Falling sales hit Burberry, Gucci

By Kim Tae-jong

Many luxury brands such as Burberry, Gucci and Prada have seen a huge drop in sales amid the prolonged economic slump, data showed Thursday.

This belies the general belief that demand for high-end goods is little affected by bad economic conditions.

According to a recent audit by the Financial Supervisory Service (FSS), Burberry Korea posted 228.1 billion won in sales and 21 billion won in operating profit in the 2012 fiscal year, a 5.3 percent and 35.1 percent drop compared to its previous fiscal year.

The 2012 fiscal year refers to the period between April 1 2012 and March 31 in 2013.

The British luxury fashion house’s net profit also dropped by 35.1 percent to 16.8 billion won from 25.9 billion won. This is the second year for the brand to see such a drop after a 25.6 percent drop in the 2011 fiscal year.

Other high-end brands also suffered a drop in sales.

Gucci Group Korea’s sales dropped by 4.5 percent to 282.6 billion won with its operating and net profit decreasing by 34.8 percent and 43.0 percent, respectively.

Ferragamo Korea’s sales increased by 1.2 percent to 98.4 billion won but its operating and net profit decreased by 9 percent and 12.8 percent.

Prada Korea’s net profit increased by 10.5 percent to 58.8 billion won; a much lower growth rate than the previous fiscal year when it stood at 64.2 percent.

Sales records of other luxury brands such as Chanel and Hermes were not available as they do not disclose their sales since they are incorporated companies.

The results are somewhat different from previous years when luxury items sold briskly despite the lingering economic downturn.

In fact, they have been long criticized for profiteering by taking advantage of so-called “Veblen effect.”

Despite a strong won and tariff cuts in recent years, they increased their prices in the belief that high-end users would snap up higher-priced products even though cheaper substitutes were an option.

“Amid the economic downturn, people in the middle class who emerged as major customers of so-called popular luxury brands such as Burberry and Prada in recent years seem to have tightened their wallet strings,” an official from Lotte Department Store said.

He also pointed out that the demand for high-end goods is still strong, but high-end customers’ tastes have also changed as they prefer less well-known luxury goods rather than commonly-known brands.