{"id":6642,"date":"2023-10-29T07:24:09","date_gmt":"2023-10-29T07:24:09","guid":{"rendered":"https:\/\/infundpros.com\/business\/louis-vuitton-juggles-volume-and-value-as-luxury-boom-ebbs\/"},"modified":"2023-10-29T07:24:09","modified_gmt":"2023-10-29T07:24:09","slug":"louis-vuitton-juggles-volume-and-value-as-luxury-boom-ebbs","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=6642","title":{"rendered":"Louis Vuitton juggles volume and value as luxury boom ebbs"},"content":{"rendered":"
\n

A screaming crowd 20 people deep strained against barriers and spilled on to the road outside Louis Vuitton\u2019s October runway show on Paris\u2019s Champs-\u00c9lys\u00e9es as movie star Zendaya walked the red carpet in a white zippered gown split to the navel.\u00a0<\/p>\n

\u201cIt\u2019s like doing crowd control during Beatlemania,\u201d a police officer grumbled to a colleague as he swatted away a Louis Vuitton handbag swinging from an animated woman\u2019s wrist.<\/p>\n

The LVMH-owned fashion house has been one of the biggest winners of the luxury boom that is now drawing to a close, doubling in size in the past five years to become the world\u2019s first luxury brand to exceed \u20ac20bn in annual sales. <\/p>\n

Against this more subdued economic backdrop, Vuitton\u2019s chief executive Pietro Beccari \u2014 who was appointed from LVMH\u2019s Christian Dior Couture in January \u2014 now faces the dual challenges of continuing to grow an already huge brand while maintaining its luxury cachet.\u00a0<\/p>\n

\u201cLouis Vuitton is the leader of luxury so we have to keep on doing more and more, creating more and more desirability for the culture of the brand as well as the designs,\u201d Beccari told the Financial Times at the October show. <\/p>\n

Inside the cavernous venue \u2014 a building site for what will become one of Vuitton\u2019s newest and biggest global location swathed in orange plastic sheeting for the occasion \u2014 LVMH executives and the family of billionaire owner Bernard Arnault mingled with stars and influencers. It was a show of force for the flagship house of Arnault\u2019s sprawling luxury empire two weeks before third-quarter results showed that industry-wide growth was softening to a more normal historical pace after a three-year boom.\u00a0<\/p>\n

<\/source><\/source>\"Zendaya<\/picture>
Stars such as Zendaya help boost the appeal of designer brands <\/span> \u00a9 Edward Berthelot\/Getty Images<\/span><\/figcaption><\/figure>\n

LVMH sales grew 9 per cent in the most recent quarter to \u20ac19.9bn, down from 17 per cent in the preceding three months. The group does not break out figures for individual brands, but analysts estimate Louis Vuitton tracks the trajectory of LVMH\u2019s fashion and leather goods division where the pace of growth halved from 21 per cent in the second quarter to 9 per cent in the third. <\/p>\n

But despite the change in pace, Louis Vuitton is still expected to be well on its way to the next milestone of \u20ac30bn in sales in the next few years, according to estimates from HSBC.<\/p>\n

\u201cAt that size, every year they create the equivalent of a new company\u201d in terms of growth, said Roberto\u00a0Costa, head of global luxury investment banking at Citi. \u201cIt\u2019s such a strong brand that it will continue growing.\u201d<\/p>\n

However, achieving that will take more work as aspirational customers in the US and Europe rein in spending and China\u2019s recovery from last year\u2019s Covid-19 lockdowns proves slower than expected. Louis Vuitton\u2019s like-for-like sales in the US turned negative in the first three quarters of the year, according to HSBC estimates, but are expected to pick up towards the end of 2023.<\/p>\n

Arnault\u2019s thesis for how to continue growing Vuitton was set out at the group\u2019s annual meeting at the start of 2022. \u201cLouis Vuitton is much more than a fashion brand, it is a cultural brand with a global audience,\u201d he said.<\/p>\n

Erwan Rambourg, global head of consumer and retail research at HSBC, said: \u201cWhen Arnault tells you Vuitton does not sell handbags but culture, he is basically telling you that as long as the brand equity is strong, there\u2019s absolutely zero limit to what they could be selling tomorrow: hospitality, skincare, skateboards, whatever.\u201d<\/p>\n

