Longchamp Outpaces Vuitton by Sticking to Value-for-Money Luxury
Longchamp, the French company known for its folding nylon Le Pliage handbags, is benefiting from a lull in luxury demand.
While larger brands such as Louis Vuitton seek to combat slowing growth by curbing retail expansion and increasing prices, closely held Longchamp is adding stores and sticking to its more affordable prices. The result: revenue growth that is faster than many of its rivals.
The Paris-based company, which opened its biggest European boutique in London last month, posted sales that advanced 16 percent to 454 million euros ($615 million) in 2012. That compares with sales growth of 14 percent at LVMH Moet Hennessy Louis Vuitton SA (MC)’s fashion and leather-goods division and 10 percent for the luxury industry.
“This is not magic,” Longchamp Chief Executive Officer Jean Cassegrain said in an interview. Being known for offering value for money “is one of the strengths of the brand.”
Cassegrain expects Longchamp’s revenue growth to slow to less than 10 percent this year as economic instability hits consumer spending. That’s still double the rate Bain & Co. estimates for the luxury sector. Sticking to its strategy while others are changing theirs is creating opportunities, not least in finding decent store locations, the CEO said.
Longchamp’s boutique on London’s Regent Street gives the brand more visibility in the British capital, where it has two smaller shops, and allows it to display in one place its full range of goods, which include women’s clothing and shoes.
Other outlets will follow this year in Rome, Tel Aviv, Abu Dhabi and Sao Paolo, and next year in Munich and Barcelona where Longchamp has spent “years” looking for decent retail locations without finding them, Cassegrain said.
“We can build the business on two legs, the locals and the tourists,” Cassegrain said. Sales to non-Europeans are rising faster than sales to Europeans, who account for a larger share of the total, he said.
In the last three years, Longchamp revenue has surged 75 percent, about twice as fast as the personal luxury-goods market.
The move by some luxury brands to target the wealthiest clientele with more expensive products is leaving room at a more affordable price point, according to Luca Solca, an analyst at Exane BNP Paribas. Longchamp’s leather bags range from about 250 euros to 800 euros, while equivalent Vuitton models can range from about 1,000 euros and 3,000 euros.
While manufacturing in France means “there is a certain level of price that we can’t go around,” said Cassegrain, “we don’t want to overinflate our prices. We intend to keep our brand position.”
Longchamp, founded in 1948 by Cassegrain’s grandfather, plans to expand its women’s handbag offer and broaden its men’s accessories range as bags “become part of a gentleman’s outfit,” the CEO said.
Luggage and shoes are other areas where the company aims to grow, he said. Longchamp’s commercial ambitions are more muted in ready-to-wear, which serves mainly as a communication tool and a way to spice up the stores, he said.
The company doesn’t plan to sell a stake publicly or privately amid interest from would-be investors, the CEO said.
“We hope and intend to stay independent as long as possible but frankly there is no obligation” to sell, he said. “We don’t feel pressure.”
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