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In this year’s third quarter, the Ralph Lauren fashion brand’s U.S. revenue grew 13 percent. Capri Holdings, which owns Michael Kors and Versace, saw revenue jump 17.5 percent. Both grew more than the rate of inflation.
Ralph Lauren’s sales remained strong despite an 18-percent price hike this year, following a 15-percent rise in 2021. Capri also reported pricing its goods higher.
In Europe, demand is even stronger.
On the continent, Coach brand owner Tapestry reported sales up 24 percent following price increases, largely on demand from international travelers, particularly those from Asia and the Middle East.
Ralph Lauren took in 15 percent more in Europe during the period. Capri’s combined revenue from Europe and the Middle East sprang up 20 percent.
Supply chain snarls that had hobbled supplies in the past are largely over, the companies have said in recent statements.
However, the luster may be beginning to tarnish.
At The RealReal, an online retailer of second-hand luxury items, customers are tending to forsake pricier items and trade down to cheaper fare.
Ralph Lauren and Tapestry report more aggressive promotions and discounts among competitors.
Lauren recently reported slower sales in its stores; Tapestry, which also owns the Kate Spade and Stuart Weitzman brands, now projects revenues will fall as much as $400 million this year compared to last, The Wall Street
Journal reported. Capri also shaved $400 million from its 2022 revenue projection.
Luxury merchants are expected to see European sales stumble amid the region’s soaring energy prices and relentless inflation.
The strong dollar also is impinging on sales, the companies noted, as is China’s economic slump and series of drastic anti-COVID lockdowns.
Before and during the COVID War, Chinese shoppers had been among the brands’ most avid fans.
Tapestry’s China sales fell 11 percent in the third quarter; Capri’s sales there fell “in the high double-digit percentage range,” the WSJ said.
The companies can sustain their margins only by refusing to discount, even in the face of slumping demand, analyst Simeon Siegel at BMO Capital Markets, told the WSJ.
“Brands are holding strong so far,” the WSJ noted, “but the real test isn’t even here yet.”
TRENDPOST: Luxury brands are a bellwether.
Demand for pricey baubles was an early indicator in 2021 of the economy’s recovery after COVID lockdowns.
Now, well-heeled shoppers thinking twice about three-figure purses and thousand-dollar luggage is a sign of the far-reaching impacts of inflation, rising interest rates, and growing economic unease.
And as we note in this and previous Trends Journals, even the upper middle class are lowering their shopping standards buying lower quality food at Walmart and cheaper products at dollar stores.