Last Updated on September 16, 2022
In recent weeks, the global luxury brand has announced a price hike for some of its products. Cyrille Vigneron, CEO of Cartier, has pegged the increase at three to five percent. The increase will be in part to combat rising diamond, gold, and platinum prices, as well as recent euro weakness versus the U.S. dollar. It will also help offset the weakening Chinese yuan.
Price hikes
Amid a global recession, the luxury watchmaker Cartier is planning to increase the prices of all its products in the U.S. beginning Sept. 1. The price hikes are expected to increase prices by between two and five percent. The price increase will help combat the rise in gold, diamond, and platinum prices, and the weakening euro against the U.S. dollar. However, consumers may not be able to absorb such price increases. Travel has increasingly become a competitor for luxury goods.
In the meantime, the cost of living across the Western world is rapidly increasing, and wealthy people are spending more. In general, the wealth distribution across the globe favors global luxury. While the price hikes are bad for consumers, they‚ve created new jobs for people who stand in long lines to buy luxury goods. These individuals make money off the difference between the original price and the premium. The price hikes at Cartier could have a positive impact on global luxury spending.
A company whose earnings depend on the Swiss franc has said it may need to raise prices in the euro zone, which will affect the Geneva watch fair and the Paris luxury goods fair. The Swiss currency‚s rise will also impact the margins of the group, and the price hikes will not fully compensate for it. This has prompted analysts to lower profit forecasts for Richemont and rival Swatch. While Cartier is a leading luxury watch brand, its margins are not high enough to compensate for the impact. However, the CEO did not rule out further price hikes in the future, and said that the company is confident in its performance this year.
Impact on margins
The impact of Cartier price increases on margins will be difficult to determine as the company is still a hot property in the luxury market. However, the company does have some upside. The company recently ended a two-year inventory buyback spree. This entailed purchasing back 500 million Euros worth of stuck Cartier luxury watches. This move should allow the company to resume price increases. The company still has plenty of room for growth as it has a huge group backing it.
The company‚s announcement of the increase was accompanied by a statement regarding its outlook for the fourth quarter. The company noted that the increase in sales was primarily due to the increasing popularity of high-end jewelry. The company is seeing a strong performance from its online sales as well, which are helping the brand grow in the luxury market. But it also faces challenges with the global economic downturn. The company expects the price increases to increase its gross margin, which is expected to result in higher profits and a stronger balance sheet.
While it remains important to focus on the core businesses at Cartier, it will be difficult to ignore the brand‚s performance in the luxury market. Its watch brands, particularly Cartier, continue to be its strongest performers in the richemont group. The brand‚s strong brand recognition and pricing power will ensure its continued success, and the company should benefit from margin protection in this environment of inflation. But in the short term, the company will have to remain cautious.
If you want to know which companies have the highest potential for price increases, look at the number of bags sold and the resale value of their products. Then look at the organic growth trend, the Google search strength, and the five-year organic growth trend. Hermes stands out in this regard, with its conservative price increases. Its price increases have not only attracted investors but also consumers. But the company has also attracted strong consumer interest and has an impressive five-year organic growth trend.
Impact on sales
Cartier‚s sales leadership team had identified two long-term objectives: building deeper relationships with customers and selling on value to reduce discounting. Janek‚s customized sales training workshop helped Cartier salespeople overcome customer price objections and build more meaningful client relationships. Janek developed the workshop by interviewing key Cartier organizational contacts. The workshop featured modules from Janek‚s Critical Selling Skills and Critical Negotiation Sales programs.
As for Cartier‚s plans to expand its brick-and-mortar stores, Cyrille Vigneron said that he hopes to test the waters in Texas and Florida with a seasonal pop-up in Palm Beach. He said the company is confident that the Chinese market will bounce back from Covid-19 lockdowns. In addition, he believes Asia has the highest growth potential in the next five to ten years.
Amid this global economic climate, luxury brands have begun to increase prices. The rise in prices has hit lower-income consumers the hardest, but hasn‚t deterred wealthy shoppers. This latest move from Cartier, the world‚s leading luxury watchmaker, is likely to be the first of many to come. While some consumers may absorb a few percent of price hikes, other industries, including travel, are competing for discretionary dollars.
Luxury watchmakers have been forced to raise their prices due to a wide range of expenses, including currency fluctuations, shipping costs and labor costs. While this may impede growth in other markets, the trend is unlikely to hurt the luxury goods industry‚s bottom line. According to Morgan Stanley analysts, sales to Russians overseas represent less than 2% of total revenue. Besides, Russia‚s invasion has caused a negative impact on sales in other regions.
The war against Ukraine has increased rumors about the diamond industry. With sanctions imposed on Russian-owned Alrosa, supply shortages are expected. The increased demand will increase prices for consumers. Moreover, the parent company, Richemont, has dropped its membership in the Responsible Jewelry Council, an industry group that sets supply-chain and sourcing standards. Richemont does not want to be part of an organization that includes companies financing conflict. As a result, Alrosa suspended its membership.
About The Author
Fernánda Esteban is a food fanatic. She can't go more than a few hours without eating, and she loves trying new foods from all over the world. Her friends know that they can always count on her for a good conversation, and she's an animal lover who will never turn down an opportunity to pet a dog or cat. Fernánda also enjoys learning about random facts, and she's a social media practitioner who loves to share what she knows with others.