Shared from Business of Fashion
When Gucci-owner Kering and Hermès report earnings this week, investors will be looking for signs that the big luxury fashion groups are confident that wealthy shoppers are willing to pay higher price tags for designer accessories.
Rival Louis Vuitton, the world’s largest luxury label, said on Tuesday it would raise prices globally from Feb. 16 due to higher manufacturing and transport costs — one of the first major luxury brands to do so this year.
Pricing power could emerge as a key driver of revenue growth again in 2022 for the top tier of the fashion and leather goods industry, following a string of price hikes in 2021 and 2020.
Consumers came out of lockdowns eager to spend their cash on luxury fashion and accessories, after months of being stuck at home. Brands are taking advantage of that spending power to make their wares even more costly and exclusive.
Bloggers on China’s social media platform Xiaohongshu are forecasting higher prices from Kering profit engine Gucci from as soon as Friday. Gucci’s small Marmont shoulder bag, which currently costs 16,500 yuan ($2,602), is seen going up around 3 percent, while other Gucci accessories could climb 10-15 percent.
Users of the Xiaohongshu site, known in the industry as Little Red Book, often cite sales associates for the fashion labels and have a track record of correctly predicting price increases but do not always specify their sources.
Kering’s Balenciaga already raised prices in early January in China, according to the Xiaohongshu site. The cost of the label’s curvy Hourglass handbags in size small and extra-small, for instance, has risen by 3.5-4 percent to 17,500 yuan and 11,550 yuan respectively.
Kering declined to comment, noting it is in a closed period ahead of its annual earnings on Thursday.
Hermès told Reuters it would be likely to address the pricing issue when it reports earnings on Friday, denying analysts’ reports that the company had already increased prices last month by 3 percent to 10 percent.
Chanel raised the prices of some of its most sought after handbags three times last year, with its small classic handbag now costing around $8,200, or 60 percent more than in 2019.
“This year is likely to bring a virtuous circle of pricing power and brand desirability,” UBS said in a note to clients.
Kering is expected to report organic sales growth of 20 percent over the fourth quarter, HSBC has forecast, helped by marketing investments generating buzz around Gucci’s 100th anniversary — last year.
Sales at Hermès are expected to rise 12 percent at constant foreign exchange rates over the period, HSBC said.
By Mimosa Spencer and Shanghai newsroom; Editors: Silvia Aloisi and Jane Merriman
Learn more:
Louis Vuitton Set to Raise Price Tags This Week as Costs Climb
The move will affect leather goods, fashion accessories and perfumes, and makes Louis Vuitton one of the first big labels to hike prices widely this year to protect margins as costs soar.
Images and Article from Business of Fashion