Luxury retailers are making inroads despite a strong dollar and a shaky economy

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Retailers and brands that cater to affluent customers are not entirely immune to the current macroeconomic challenges, which could become even tougher next year if recession fears materialize. However, higher-income households are fairly well insulated from inflation and other financial hardships, and this is reflected in higher-end store sales numbers.

So far this year, 95% of luxury brands in the US and Europe generated positive growthAccording to a recent study by Bain & Co., the luxury market could grow by 21% this year to reach €1.4 trillion ($1.45 trillion at press time).

According to analysts at Bain, luxury is entering a phase after streetwear, and brick-and-mortar stores are regaining their relevance. “A well-thought-out (and effective) ‘boost strategy’ has led to incremental price increases across the industry (approximately 60% growth from 2019-2022) without compromising volume growth,” Bain said in a press release.

For now, the strong US dollar is taking some of the wind out of the segment’s sails. And the pandemic has hampered the success of many luxury brands in China in recent years as lockdowns continue there. Much of this has been revealed in recent reports from luxury players Capri, Tapestry and Ralph Lauren.


Managed by Versace, Jimmy Choo and Michael Kors, Capri has a total of 2 sq.m revenue up 8.6% for the year to 1.41 billion dollars; adjusted for currency translation, total revenue grew by 17.5%. Gross profit rose 7.6% to $951 million, net income rose 12% to $224 million, and gross margin edged down slightly to 67.4% from 68% last year.

By brand, Versace’s year-over-year revenue rose 9.2% to $308 million; Jimmy Choo revenue rose 3.6% to $142 million; and Michael Kors revenue rose 9.2% to $962 million. The latter benefits from the desire to raise the product and raise prices, Capri CEO John Idol told analysts. During the quarter, the Michael Kors brand also launched “Michael Kors Pre-Loved,” an online platform for buying and selling pre-owned items from the brand.

The company enjoys particular strength in North America and Europe and in full-price stores versus online stores or retail outlets, Idol said. The company is also adding more sales partners to department stores in those regions after cutbacks due to the pandemic, leading to “a very significant uptick in business,” he said.

Capri is lowering its outlook for the rest of the fiscal year, however, “due to an increasingly uncertain macroeconomic environment, foreign exchange headwinds and the continued impact of COVID-related restrictions in China,” Idol also said.

GlobalData managing director Neil Saunders is similarly cautious about the company’s near future.

“Capri’s results underscore the continued resilience of the luxury sector, where despite many economic challenges, consumers continue to spend relatively freely,” he said in emailed comments. Overall, we think Capri is in a good position. However, we are very cautious about the next quarter as we believe softer demand and poor exchange rates will hurt growth.”

Ralph Lauren

Reportedly, Ralph Lauren worn by the president’s granddaughter and her fiance at a White House wedding last weekend, exceeded expectations in the last quarter, with revenue rose 5% to $1.6 billion. The apparel brand largely maintained its full-year outlook with slight adjustments in light of the strong dollar, according to its press release. The company expects net income to grow in the high single digits and adjusted operating margin to be at the low end of a prior range of 14% to 14.5%.

Profits fell and net income fell 22.1% to $150.5 million. Operating expenses increased 7% year-over-year, primarily due to investments in marketing and higher compensation and selling expenses to support increased revenue and drive long-term growth, the company said. Retail turnover increased by 1.9% to 917 million dollars, wholesale – by 8.9% to 619.5 million dollars.

Adjusted for currency trends, the brand’s revenue increased closer to 13%, which Saunders called “good progress for the brand in most of the regions where it trades.”

That includes China, which Wells Fargo analysts said “was an unexpected bright spot” for the brand in the period, with profits there growing 30%.

https://www.retaildive.com/news/luxury-retailers-strong-dollar-shaky-economy/636640/ Luxury retailers are making inroads despite a strong dollar and a shaky economy

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