Louis Vuitton Might Continue to Raise Prices on Its Leather Goods

With business booming at LVMH Moët Hennessy Louis Vuitton, the luxury behemoth is obeying the old adage: If it ain’t broke, don’t fix it.

This means staying the course when it comes to pushing the momentum of its star brand, Louis Vuitton, which recently recruited the highly popular streetwear designer Virgil Abloh to head menswear.

“We think what we do now is exactly what should be done and that should enable us to sustain the momentum of the brand for the quarters to come,” said Jean-Jacques Guiony, chief financial officer, speaking in a conference call with analysts detailing the company’s first-quarter sales report.

“We are not concerned with the risk of becoming overexposed — the risk is to lack momentum and not be at the forefront of competition in terms of marketing,” he said.

The idea is to keep the label “alive and kicking and that long-term, it doesn’t become boring,” added Guiony, who noted that Vuitton doesn’t sell only monogrammed items but many other products as well.

“The brand has to be different things to people and has been different things to different people for many, many years — we know that the brand is growing, and it’s growing fast,” he said.

As reported, LVMH recorded a 10 percent rise in first-quarter sales, propelled by a 16 percent organic sales increase from the fashion and leather goods division — home to Vuitton.

The sales figures were “impressive,” noted Barclays analysts in a research note Tuesday, raising the target price to 255 euros ($316), from 245 euros, after increasing earnings-per-share estimates for the next three years by between 5 and 7 percent.

The company’s share price reached a record high on Tuesday, closing up nearly 5 percent at 275.15 euros.

“We had a good start of the year, and we expect these good trends to continue,” Guiony said, cautioning that it would be difficult to predict the environment into the second quarter.

“We are not in a business where the visibility is particularly good — we try to understand the market, we try to understand the customers, but predicting their behavior and predicting external shocks as they may happen from time to time is always a very difficult task,” Guiony added.

The group increased prices for Louis Vuitton brand leather goods for the first time in three to four years by just under 2 percent, but executives declined to comment on the possibility of future price hikes.

“We increased prices for leather goods in a limited way, around 1.7, 1.8 percent in February across the board — it was a widespread price increase which didn’t draw a lot of attention,” he noted.

Asked if he thought the trading environment might become less volatile, even after taking into account the shifts in consumption that correspond to the timing of the Chinese New Year — a holiday that generates significant amounts of business for the luxury goods purveyor — Guiony responded that he expects volatility to remain. “Volatility is a fact of life,” he said.

While LVMH is constantly revamping stores for its brands, Guiony said he does not expect any major changes in the number of stores for Christian Dior, Fendi and Céline, which each count around 200 units. While there is room for an increase at Céline, which recently recruited trendsetting designer Hedi Slimane, the company is still assessing plans. Dior, meanwhile, is opening stores, but “not in a frantic way,” while Fendi’s store network is “increasing regularly … in a controlled way,” according to Guiony.

As for Vuitton, the company expects online sales to absorb much of the increase in traffic.

“We don’t feel the need for drastic action in terms of the way we welcome our clients and the way we serve them. The existing network works extremely well, and we have no particular plans to change the whole thing,” he said when asked about the density of traffic in the stores.

Currency fluctuations have pushed business to Hong Kong and Macau, Guiony said.

“We see the flows of Chinese tourists particularly moving pretty quickly where they feel they get the best deal from a currency viewpoint,” he explained, noting that there has been a bit of a slowdown in Europe in terms of growth in fashion and leather goods, which has been compensated by business in Asia.

In the U.S., the luxury market has been doing well, the executive added, highlighting improvement in watches and jewelry as well as fashion and leather goods.

“Overall, business is very well-oriented in the U.S. for the time being,” Guiony said.

Reflecting broader industry trends, globally, the jewelry business outpaced watches, with a “very good quarter for Chaumet and Bulgari,” while watches showed an “improving trend,” he continued, noting that Tag Heuer had one of its best quarters compared with the recent past.

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