Kering and Hermes, two influential players in the luxury fashion industry, are gearing up to release their earnings reports for the recent period. These reports are highly anticipated by investors as they seek to determine whether these luxury brands are confident enough to increase prices for their designer accessories, following in the footsteps of Louis Vuitton, the world’s largest luxury label.

Louis Vuitton recently made headlines by announcing global price hikes due to increased manufacturing and transport costs. This decision positions Louis Vuitton as one of the first major luxury brands to implement price increases this year. With this move, pricing power could play a significant role in driving revenue growth in the high-end fashion and leather goods industry in 2022, building upon previous years’ series of price hikes.

After enduring months of lockdown restrictions, consumers are now eager to indulge in luxury fashion and accessories. Luxury brands are capitalizing on this surge in spending power by making their products even more expensive and exclusive.

According to bloggers on Xiaohongshu, a popular social media platform in China, Gucci, a leading profit generator for Kering, is expected to raise prices as early as Friday. The price of Gucci’s small Marmont shoulder bag, currently priced at 16,500 yuan ($2,602), is predicted to increase by approximately 3%. Other Gucci accessories may also see price hikes ranging from 10% to 15%. Although the sources of these predictions are often sales associates for fashion labels, their accuracy in forecasting price increases has earned credibility.

Kering’s Balenciaga has already implemented price increases in China in early January, according to Xiaohongshu. For instance, the cost of Balenciaga’s curvy Hourglass handbags in size small and extra-small has risen by 3.5% to 4%, reaching 17,500 yuan and 11,550 yuan, respectively. Kering, being in a closed period before its annual earnings report on Thursday, declined to comment when approached for confirmation.

On the other hand, Hermes stated that it would likely address the pricing issue when it reports its earnings on Friday. The company refuted analysts’ claims that it had already raised prices by 3% to 10% last month.

Chanel, another renowned luxury brand, raised prices for some of its most coveted handbags three times throughout last year. For example, the small classic handbag now carries a price tag of around $8,200, reflecting a 60% increase compared to its 2019 price.

UBS, a prominent financial services company, predicts that the luxury fashion industry will witness a “virtuous circle of pricing power and brand desirability” this year. This sentiment is based on the belief that price increases will further enhance the appeal of luxury brands.

Projections indicate that Kering will report a 20% organic sales growth for the fourth quarter, credited to marketing investments that generated excitement around Gucci’s 100th anniversary celebration last year. HSBC, a multinational investment bank, forecasts a 12% sales rise at Hermes during the same period, accounting for constant foreign exchange rates.

Links:
1. Business of Fashion
2. Vogue