Aspirational buyers will accept higher prices, says LVMH

Top-end buyers in the luxury market haven’t been put off by price hikes and aspirational buyers will adjust in time, says the chief financial officer at LVMH.

What’s happened 

• Jean-Jaques Guiony told an earnings call that currency movements and, more importantly, inflation, particularly in the US and Europe, had been behind some significant price rises (eg certain Vuitton products have almost doubled in price over the past five years).
• The business has taken advantage of strong demand to put prices up and maintain margins – “most of our competitors have been doing the same,” he noted.
• “I’m not particularly worried as to the acceptancy of the new level of price from aspirational customers,” he said. “It’s just that it is going to take time, as we can see on the markets.”
• And he rejected the idea that brands might design products aimed specifically at aspirational customers.

Why it matters

Price is one signifier of luxury and, wanting an air of exclusivity, any compromise here could dilute the image of a brand. With 42% of its revenues coming from Asia where inflation is not such an issue, LVMH would seem to be well placed to continue its brand marketing and wait for aspirational buyers to catch up.

Key quote

“This is not FMCG. The link between marketing investment and sales is not immediate and totally mathematic … we invest behind the brands to boost desirability [and] boosting desirability is an art and not a science” – Jean-Jacques Guiony, CFO at LVMH Moёt Hennessy.

Sourced from Seeking Alpha, LVMH Moёt Hennessy

[Image: LVMH]