{"id":40176,"date":"2025-09-03T05:20:10","date_gmt":"2025-09-03T05:20:10","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/40176\/"},"modified":"2025-09-03T05:20:10","modified_gmt":"2025-09-03T05:20:10","slug":"greedflation-boosting-growth-at-big-us-groups-smaller-european-labels","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/40176\/","title":{"rendered":"Greedflation Boosting Growth at Big US Groups, Smaller European Labels"},"content":{"rendered":"

\n\tLONDON \u2014<\/strong> The season\u2019s most popular color? Without a doubt, it\u2019s white.<\/p>\n

\n\tGroups including Burberry,<\/a> Ralph Lauren<\/a> and Tapestry<\/a> and smaller European labels have been moving rapidly into the white space created by the big European luxury brands, whose aggressive price hikes in the post-pandemic years have alienated aspirational consumers in China, the U.S. and elsewhere.<\/p>\n

\n\tAlthough the era of greedflation is slowly winding down and the big luxury houses are no longer increasing prices in the double digits, it will take time for them to win back the trust of aspirational customers who have already moved on, and opting for brands they believe offer better value for money.<\/p>\n

\n\tA Consumer Backlash<\/strong><\/p>\n

\n\tOver the past three years, like-for-like price inflation \u2014 especially in soft luxury \u2014 has been \u201csignificantly ahead\u201d of its long-term average, and well in the double digits, according to Bernstein. \u201cBrands like Chanel have led this escalation, and most have followed,\u201d the bank said.<\/p>\n

\n\tAccording to Morgan Stanley, the affordability of certain \u201ciconic\u201d luxury handbags in the U.S. has deteriorated between 10 percent and 33 percent over the past decade, far outstripping disposable income in the U.S., and \u201cpricing out the middle-income consumer.\u201d<\/p>\n

\n\tIn raising their prices, Morgan Stanley added, \u201cluxury brands have provided oxygen to more accessible alternatives. We think it is no coincidence that some more affordable brands, such as Toteme, Pol\u00e8ne, or Coach are currently growing strongly.\u201d<\/p>\n

\n\tHSBC believes that \u201cCoach, Ralph Lauren<\/a>, Longchamp and Burberry are seemingly benefiting greatly from the white space being created by premium luxury brands being out of reach for many aspirational consumers,\u201d HSBC added.<\/p>\n

\n\tThe bank argued that Europe\u2019s luxury giants \u201chave undoubtedly lost in authenticity and appeal,\u201d due to a lack of creativity, greedflation and prices that are \u201cdifficult to justify.\u201d<\/p>\n

\n\tThere is also a rapidly growing white space in China. According to the business research firm Third Bridge, local Chinese brands \u201coffer better value for money, and are creating increasingly fierce competition\u201d for the luxury brands in a highly price-sensitive market.<\/p>\n

\t\t\t\t\t\t\"\"<\/p>\n

\t\t\t\t\tAlexa Chung in Burberry\u2019s Festival campaign.<\/p>\n

\t\t\t\t\t\t\t\t\tCourtesy of Burberry<\/p>\n

\n\tA New Land of Opportunity<\/strong><\/p>\n

\n\tThe white space is fertile ground for brands touting a value for money proposition. <\/p>\n

\n\tIn August, Ralph Lauren<\/a> outstripped first-quarter expectations and raised its outlook for the full fiscal year, even with some fear over how consumers will react to the impact of higher U.S. tariffs on imports.<\/p>\n

\n\tNet income rose 30.7 percent in the quarter to $220.4 million, while\u00a0revenues for the three months ended June 28 increased 14 percent to $1.7 billion, an 11 percent increase in constant currency.<\/p>\n

\n\tPatrice Louvet, president and chief executive officer of Ralph Lauren Corp., said in an interview the company puts a lot of emphasis on value perception, which \u201cisn\u2019t just about price. It\u2019s about how\u2019s the storytelling, what\u2019s the product experience, what\u2019s the shopping experience.\u201d<\/p>\n

\n\tHe added: \u201cWe know the consumer is discerning, and we\u2019re putting a lot of emphasis on making sure that, relative to the competitive set, we provide a very attractive value. It is all about authenticity.\u201d<\/p>\n

\n\tTapestry has also been reaping rewards in the white space. The parent of Coach and Kate Spade beat fiscal third-quarter earnings and sales estimates and raised its outlook for the rest of its year, which ended in July.<\/p>\n

\n\tIn the fourth quarter, sales of the powerhouse Coach handbag brand shot up 14 percent to $1.4 billion in the quarter, adding a dash of accessible luxury luster to the company.\u00a0<\/p>\n

\t\t\t\t\t\t\"Patrice<\/p>\n

\t\t\t\t\tPatrice Louvet<\/p>\n

\t\t\t\t\t\t\t\t\tStephane Feugere\/WWD<\/p>\n

\n\tIn the first quarter of fiscal 2025-26, Burberry successfully stemmed the double-digit sales declines of the previous year and outstripped growth expectations.<\/p>\n

