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Economy. The luxury goods industry is immune to the crisis

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The cost of living has risen sharply over the past year, but inflation is not hitting everyone equally. The richest consumers continue to drive luxury brand sales, with Ferrari, Dior, Louis Vuitton and Versace expecting even better results in the coming months, CNBC reports.

Experts point out that also in the past luxury goods were characterized by exceptional resistance to economic turmoil. Now, in addition, the richest have an even larger pool to spend. “The disposable income of most affluent consumers has increased because the pandemic has saved them on travel,” Amrita Banta, managing director of Agility Research & Strategy, told CNBC.

Promising results and new forecasts

LVMH, which owns brands such as Louis Vuitton, Dior, Fendi and Givenchy, recorded a revenue increase of 21 percent. to $ 37.8 billion in the first half of 2022.

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Versace’s quarterly revenue increased by almost 30 percent. up to $ 275 million. Total revenues of the parent company, Capri Holdings, which also owns the Michael Kors and Jimmy Choo brands, grew by 15%. to $ 1.36 billion.

Despite economic uncertainty, Capri CEO John Idol said the company did not intend to revise its long-term goals due to “proven resilience in the luxury sector.” The Italian manufacturer of luxury cars Ferrari is expecting higher revenues.

Other companies are also seeing increased sales in segments targeting more affluent customers. The American airline Delta Air Lines recorded a significant increase in ticket sales in the business and premium economy class.

Symbols of wealth

Experts say the enduring strength of the luxury category is confirmed by past crises in which the rich are often the last to feel the effects because their resources are so large. Among the wealthy, constant spending also signals that expensive purchases are used as status symbols.

“Having symbols of power in your tribe is a powerful thing,” said Milton Pedraza, founder and CEO of Luxury Institute, a market research and business management company. “These symbols of power are still of great importance in the ultra-wealthy tribes,” he added in an interview with CNBC.

Amrita Banta of Agility Research & Strategy says there has been a cultural shift since the recession in 2008 and that high net worth consumers today are less to spend money during the downturn and “feel entitled to spend their wealth.” She said this is partly a reflection of people in developing countries where wealth is growing.

Luxury companies may see a slowdown in spending among 80 percent. “almost wealthy,” said Pedraza of the Luxury Institute. But according to him, these consumers usually make up around 30% of the total. sales.

Instead, he said luxury brands often count on just 20%. their customers – ultra-wealthy and very wealthy, who are responsible for most of their sales. And since this group is much more resistant to inflation and recession, luxury companies tend to experience the slowdown last, he said.

“The type of customers and sales volume of true luxury brands make them very resilient,” he said. “Super resistant,” he added.

Main photo source: Papin Lab / Shutterstock



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