PARIS — Few luxury companies are likely to match Chanel’s dramatic move to harmonize prices, which involves an imminent 20 percent price increase in Europe and a 20 percent drop in China, according to HSBC.
In a research note published Wednesday, luxury analyst Antoine Belge said price adjustments are likely for listed companies, though not to the extent of privately held Chanel and Patek Philippe, which are “leading the way.”
“We are not convinced many other brands would significantly increase price points short-term as there is a risk of alienating what little is left of local European consumer interest,” Belge wrote, estimating the magnitude of price increases for European luxury companies would be in the range of 10 percent “and be gradually implemented over the next 12 to 18 months.”
HSBC also forecasts price reductions of about 10 percent in Hong Kong and Mainland China rather than 20 percent, while prices in Japanese yen are likely to creep up in the second quarter.
“Hong Kong has been losing out to alternative destinations and many products are currently cheaper in Japan than in Hong Kong,” Belge noted.
In his view, the “benefit of the weaker euro in terms of profits is far greater than issues around pricing,” estimating the positive exchange rate effect at the EBIT level will be around 30 percent “spread over 2015 and 2016 depending on hedging strategies.”
As reported, Chanel plans to introduce harmonized prices gradually and across all fashion categories, with the goal of full alignment by the end of this year, with the exception of Brazil, constrained by high export duties.
The shift is designed to ensure its customers are not led by price differentials, which have become more extreme in recent months thanks to the rapid devaluation of the euro, fueling a parallel market.
In an interview with WWD, Chanel’s president of fashion Bruno Pavlovsky said harmonized prices would allow Chanel’s boutique managers to focus on building their local clientele, and help position the brand for an eventual leap into digital commerce.
Long lines formed in front of Chanel stores in Hong Kong on Wednesday as Chanel opted to institute the lower prices immediately, ahead of the April 8 date when European prices are to shoot up.