Inflation or not, luxury bands in Olympic form

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Inflation or not, luxury groups in Olympic form

Groups such as Hermès, L'Oréal and Prada announce exceptional half-year results.

The big luxury groups continue their ascent, making up for the slowdown in sales in China with increases in Europe and the United States, in a sector where they have been able to raise prices without losing their customers, impervious to the uncertain global economic situation.

LVMH, Kering, Hermès, L'Oréal, Prada, Moncler: luxury groups announced exceptional half-year results this week, with global sales up 20% at 30% and profits in the same line.

Unlike mass distribution, the luxury clientele is made up of wealthy people, the CSP+, wealthier categories who are less sensitive to inflation, the risk of recession and fears linked to the slowdown in the labor market, according to him.

“[Geographically] all markets are up except China which is down a bit. »

— Arnaud Cadart, portfolio manager at Flornoy

What the groups confirm: luxury saw its sales increase in the United States, Japan and Europe, compensating for a slower pace in China due to confinements to fight against COVID-19 in the second quarter.

Prada sales jumped 89% in Europe and 42% for Moncler thanks to the return of tourists, especially Americans who benefit from a strong dollar against the euro.

In Europe, we now have a quadrupling of sales to the Americans compared to last year and we are above 2019, confirmed Jean-Marc Duplaix, financial director of Kering (Gucci, Yves Saint Laurent, Balenciaga…), during a conference call with journalists.

The rise in the value of the dollar against the euro is a boon for the luxury industry, which produces mainly in Europe (in euros), in particular in France and Italy, but which sells all over the world (in dollars).

We estimate that on average the eurozone represents [only] around 15% of the total turnover of European luxury companies, an HSBC note estimated in mid-July. The sector is thus benefiting from strong exchange rate support thanks to the depreciation of the euro.

The world leader in luxury LVMH saw its turnover take off by 28% in the first half compared to the same period of 2021, thus crossing 36.7 billion euros (48.1 billion euros). Canadian dollars) over the period from January to June. A quarter of this increase is due to the exchange rate effect, according to the group.

Faced with the rise in the cost of raw materials and transport, the sector may also to raise its prices.

For now, customers are insensitive to this increase. Sales in France increased by 41%, a record, underlines Pierre Michaud, manager at Monocle, referring to the situation of the Hermès group's customers.

At LVMH, owner among others from Louis Vuitton, Dior, Tiffany, most brands have increased their prices […] by 3% to 7%, explained the financial director Jean-Jacques Guiony, mainly in the first quarter. When there is a recession, we adjust, and we adapt, he explains.

In the same vein, a small adjustment, between 3% and 5%, was made at Hermès on jewelery and watches to take into account the very sharp increase in the price of gold and certain metals, explained the manager Axel Dumas during a conference call with journalists.

Pierre Michaud, at Monocle, remarked to AFP that at the saddler-leather goods, the rise in prices greatly exceeds the rise in costs.

Despite an uncertain global economic future, the major luxury groups say they are confident. Kering even announced in June that it wanted to double its Yves Saint Laurent sales in the medium term, to reach 5 billion euros annually and multiply by 1.5 those of its flagship brand Gucci, to reach 15 billion euros. euros.

At the same time, Ferrari indicated that it was aiming for sales of up to 6.7 billion euros in 2026, which would be a jump of around 40% on the revenue of some 4.8 billion euros expected this year.

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