\n\tComparable store sales in the three months to June 30 were down 1 percent, compared with analysts\u2019 projections of a 3 percent decline. In the corresponding period last year, comparable store sales were down 21 percent.<\/p>\n

\n\t\u201cIt\u2019s early days, and it\u2019s a tough macro, but we are really starting to see the potential of what lies ahead,\u201d said CEO Josh Schulman, who has been tweaking Burberry\u2019s pricing strategy and adopting a \u201cgood, better and best\u201d offer in a bid to appeal to a variety of customers, not just the high-net-worth ones.<\/p>\n

\n\t\u201cWe\u2019re taking things step by step, but we are optimistic about the quarters ahead, and optimistic about the business in general,\u201d Schulman added.<\/p>\n

\n\tHSBC has high hopes, too. \u201cBurberry used its outlet network swiftly to help move products from an overpriced, handbag-focused approach to go back to basics: well-priced, authentic, outerwear-focused,\u201d the bank wrote in a report called \u201cKnight Fever,\u201d referring to the brand\u2019s historic logo.<\/p>\n

\n\tCustomers, too, are taking a renewed interest in the more democratic Burberry.<\/p>\n

\n\tIn July, after a year-long absence, Burberry made a comeback on the shopping platform Lyst\u2019s ranking of hottest brands. In the second quarter of 2025, Burberry landed in 17th place, ahead of Gucci, Birkenstock and Valentino.<\/p>\n

\n\tLyst said Burberry\u2019s return was the result of a resurgent \u201ccool Britannia\u201d vibe, a strong festival campaign and a growing demand for its menswear offering.<\/p>\n

\t\t\t\t\t\t\"\"<\/p>\n

\t\t\t\t\tA Lady Dior bag.<\/p>\n

\n\tBig Luxury Is Feeling the Pain<\/strong><\/p>\n

\n\tBy contrast, the big European brands are suffering and hoping that recent changes in management and creative direction, as well as less-aggressive price hikes will turn the tide in their favor.<\/p>\n

\n\tAccording to Citi, luxury brands raised prices 3 to 6 percent in July to offset the impact of higher U.S. tariffs, and to smooth over price gaps in Europe. Industry sources say there will be more single-digit price hikes before the end of the year.<\/p>\n

\n\tIn the meantime, brands continue to feel the pain of consumer backlash against prices.<\/p>\n

\n\tIn the first half, LVMH Mo\u00ebt Hennessy Louis Vuitton<\/a> saw net profit fall 22 percent as its key fashion and leather goods division missed expectations. The division, home to brands including Louis Vuitton, Dior and Celine, recorded a 9 percent drop in organic sales in the second quarter, below the Visible Alpha consensus forecast for a 7 percent decline.<\/p>\n

\n\tAt Kering<\/a>, parent of Gucci, Saint Laurent and Balenciaga, group net profit plummeted 46 percent in the first half. The group is hoping that incoming CEO Luca de Meo can stop the bleeding, particularly at Gucci, where Demna is set to take over as creative director.<\/p>\n

\t\t\t\t\t\t\"\"<\/p>\n

\t\t\t\t\tSienna Miller in a Gucci hobo bag and red Miu Miu clogs.<\/p>\n

\t\t\t\t\t\t\t\t\tGetty Images<\/p>\n

\n\tAt Prada Group, retail sales in the first half were down 1.9 percent to 1.65 billion euros, with performance in the second quarter impacted by lower tourist flows in Japan and Europe. Net profit in the six-month period was broadly flat at 386 million euros.<\/p>\n

\n\tIn 2024, the Chanel juggernaut came to a halt, as revenues fell for the first time since the pandemic and operating profits plummeted 30 percent amid a sharp slowdown in luxury spending in mainland China.<\/p>\n

\n\tRevenues at the French fashion house totaled $18.7 billion in 2024, down 4.3 percent at comparable rates, as growth in Japan and South Korea failed to offset the impact of macroeconomic and geopolitical volatility elsewhere.<\/p>\n

\n\tThe Value for Money Conversation <\/strong><\/p>\n

\n\tEven with changes to pricing, creativity and management, it might take a while for the big brands to win back aspirational customers.<\/p>\n

\n\tAccording to a joint report by Bain & Co. and Altagamma, the Italian luxury goods industry association, engagement with brands across the demographics has slowed since 2022, with social media follower growth down 90 percent, and engagement rates off by 40 percent \u201clargely due to price fatigue and stagnant creativity.\u201d<\/p>\n

\t\t\t\t\t\t\"The<\/p>\n

\t\t\t\t\tThe expanded Louis Vuitton flagship on Via Montenapoleone in Milan.<\/p>\n