The appointment of entertainer Pharrell Williams to design menswear earlier this year epitomised this strategy. Although his lack of design training was controversial in some fashion circles, his debut runway show on a floodlit bridge spanning the Seine was a promotional hit, garnering more than a billion views across video platforms \u2014 a record for the brand. Models were accompanied by a gospel choir and a live orchestra, and the event was rounded out with a performance by Williams and rapper Jay-Z.\u00a0<\/p>\n

Although menswear only accounts for about 5 per cent of Louis Vuitton\u2019s sales, \u201cthat\u2019s besides the point. The point is the halo effect\u201d that comes with Williams, said Rambourg.\u00a0<\/p>\n

<\/source><\/source>\"Louis<\/picture>
Louis Vuitton chief executive Pietro Beccari, left, and Pharrell Williams. who runs menswear design at the brand <\/span> \u00a9 Matteo Prandoni\/BFA.com\/Shutterstock<\/span><\/figcaption><\/figure>\n

Industry experts expect Beccari to use enthusiasm for the brand to expand Louis Vuitton\u2019s reach into new categories, just as he did successfully during his time at Dior, during which sales quadrupled to more than \u20ac8bn and margins more than doubled, according to estimates.\u00a0<\/p>\n

Expanding Vuitton\u2019s limited offering in perfume and cosmetics is one area the company could tackle. Dior\u2019s homeware and childrenswear lines are the top seller at London luxury department store Harrods, according to managing director Michael Ward, another field Beccari could look at.<\/p>\n

Louis Vuitton\u2019s construction on the Champs-\u00c9lys\u00e9es is on the site of a former hotel, leading to speculation that the brand plans to open its first permanent hospitality location there. \u201cThe Louis Vuitton brand lends itself to experiential offerings: hotels, restaurants, maybe even travel itineraries,\u201d said an executive at the group.<\/p>\n

While Vuitton\u2019s leather goods and menswear product offering has been strong, their womenswear is weaker, according to Ward. \u201cFor me the biggest thing is making sure they stay relevant in fashion and accessories, which is the key to their future,\u201d Ward said. \u201cLVMH is bringing in [Beccari] to do what he did with Dior, which was to create really fantastic fashion and apparel.\u201d<\/p>\n

Over the years, critics have fretted that Vuitton\u2019s increasing size risked making it too mainstream to be considered luxurious and exclusive. The brand\u2019s answer has been to develop tailored product lines and communication campaigns for different audiences.\u00a0<\/p>\n

The result is that \u201cwhether you\u2019re a first-time 22-year-old purchaser or an uber-wealthy Hong Kongese tai-tai<\/em> buying for the 25th year in a row, you\u2019re getting the illusion that you\u2019re the only one buying Vuitton\u201d, said Rambourg.\u00a0<\/p>\n

Despite its strength and size, however, the brand will have to readjust to the new normal alongside the rest of the industry. The Stoxx Europe Luxury 10 index has fallen by about 20 per cent from historic highs in late April as signs of softening in the US spread to other markets, with LVMH shares falling in tandem from highs of more than \u20ac900 a share to about \u20ac661 today, giving it a market capitalisation of \u20ac334bn.<\/p>\n

Brands such as Gucci and Balenciaga \u2014 owned by rival Kering \u2014are selling \u201cvery poorly\u201d this year but \u201cLouis Vuitton has also not been great\u201d, according to a buyer at a North American department store. \u201cAnything that\u2019s really dependent on logo or brand recognition is not doing well.\u201d<\/p>\n

LVMH is going through its annual budgeting process for all its companies, including Vuitton. Brand managers have been told not to present budgets with sales growth in excess of 10 per cent for next year, one analyst said. \u201cThey are clearly turning the screws on expenses.\u201d<\/p>\n

According to an executive in the luxury industry: \u201cThey are as data- and merchandising-driven as they come, so when people at Louis Vuitton start to say they are concerned [about the outlook], you listen.\u201d<\/p>\n

LVMH and Louis Vuitton declined to comment. <\/p>\n

\u201cIf you can build something exceptional, you can cultivate a moment of magic that people will pay anything to be a part of,\u201d the LVMH executive said.\u00a0<\/p>\n

On the street after the runway show, two American women at the back of the crowd strained to see over the melee as K-pop star Felix walked the rope line flanked by bodyguards.<\/p>\n

\u201cWhat is this about?\u201d one shouted.\u00a0<\/p>\n

\u201cI don\u2019t know, but let\u2019s get to the front,\u201d her friend replied before plunging into the throng.\u00a0<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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