Blog: Leonie BarrieLooking up for luxury?

Leonie Barrie | 5 August 2009

Luxury brands and retailers appear to be weathering a difficult market, with strong demand in Europe and Asia helping sales at both LVMH and PPR it emerged last week.

At LVMH, the world's biggest luxury goods group, a strong showing from the company's fashion and leather goods brands failed to offset slumps in other divisions – most notably wines and spirits, and watches and jewellery – as retailers cut their inventories.

But while first half profit fell by 23%, revenues edged up by 0.2% to EUR7.81bn, thanks largely to an 8% sales increase from fashion and leather goods. Chairman and CEO Bernard Arnault said the results demonstrated the appeal of the company's brands, which he described as "particularly remarkable, given the global economic crisis".

Its biggest rival, luxury goods group PPR, posted a 19% drop in first half profits to EUR281m (US$397m), but beat most analysts’ expectations. The owner of Gucci and other high-end brands said revenues in the first six months of the year fell 3.6% to EUR9.235bn – but the contribution from markets outside France continues to grow.

Luxury handbag and accessories maker Coach, meanwhile, posted a 31.8% drop in fourth quarter profit as cash-strapped shoppers sought out deals in its factory outlets but shied away from buying more expensive items at US department stores.

To try to boost demand, Coach is launching a new global brand in autumn 2010 named after its chief designer Reed Krakoff, which will also mark its first foray into ready-to-wear. The company has also tweaked its pricing strategy, with more products sitting in the "sweet spot" of between $200 and $300, which is helping to bring younger shoppers into its stores.

Mirroring an earlier announcement by rival Nike, sportswear giant Adidas has responded to Greenpeace claims connecting the sourcing of leather with rainforest destruction by unveiling a new set of stringent supplier requirements. In particular, the German company wants its Brazilian suppliers to prove that all leather is sourced from cattle outside the Amazon Biome by 1 July next year.

The moves by both Nike and Adidas highlight how the industry's complex supply chains exacerbate the challenge of raising environmental standards. However, the Greenpeace report on which their decisions were based could also be a catalyst for multi-stakeholder dialogue.

New rules setting out the shape and material of the record-breaking high-tech bodysuits worn by competitive swimmers have been described by Speedo as "a retrograde step that could be detrimental to the future of swimming." The sport's international governing body FINA has decided that for men, the swimsuits can run from the waist to the knees only, while for women the suits should run from the shoulders to the knees. FINA has also decided the suits should be made only from textiles.

Under these guidelines, long-length swimsuits like Speedo's LZR Racer, which was launched ahead of last year's Olympic Games in Beijing, would be banned.



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