\t\t\t\t\t\t\t\t\tGiovanni Giannoni\/WWD<\/p>\n

\n\tBernstein, meanwhile, believes that \u201cvalue for money remains the main concern for luxury brands in the second half, with the luxury sector facing a paradigm crisis across multiple fronts.\u201d<\/p>\n

\n\tYanmei Tang, analyst at Third Bridge, said even the most resilient luxury buyers \u201chave their limits, and brands must offer more than just higher price tags to retain them. Price increases must be justified through innovation or improvements.\u201d<\/p>\n

\n\tTang added that \u201cvalue perception remains important, as many ultra-wealthy individuals are not willing to overpay simply for a brand name. While these consumers continue to spend, they are becoming more selective, drawn to \u2018quiet luxury\u2019 and discreet, high-quality items recognized by their peers.\u201d\u00a0<\/p>\n

\n\tAmrita Banta, managing director at Agility Research & Strategy, said that despite greedflation, high-net-worth and ultra-high-net-worth individuals are still spending on luxury goods.<\/p>\n

\n\t\u201cHowever, they are more selective and shifting toward\u00a0value-anchored\u00a0luxury. It is a redefinition of what makes luxury worth paying for,\u201d she said, adding that these shoppers scrutinize\u00a0the value of their purchases.\u201d<\/p>\n

\t\t\t\t\t\t\"Backstage<\/p>\n

\t\t\t\t\tBackstage at Herm\u00e8s men\u2019s spring 2026.<\/p>\n

\t\t\t\t\t\t\t\t\tVanni Bassetti\/WWD<\/p>\n

\n\tBanta added: \u201cIf a price increase is accompanied by enhanced quality, exclusivity or service, they may accept it. However, if it\u2019s perceived as unjustified, it can result in brand erosion. High-net-worth consumers are typically brand-loyal, but not unconditionally.\u201d<\/p>\n

\n\tJohann Rupert, founder and chairman of Cartier parent Richemont<\/a>, would agree. In contrast to its luxury peers, Richemont<\/a> has been disciplined with pricing, and the strategy has delivered. The group\u2019s jewelry brands posted their third consecutive quarter of double-digit growth in the three months to June 30.<\/p>\n

\n\tEarlier this year, Rupert said he is loath to raise prices drastically \u2014 anywhere \u2014 for fear of damaging the relationship with the local customer.<\/p>\n

\n\t\u201cWe were not greedy in the post-COVID-19 boom period. And I think our resilient results [in fiscal 2024-25] prove that we have not suffered the revenge of our clients. Our goal is to continuously keep the value relationship for our clients, and we will not make sudden, rapid increases,\u201d he said.<\/p>\n

\t\t\t\t\t\t\"Gemma<\/p>\n

\t\t\t\t\tGemma Chan for Cartier.<\/p>\n

\t\t\t\t\t\t\t\t\tKayla Connors\/Courtesy of Cartier<\/p>\n

\n\tA Long Road Ahead<\/strong><\/p>\n

\n\tThe European luxury behemoths will have to reset their relationship with nearly all demographics and geographies if they want to start growing again. <\/p>\n

\n\tGen Z will be a particular challenge. The Bain Altagamma report said luxury brands are now contending with \u201ca growing disillusionment with their offerings among younger generations, notably Generation Z \u2026 who are reassessing their relationship with luxury.\u201d<\/p>\n

\n\tMorgan Stanley believes luxury brands are in a \u201cdifficult situation where they cannot play with the pricing lever anymore. For the sector to grow in line with its historical average, it will need to recruit again from the middle to upper-middle class. Relying only on high-net-worth individuals\u201d cannot translate to a midsingle- to a high-single-digit growth rate, the bank argued.<\/p>\n

\n\tThe bank said growth will need to come from \u201csignificant price discipline over the next three years or so and\/or playing with the product mix.\u201d<\/p>\n

\n\tBernstein\u2019s Luca Solca believes the big European brands have already made a decent start. \u201cWe are now in a different world with more moderate like-for-like [price] inflation, and a focused effort to introduce more aggressive entry price products.\u201d<\/p>\n

\n\tIn the meantime, those smaller European brands, U.S. groups and Chinese fashion brands will continue to reap the white space rewards.<\/p>\n","protected":false},"excerpt":{"rendered":"LONDON \u2014 The season\u2019s most popular color? Without a doubt, it\u2019s white. Groups including Burberry, Ralph Lauren and…\n","protected":false},"author":2,"featured_media":40177,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[79,179,18,19,17,30693,30694,30695,30696],"class_list":{"0":"post-40176","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-eire","11":"tag-ie","12":"tag-ireland","13":"tag-kering","14":"tag-lvmh-mou00ebt-hennessy-louis-vuitton","15":"tag-ralph-lauren","16":"tag-richemont"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/40176","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=40176"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/40176\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/40177"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=40176"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=40176"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=40176"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}