Global luxury brands Louis Vuitton, Chanel and Dior saw their profitability at South Korean operations worsen last year after posting decent revenue and profit growth for a few years since the COVID-19 pandemic.
According to the Financial Supervisory Service on Friday, French luxury house Louis Vuitton’s 2023 operating profit fell 31.3% from a year earlier to 286.7 billion won ($208 million) while sales declined 2.4% on year to 1.65 trillion won.
Another French luxury brand Chanel saw its sales rise 7.1% on year to 1.71 trillion won, beating Louis Vuitton to become the top foreign brand in Korea in sales term.
Chanel’s operating profit, however, fell 34.1% to 272.1 billion won.
Dior’s sales increased 12.4% on year to 1.05 trillion won while its operating profit fell 3.6% to 312 billion won.
Analysts attributed their worse profitability last year to increased marketing and advertisement costs to whet the consumer appetite for luxury goods.
Chanel’s cost of sales stood at 858.1 billion won in 2023, up 24.6% from the previous year, hurting the company’s bottom line.
The company’s marketing costs rose 17% to 573.6 billion won last year.
“With pandemic restrictions lifted and the market conditions changed, we invested heavily in brands and human resources last year,” said John Whang, Chanel Korea’s chief financial officer.
Louis Vuitton’s Korean marketing costs surged 67.5% to 354.7 billion won last year, of which advertisement expenses more than doubled to 79.2 billion won from 33 billion won.
LUXURY OF LUXURIES
Hermès, often dubbed “the luxury of luxuries,” was an exception.
The brand’s Korean sales rose 22.7% to 797.2 billion won and its operating profit increased 12% to 235.7 billion won.
Unlike its rival brands such as Chanel and Louis Vuitton, Hermès didn’t depend on celebrities to promote their products, analysts said.
The luxury industry is experiencing a growth slowdown worldwide in line with increasing economic uncertainties coupled with inflation.
LVMH, the world’s No. 1 luxury company that owns prominent brands such as Louis Vuitton, Dior and Celine, saw its sales fall 2% in the first quarter from the year-earlier period.
“The sales growth rate of our main brands, Louis Vuitton and Dior, has stagnated around 2%,” said Jean-Jacques Guiony, LVMH’s chief financial officer.
The Kering Group, the parent of Italian brand Gucci, said last month it expected its first-quarter sales to decline 10% from a year earlier, mainly due to a fall in Gucci’s sales, which it said likely fall 20% on the year.
South Koreans spent an estimated $325 on high-end goods on average in 2022, the highest amount in the world, according to Morgan Stanley.
Write to Ji-Yoon Yang at [email protected]
In-Soo Nam edited this article.