Friday, November 22, 2024

Covid has not obstructed growth of luxury sector

According to research note issued by UBS analysts, pricing power remains one of the key characteristics of the luxury goods industry

PRAVASISAMWAD.com

Analysts have estimated that brands like Louis Vuitton, which is owned by industry leader LVMH, have raised their prices two-and-a-half times higher than the inflation rate over the past 20 years.

In fact, “pricing power remains one of the key characteristics of the luxury goods industry”, UBS analysts wrote in a research note. LVMH bagged a record 64 billion euros ($72 billion) in sales and 12 billion euros in net profit last year, both exceeding pre-pandemic levels.

LVMH Chief Executive Bernard Arnault was quoted saying to reporters: “Our advantage over many other companies and groups is a certain price flexibility, i.e. we have the means to react to inflation.” The French company also owns a broad range of spirits, perfume, jewellery and cosmetics products.

Kering, the owner of Gucci and Yves Saint Laurent, has not taken a beating due to Covid. In fact, it has seen a net profit of 3.2 billion euros on sales of 17.6 billion euros, the group reported recently. Kering CEO Francois-Henri Pinault acknowledged that “for every new season, we create a new collection and we review all the price matrices”.

 

Way back in November, consultancy firm Bain & Company predicted that the luxury goods sector would grow by 6.0-8.0 percent annually and expand to 360-380 billion euros by 2025

 

Hermes, another luxury brand, saw a rise in profits: 2.4 billion euros on sales of nine billion euros. Hermes chief Axel Dumas said that his brand, which is enjoying “very strong demand”, raises its prices once a year. “All of our products have the same margins. We don’t play with our prices. They’re linked to manufacturing costs and not to desirability.”

Swiss group Richemont, which owns Cartier and runs its business year from April to March, said it booked sales of 5.6 billion euros in the third quarter alone, an increase of 38 percent over the corresponding period of 2019.

Rolex, the luxury watch maker, for example, has not increased prices in the last two years. However, at the start of 2022, it raised prices by more than 3.0 percent on average “and for some models they soared as high as 12 percent”.

Way back in November, consultancy firm Bain & Company predicted that the luxury goods sector would grow by 6.0-8.0 percent annually and expand to 360-380 billion euros by 2025.

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Toshi Jyotsna
Toshi Jyotsna
(Toshi Jyotsna is an IT professional who keeps a keen interest in writing on contemporary issues both in Hindi and English. She is a columnist, and an award-winning story writer.)

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