Citing a relatively strong economy, pent-up demand and a broadening clientele for upscale fashions and accessories, European luxury firms are soaring in America — and banking on continued expansion for years to come.
“Our U.S. operation is booming,” said Patrick Thomas, co-chief executive of Hermès International, which saw its sales in America advance 26 percent in the first half. “We think it’s due to the general economic environment. We think we have significant growth potential in the U.S. in the five years to come. We are slightly under our optimum.”
While there are concerns in the U.S. over the impact of rising interest rates and increased gasoline prices on overall retail sales, the luxury side seems relatively immune to such shocks. Indeed, substantial long-term growth potential in the U.S. underscores the positive view of the luxury sector at some investment firms.
“European luxury brands are still under-represented [in the U.S.] and new client bases are emerging, while the threat of rising interest rates should not be overstated,” Antoine Belge, analyst at HSBC in Paris, wrote in a recent overview of the sector.
A spot check of major European firms lends credence to the bullish outlook.
Consider Chanel. Sales of handbags and accessories in the U.S. from January to July ran anywhere from 40 to 68 percent ahead of last year, while ready-to-wear was up 35 percent on average, and as much as 90 percent in some doors.
“We’re predicting a very strong year in 2004, as was 2003,” said Barbara Cirkva, executive vice president of fashion, watches and fine jewelry for Chanel Inc. “People are responding to beautiful, high-quality products.”
At Christian Dior, sales in the U.S. are advancing 43 percent in dollars year-to-date, said president Sidney Toledano.
Even if that rate of growth is lower than in Asia, Toledano said it suggests Dior could double the size of its American business in the next three to four years. In the first half, roughly one-fifth of Dior sales originated in the U.S.
“The taste for luxury has been developing very fast in the U.S.,” he said in an interview.
A Stella McCartney sketch of a custom dress made from protein-based silk in partnership with biotech lab Bolt Threads. The dress will be displayed at The Museum of Modern Art's upcoming design exhibition, "Items: Is Fashion Modern?"