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Apr 24, 2024

Why most exclusive Hermès and Cucinelli thrive amid luxury crisis

“Hermès is poised to overtake Louis Vuitton and reach €20 billion,” making waves in headlines. BoF details how the Birkin bag maker’s sales are forecasted to hit this significant milestone by 2027 or sooner, with Citigroup Inc. analysts suggesting Hermès has the potential to surpass LVMH’s flagship Louis Vuitton as the luxury industry’s biggest brand by turnover.

Meanwhile, other headlines announce Brunello Cucinelli’s impressive revenue growth of +16.5% in the first quarter of 2024. Journalists highlight the challenges facing the luxury goods market in 2024, evidenced by Kering issuing a profit warning and LVMH’s first-quarter report indicating slower sales growth. Nonetheless, Brunello Cucinelli’s business performance remains resilient in the face of economic uncertainty.

These noteworthy economic and financial news stories are reshaping the luxury landscape, particularly during this challenging period when the fashion industry is struggling with lacklustre results. Reports from international press sources highlight LVMH’s modest 3% rise in first-quarter sales, signalling a slowdown, while Kering’s profit warning cites a decline of -10% in their turnover in Q1 2024. Moreover, Kering is expected to face a 40 to 45 percent decline in first-half profits, attributed to sluggish demand in China and underperformance at its flagship brand, Gucci, putting pressure on the group.

What’s driving this dynamic? Luxury is experiencing a sharp deceleration due to the economic crisis and stagnant shopping activity in China. In contrast, uber luxury—also known as hyper luxury or ultra-luxury, characterised by its extravagant nature—continues to surge ahead.

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As a result, many brands previously positioned in the aspirational luxury segment now aspire to achieve uber-luxury status. Examples include Prada, with Prada’s Galleria bag priced at $4,600—85% higher than in 2019, according to the Wayback Machine internet archive. Despite, or because of, the steep price hikes, Prada experienced remarkable growth in 2023, and the Group generated revenue of Euro 4.7bn, with growth up +17%. At a brand level, Prada’s retail sales grew at a solid +12%, while Miu Miu thrived at +58%. Similarly, Chanel has increased the prices of its iconic it-bags to over €10,000 in stores in an attempt to harmonise prices and tackle parallel markets and inflationary pressures, especially in the aftermath of the Covid pandemic. So, what about this high-flying pricing strategy? It’s proving to be a winning formula so far.



Angelo Ruggeri
Journalist, Master’s Programme Tutor & Fashion Styling Course Leader, Milan