8 billion) was the biggest brand value winner among the four, climbing to 7th place from 10th. The luxury brand, which is owned by the Richemont Group (whose other brands include Van Cleef & Arpels and Montblanc) benefited from sales growth in the UK, mainland China, and Hong Kong.
Under Armour falls back to earth
After a stellar 2016 performance, Under Armour (down 36% to US$3.8 billion) is falling back to earth on significantly reduced expectations, recording largest brand value drop in the league table. The brand, which had grown remarkably in previous years on the back of its high-tech sports clothing, failed to spread into basketball shoes and other product verticals.
The brand’s strengths had traditionally revolved around clever product placement and celebrity endorsements, especially with American basketball superstar Stephen Curry. Unfortunately for Under Armour, it appears that its highly-regarded expertise in athletic clothing has not been recognised across the rest of its product range.
Anta remains mainland China’s leading sportswear apparel brand
Chinese sports and footwear brand, Anta (up 29% to US$2.6 billion this year) continues a remarkable run of brand value growth. While the brand remains focused on the Chinese domestic market, Anta is continuing to grow its direct-to-consumer online retailing business model in the US. This has seen it rise from the 33rd most valuable apparel brand to 28th this year.
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 50 most valuable apparel brands in the world are included in the Brand Finance Apparel 50 2018 league table.
Brand value is equal to a net economic benefit that a brand owner would achieve by licensing the brand. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand.
More information about the methodology as well as definitions of key terms are available in the Brand Finance Apparel 50 2018 report.
Data compiled for the Brand Finance Apparel 50 league table and report is provided for the benefit of the media and is not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading brand valuation and strategy consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand Strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1. Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2. Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3. Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4. Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5. Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6. Apply the royalty rate to the forecast revenues to derive brand revenues.
7. Brand revenues are discounted post-tax to a net present value which equals the brand value.