In the (Birkin) bag… Inflation is near a 40-year high and the global economy is on the downturn, but deep-pocketed shoppers are still snapping up $10K purses. Yesterday, luxury retailer Hermès said its quarterly sales rose 24% from last year, while Gucci owner Kering reported a 23% jump. As many industries brace for dwindling demand, luxe retailers see few signs of a slowdown:
- Opportunity in opulence: Analysts expect luxury sales to rise 5% this year as shoppers splurge on Cartier watches, Dior scarves, and “supremium” whips like Ferraris.
- Fashionably great: Last week LVMH (which owns Louis Vuitton, Dior, Sephora, and Moët Hennessy) posted a bigger-than-expected 22% sales bump.
A tale of bags and bag-nots… Business is booming for pricey products: luxury retailers can often raise prices without losing sales because wealthier shoppers are less sensitive to price increases. Hermès has already hiked prices 4% this year (twice as much as in previous years) and plans to jack up prices up to 10% in January. Chanel hiked the price of its classic purse three times last year — for a $3K total increase.
The threshold’s higher for high rollers… Gucci belts aren’t made for tightening: Hermès expects business to keep booming because its customers aren’t worried about gas prices. Brands that cater to big spenders, like Ferrari, have recently boosted their profit forecasts as the superrich throw down for pricier products. Meanwhile, regular retailers like Walmart and Target have lowered their profit forecasts as everyday consumers continue to cut back.