The easy money is drying up for luxury labels.
Richemont — the Swiss jewelry giant that owns Cartier and Van Cleef & Arpels — admitted yesterday that it’s “starting to see a bit of a slowdown in Europe” as the continent’s credit crisis frazzles the nerves of wealthy shoppers.
“It is extraordinarily difficult to predict what’s going to happen,” Johann Rupert, Richemont’s shrewd chairman, told the company’s investors on a conference call yesterday.
With global financial markets seesawing on fears of debt defaults by Italy and other countries, both Europe and the US will be a “mess for a considerable period of time,” Rupert added.
Separately yesterday, Diego Della Valle — the billionaire chairman of luxe Italian shoemaker Tod’s — stayed relatively tight-lipped about the company’s outlook despite the fact that profits were up 24 percent during the first nine months of the year.
The natty retail tycoon likewise noted that well-run retail operations are “particularly important during challenging environments like the current ones, especially in Europe.”
Investors in recent months have been overestimating the moods of the world’s wealthiest shoppers, according to Pam Danziger of Unity Marketing, a retail consultant focused on the luxury sector.
While revenue gains at Neiman Marcus and Saks have outpaced the rest of US retail this year, that’s partly because those stores have introduced lower-priced fashions to accommodate increased penny-pinching, she says.
Successful upscale retailers “are doing well because they have adapted to the changing economic climate, not that they are back doing their old tricks,” Danziger says.
In addition to shifting their product mix, luxury sellers have likewise relied increasingly on growth in Asia to prop up results that are sagging elsewhere.
Richemont said it still expects to post “significantly” higher operating profit this year, but admitted that the upside is coming from the sheer strength of the first half, as well as the company’s rapid growth in Asia.