The Louis Vuitton brand raised prices Feb. 15, spokeswoman Kaori Fuse said. Retailers such as LVMH (MC), the world’s biggest luxury goods maker, are confronting a plunge in the yen that undercuts the value of sales in Japan, the second-biggest market for personal luxury goods.
The yen has depreciated against both the dollar and the euro as Prime Minister Shinzo Abe talked down the value of the currency, promising to implement policies to stimulate the economy and have Japan’s central bank set a 2 percent inflation target. Finance officials from the Group of 20 this month signaled Japan has scope to stimulate its economy, as long as policy makers cease publicly advocating a weaker yen.
“There’s a risk of a currency battle” after the yen plummeted at the end of last year, LVMH Chief Executive Officer Bernard Arnault said Jan. 31.
Arnault, France’s richest man according to Bloomberg’s Billionaires Index, said Jan. 31 that Louis Vuitton prices would be raised on Feb. 15 in Japan. LVMH (MC) got 8 percent of its revenue from Japan in 2012.
“We are an importer, so the weakening yen and rising raw material prices are part of the reason for the price increase,” Louis Vuitton Japan’s Fuse said in a phone interview. The increase is the largest since the Japan unit was established in 1978, said Fuse, who declined to comment on individual product prices.
The yen has dropped about 13 percent against the dollar in the past three months, the worst performance among 16 major currencies tracked by Bloomberg.
The last time Louis Vuitton raised prices in Japan was in August 2011, when the business added 3.8 percent to the price of watches and fine jewelery. Fuse said the company regularly reviews pricing and that in November 2008 it lowered the price of leather goods and accessories by about 7 percent in Japan.
Analysts said the higher price increases probably wouldn’t drive away customers.
“Brand goods have low price sensitivity,” said Dairo Murata, a retail analyst at JPMorgan Securities Japan Co. “People who buy those brands won’t be so frugal as to care about another 10,000 yen.”
Shopping at Home
Even with the price hikes, the weakened yen could make Japanese luxury consumers more likely to shop domestically than buy abroad, said Cedric Rossi, an analyst at Bryan Garnier & Co. in Paris who recommends buying LVMH stock. “In the last two or three years, Japanese customers were buying more and more abroad just to take advantage of the strong yen against the euro.”
“Japanese customers are the historic clientele of the luxury brands,” he said. Rossi said other price increases by luxury goods retailers in Japan in future weeks would come as no surprise.
The Japan units of Tiffany & Co. and Hermes International SCA (RMS) aren’t considering raising prices at the moment, according to company officials who asked not to be identified, citing company policy. A spokeswoman for Prada SpA (1913) declined to comment on the possibility of higher prices.
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