Euro crisis boosts sales of luxury goods overseas
- 28 May 2010
- From the section Business
You might think this would be a bad time to sell a caviar serving set for $34,000 or a crocodile-skin writing desk for even more.
But you'd be wrong.
French leather goods maker, Louis Vuitton, which opened its latest flagship store in London this week, is riding a wave of rising profits on the back of Europe's economic crisis.
While policy makers in Brussels tear their hair out, Europe's luxury retailers are quietly smiling at the fall in value of the single currency.
Since November, the euro has lost a fifth of its value against the dollar, a trend which boosts profits for companies which export to the US and East Asia.
And luxury goods companies, from watchmakers to dress designers, which source their products in eurozone countries, have seen their costs fall sharply and revenues rise.
Louis Vuitton's chief executive, Yves Carcelle, says he welcomes the fall in the euro's value.
"I honestly think, and I'm not the only one to think that, that for the last four years the euro was overvalued compared to other currencies."
Louis Vuitton is part of the world's largest luxury goods group, LVMH.
"Because we manufacture in our factories in France and Italy and sell all over the world, it's more of a breeze for us now than the squeeze we've had in the past four years," Mr Carcelle adds.
What's in store?
The new Louis Vuitton shop in London's New Bond Street showcases leather travel luggage, accessories and furniture for the French brand at prices which range from $150 to $70,000.
The UK is not a member of the euro but the pound has also fallen sharply in recent months, giving a boost to the spending power of London's many tourists and expat residents.
"We are talking about thousands of people not millions, but there is a market place that's untouched (by the downturn)," says Ben Elliot, who runs the international concierge service, Quintessentially.
"They're not spending on such ostentatious things. The bling factor - that's gone to an extent. But if you just look at the financial results of businesses in that sector, they've either cut costs or the appetite for cars, holidays, and the luxury sector is back."
This week Britain's Burberry, famous for its classic check-patterned accessories, said that profits for last year rose 23%.
Richemont, Swiss owner of the Cartier and Montblanc brands, saw April sales rebound by 24% after a difficult year.
Sales have also been rising for France's Hermes and Italy's Prada.
Crisis, what crisis?
But Richemont's deputy chief executive officer, Richard Lepeu, struck a cautious note.
"What is going on in the western world is not very encouraging, look at Europe and what may happen in the US as well."
"The only piece of good news is Asia-Pacific that continues to boom."
No company likes uncertainty, so the problems in Brussels are being closely watched in Paris and Milan.
"Anything that impacts consumer confidence could also have an impact on luxury demand. But so far we haven't seen that," says Dennis Weber at Evolution Securities in London.
Spain, Greece and Portugal, where the problems are most acute, are relatively small luxury markets.
And Yves Carcelle says he's sure the story will have a happy ending.
"You know Europe, we've seen through the last 60 years, we have always advanced through crisis. It's only through crisis that steps are made."
"I don't like it, but it was probably the only way to force all the governments together, to have more discipline on their budgets and on their deficits and more centralised government of the eurozone."