The bubble of luxury has plenty of fizz in it yet.
While there are signs the explosive growth seen in the sector so far this year is beginning to slow amid uncertainty over the impact of high interest rates, the presidential election and the war in Iraq, most observers believe luxury’s good times will just keep on rolling, at least through 2005. Such players as Louis Vuitton, Gucci, Bulgari, Tod’s, Coach and Cartier are expected to have double-digit growth through next year.
By geographic segment, business in Europe has stabilized and the U.S. has shown buoyancy after a slight bump, while Asia is quickly becoming a hotbed for luxury boutique retailing.
Designers from Milan, Paris and New York remain optimistic about business. And they should be, as consumers vigorously buy their clothing, leather bags, shoes and accessories.
The optimism is fueling another spurt in store openings worldwide. Ralph Lauren earlier this month opened Polo’s first store in Milan, a 16,000-square-foot palazzo that is believed to be the designer’s most expensive store to date; Fendi is said to be planning to open 15 stores a year for the next three to four years; Tod’s has opened 38 units during the past 18 months, and Louis Vuitton last week inaugurated a 9,700-square-foot store in Shanghai as the latest arrival in that booming market. These openings are on top of the string of other new stores arriving almost weekly in developed markets such as the U.S. and developing countries such as Russia and China.
In reporting a 49 percent leap in first-half net profits at LVMH Moët Hennessy Louis Vuitton, chairman Bernard Arnault said the “second half is looking very good for the group as a whole. The world is being driven by economic growth, even if we are not feeling it so much in Europe.”
Speaking earlier this month about Gucci Group’s first-half performance, chief executive officer Robert Polet was also upbeat. He cited a “mini boom” in luxury spending in the U.S., thriving sales in Asia Pacific and strong tourist spending by Japanese in South Korea and Hawaii.
“We think overall, companies have bounced back from the Iraq and SARS crises,” said Rupert Trotter, an equities analyst at Isis Asset Management in London. “Russia, India and China — and the Chinese travelers — especially are becoming major contributors to growth in the luxury goods sector, adding 3 percent to demand year-on-year, each year.”
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