Has the recession now begun to hit the nouveau riche?
If you can afford a Hermes handbag, Cartier jewellery, or a Jaeger-LeCoultre watch, then you probably don’t have much to worry about, but if your wardrobe boasts the odd ever-so-recognisable Burberry “flag” to proclaim your European-chic credentials, then look out. This particularly applies if you are Chinese, as it just might be that the recession, yes, that annoying constraint on your buying power, that has only affected others until now, has caught up with you.
One of the more interesting contrarian economic indictors in recent months has been the success of luxury brands. The list of luxury goods manufacturers that have reported strong results in recent months is long and includes: BMW, Anya Hindmarch, Mulberry, Richemont, and LVMH that sells Louis Vuitton handbags, Dior perfume and Dom Perignon champagne. In August, Hermes International actually increased its annual sales and profitability targets. However, Burberry, the British luxury goods brand, has now put a damper on the luxury goods party and announced far less cheery news.
Burberry has issued a profits warning and said that profits would be lower than some analysts had predicted due to a “broad slow down in sales”. We have had the Eurozone crisis to worry about of course, and the global recession, but until now all has looked rather cosy in luxury goods, although there have been some signs that the slow down in Asia, and particularly China, would start to affect things soon. Burberry talk of flat sales and a significant slow down in demand that will put profits, to March 2013, at the lower end of expectations.
Burberry insists that this isn’t a China issue alone, but a broader slow down in sales and that they weren’t alone: rivals are suffering too. All this has lead to a significant downturn in share prices across the sector. What a stark contrast to Hermes’ recent much more optimistic note. Stacey Cartwright, Burberry’s finance director said, in a phone interview, that other companies with brands like Burberry, which were “less rarefied” than Hermes, were experiencing similar trading conditions.
So, it looks like the richest will still be adding to their collection of handbags this fall, but those of us who have to look at the price tag may think again before we treat ourselves to that little bit of luxury. All this might suggest that, globally at least, things are getting worse, not better. I’m almost inclined to start a handbag index, as an indicator of global prosperity, as although a bit of an indictment on the human race, there is probably a strong correlation between economic growth and the number of posh bags being sold. I predict the end of this recession will occur when ridiculously expensive handbag sales begin to rise once again!
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