LIVE MARKETS-Luxury price hikes: will shoppers pay up?

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LUXURY PRICE HIKES: WILL SHOPPERS PAY UP?

JP Morgan points out that there has been a wave of price increases at most luxury brands in recent weeks, across the U.S. market but also elsewhere in the world.

The Wall Street bank believes the average mid-single digit price hikes seen in the U.S. should largely protect margins for most brands from the potential tariff headwinds.

But the real question is: will shoppers pay up?

"We are more mindful of the potential implications on underlying demand, notably as luxury consumers were already showing pricing fatigue, with volumes tracking negative for the vast majority of the sector," writes JPM's Chiara Battistini.

According to the analyst, the brands undergoing a turnaround such as Gucci and Ferragamo seem to be taking a more cautious approach to pricing, while hard luxury looks better positioned.

"We see price increases implemented in hard luxury so far as the most sustainable, currently running in line with the rest of the sector, despite the rise in precious metals, if anything enhancing the relative value for money proposition vs soft luxury," she says.

French luxury bellwether LVMH LVMH.PA said in late May it had room to raise prices of high-end products by around 2-3% without likely affecting demand from luxury clients.

(Danilo Masoni)

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