How Are Luxury Brands Faring Since The Coronavirus Outbreak?
It’s not all bad news, guys
April 23, 2020
There are many factors that contribute to the profitability of a fashion brand. These include availability at the right locations, strategic marketing, and, most important, nationwide economic stability. All these elements have taken hard hits since the coronavirus outbreak. With federal mandates to self-quarantine, doors have closed, leading to foot traffic becoming virtually nonexistent, diminishing sales exponentially. Thus, jobs have been cut, and there are less resources to invest in. The masses are also less likely to spend money on nonessential items when their paychecks are being slashed or are not coming in altogether. It’s a ripple effect that has disrupted the steady balance of commerce, and companies, both big and small, are suffering the fallout.
Indeed, luxury conglomerates are trying their best to weather the storm of COVID-19. Yesterday, Kering, the French umbrella company of brands like Gucci, Bottega Veneta, Pomellato, Ulysse Nardin, and Balenciaga, reported a 15.4 percent drop in revenue in Q1. Its biggest competitor, LVMH, which has oversight of Louis Vuitton, Christian Dior, Bulgari, Fenty, and Givenchy, also announced a 15 percent drop. Analysts are suggesting that this steep decrease is due to the lockdown in the Asia-Pacific region, particularly in mainland China, which reaps most of the revenue for these firms.
“The declines mostly reflect how much each brand depends on China for sales,” reported Business of Fashion. “Kering’s brands closed their stores in the country for much of January and February, and the company cut back on advertising in its most important market as well.”
Gucci, for example, went from $1.96 billion to $2.52 billion year over year, a 23.2 percent decrease. And there are many other labels that have followed the same trajectory, trying to sustain their businesses while also striving to offer aid during this crisis. “The Covid-19 pandemic took a heavy toll on our operations in the first quarter,” said Francois-Henri Pinault, CEO of Kering, per TeleTrader. “We took immediate action to ensure the safety and well-being of all the Kering people around the world, and of our customers. We also lent our support to the communities in which we are present, helping meet the extraordinary needs generated by this public health crisis, notably among healthcare workers and hospitals.”
As disparaging as all this looks, there are outliers. Bottega Veneta saw a 10 percent increase, and Hermès’s flagship in Guangzhou garnered $2.7 million in sales in one day. Also, U.S.–based company Capri Holdings, which owns Michael Kors, Versace, and Jimmy Choo, saw an 11.9 increase in Q1. Still, the global economy as a whole is unsteady, and any glimmers of hope could darken as cases of the coronavirus continue to rise. But with immense resources at their disposal, it’s no wonder why Pinault is confident that fashion brands—at least the big ones—“will all emerge from this period of uncertainty at the top of their game.”