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Luxury brands showed insolent form in 2021 and intend to maintain their margins in 2022 despite rising costs and inflation, which should lead to price increases.
The LVMH group, the world’s No1 in luxury, posted record results in 2021.
REUTERS
The luxury giants have announced financial results for 2021 exceeding, sometimes significantly, those before the pandemic, thanks in particular to the dynamism of sales in Asia and the United States. The world No1 LVMH broke all records with 64 billion euros (nearly 67 billion francs) in turnover, 10 billion more than in 2019 and a net profit jumping to 12 billion euros once morest 7 .8 billion in 2019.
Also Kering and Richemont
Kering (Gucci, Yves Saint Laurent, Bottega Veneta) exceeds its pre-pandemic sales to 17.6 billion euros (18.4 billion francs) in 2021 with a net profit of 3.17 billion euros and Hermès close to 9 billion euros in sales with a net profit almost a billion higher than before the pandemic at 2.44 billion.
The Geneva group Richemont, owner of Cartier, which publishes its results on an offset basis, also announced in mid-January for its third quarter sales up 38% compared to the same quarter of 2019 to 5.6 billion euros ( 5.85 billion francs).
Confidence in luxury
This good financial health did not surprise analysts. In its annual study published in November, Bain and Company estimated that “the market for personal luxury products might reach 360 to 380 billion euros by 2025, with sustained growth of 6 to 8% per year. » And it is not the health restrictions and inflationary risks that will dampen the ardor of the groups which attack 2022 very confident.
“We have an advantage over a lot of other companies and other groups, it is to be able to have a certain flexibility on our prices, so in the face of inflation we have ways of reacting”, declared the boss of LVMH Bernard Arnault during the presentation of the results.
Price increases
Pricing flexibility “is one of the main characteristics of the luxury industry”, said the UBS bank in a note from early February estimating that “big brands such as Louis Vuitton (LVMH) have increased their prices over the past 20 average of 2.5 times the rate of inflation.
“Working on desirability”
“Each new season, we create a new collection, we review all the price matrices”, explained the boss of Kering François-Henri Pinault during the presentation of the results to the press. But if he has noted for some time “a gigantic inflation on transport”, he attributes the price increases also to the fact of “working on the desirability of houses”, according to him, which involves “the sophistication of products”, the ” upmarket”, with “products whose price increases”.
Increases at Rolex
“In some cases, demand exceeds supply, which means consumers will both buy and pay higher prices,” HSBC bank said in a January note. Rolex, “which has largely refrained from raising its prices over the past two years, started 2022 with average price increases of more than 3% and, for some models, they reached up to 12%”, according to this note.
Beware of sudden increases
Hermès, which has faced “very strong” demand for its products, increases its prices once a year, according to its manager Axel Dumas when asked regarding the subject during the presentation of its results. “All our products have the same margins, we don’t play with our prices. They are linked to the manufacturing price and not to their desirability,” he explained, estimating the increase at around 3.5%. The artisanal manufacture of the bags means that they “may be less subject than others to the prices of energy and raw materials”, he added.
However, beware of these price increases, warns Arnaud Cadart, portfolio manager at Flornoy, “this can slow down purchases”. “There are limits. A bag at 1,000 euros that goes to 1,200 euros the next day can slow down demand,” he adds.
(AFP)
