Kering and Hermes, two of the biggest players in the luxury fashion industry, are about to release their earnings reports, and investors are eagerly awaiting their stance on increasing prices for designer accessories. This development comes after Louis Vuitton, the world’s largest luxury label, recently announced its decision to raise prices globally due to rising production and transportation costs. As the first major luxury brand to do so this year, Louis Vuitton’s move could potentially set a trend for other players in the industry.
The luxury fashion sector has experienced a surge in demand as consumers emerge from lockdowns with a desire to indulge in luxury items. Brands are seizing this opportunity by raising prices, further elevating the exclusivity and expense of their products. Bloggers on China’s popular social media platform, Xiaohongshu or Little Red Book, have been predicting price increases for Kering’s Gucci, with Gucci’s small Marmont shoulder bag expected to rise by approximately 3%, and other accessories potentially seeing a 10-15% increase.
Kering’s Balenciaga has already raised prices in China, with the curvy Hourglass handbags witnessing a hike of 3.5-4%. However, Kering has chosen not to comment on these price adjustments as it is currently in a closed period before its annual earnings announcement. Conversely, Hermes has refuted reports suggesting that it had increased prices by 3% to 10% last month. The company states that it will likely address the pricing matter during its upcoming earnings report on Friday.
Chanel, another prominent luxury brand, increased the prices of its sought-after handbags three times last year, with the small classic handbag now retailing for approximately $8,200, marking a 60% increase compared to 2019. UBS, in a note to clients, predicts that this year will witness a “virtuous circle” of pricing power and brand desirability within the luxury fashion industry.
Financial analysts anticipate that Kering will report a 20% growth in organic sales for the fourth quarter, thanks to strategic marketing investments that generated heightened interest in Gucci’s 100th anniversary in 2021. Likewise, sales at Hermes are expected to rise by 12% at constant foreign exchange rates during the same period. With these positive projections, it will be intriguing to observe whether Kering and Hermes will follow Louis Vuitton’s lead and hike their prices, thereby indicating their confidence in affluent shoppers’ willingness to pay higher price tags for luxury accessories.
Useful links:
– Hermes Revenue Surges As Demand for Luxury Goods Returns
– Hermes Interim Sales Surge 36.4%, Reflecting Healthy Luxury Consumer Market
