Demand falls for luxury brands as rich fear recession

by Nikki Sandison, Brand Republic 24-Jan-08, 09:10

LONDON - Richemont and Coach, two of the largest luxury goods makers, have reported that demand from Japan and the US for Cartier watches, designer handbags and expensive jewellery is slowing, signalling that even the wealthiest consumers are reining in their spending.

Richemont, the world's second largest luxury goods company, said that underlying growth slowed to 10% in December, against 14% for the full quarter.

It narrowly missed forecasts with an 8% rise in third-quarter sales.

Shares in the maker of Cartier watches and Mont Blanc pens fell by 6.7% following the news.

Coach, the largest US maker of designer handbags, said underlying sales in its US retail stores had fallen during its second quarter and were down 1.1%, as consumers cut back on visits to the stores and when they did make a purchase were choosing lower-priced items.

The drop in same-store sales in 2007 compares with a 25.7% increase in the Christmas period in 2006.

US jewellery company Tiffany also lowered its quarterly earnings forecast this month after disappointing Christmas sales.

Lew Frankfort, chief executive of Coach, told Reuters: "My own view is that we're already in a consumer recession. We do need a tax stimulus package."

Comments

James Cooke - 24/01/2008

Interesting, I wasn't expecting to hear that cash-rich people were curbing spending during recession. After all, as everyone else stops spending, prices come down, costs being equal etc, so rich people would arguably spend more, as the price / supply ratio is more efficient. These are small dips in sales and might be evidence of indebted or less wealthy high-ticket purchasers reigning in spending rather than the truly wealthy?