As the luxury slowdown continues, luxury brands are looking for ways to juice up revenue, including looking to new categories like watches and beauty. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, and the Glossy Beauty Podcast for interviews from the beauty industry. –Danny Parisi, sr. fashion reporter
Luxury brands look to category expansion and China to get through the slowdown
In the ongoing luxury slowdown, even Kering isn’t safe. The company announced its latest earnings on Thursday, revealing that its operating profits fell by 15% last year and that it expects the same will happen this year, as well. Sales across most of its brands and divisions were down. Gucci, its largest fashion brand, saw a 4% drop.
To prepare for continued slowdowns in fashion sales, Kering has been revving up investment in its fragrance arm. Last year, Kering spent nearly $4 billion to acquire the perfumery Creed, and it plans to release fragrances from three of its top brands — Bottega Veneta, Balenciaga and Alexander McQueen — this year.
This sort of category expansion is becoming more common across the major luxury groups. For Kering, it’s beauty through its new Kering Beauté arm. Richemont is also investing in beauty as an avenue for expansion, launching its own beauty division in September of last year. And for LVMH, it’s watches. Frédéric Arnault, the new CEO of the newly created LVMH Watches division, is planning to make LVMH and its 10 watch brands into a major horological player.
Whether these new expansions will help the conglomerates avoid the ongoing luxury slowdown remains to be seen. But not all major luxury groups are having as tough a time as Kering. Tapestry raised its profit forecast this week, citing higher demand for its handbags in mainland China and less significant but still positive sales growth in Europe. Sales for Tapestry grew 19% in China and 11% in Europe last quarter.
Ralph Lauren also saw positive growth thanks to strength in China. In its earnings report last week, Ralph Lauren showed its revenue increased 24% globally and 30% in China over the last quarter.
Luxury brands across the industry are seeing the resilience of the Chinese luxury market. Last week, Loewe announced a new Jonathan-Anderson-curated immersive brand exhibition that will open in Shanghai in March. It will include artifacts from the brand’s history and a look at its design and creation process. According to the brand, it’s its first major exhibition, and China was chosen due to the strength of the local Loewe customer.