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Trading in a difficult market

01 Feb 2013
With countries across Europe either in the midst of recession or slowly clawing their way out, trading conditions have been less than ideal in many markets.

But beneath the financial issues, there have been some success stories, luxury brands which, perhaps, against the odds are recording record sales and fighting back against economic conditions.

Richard Perks, Director of Retail Research at Mintel, said: “The luxury market is international and is somewhat divorced from the 'real world'. So while problems in Europe may hit the market, they will not necessarily affect sales in Europe because of inbound tourism, especially if the Euro is relatively weak.”
Perks explained that the biggest drivers at the moment are in the Far East, especially China, meaning that it would take a slowdown in markets there to affect the luxury industry.

However, this eastern influence is also a worrying trend for retailers focusing on European consumers, he went on to claim, as “the growing middle classes in India and China place far more importance on luxury goods than their counterparts in the west.
“So a healthy economy will boost luxury demand for that reason. Conversely, a slowdown in China may have a bigger impact on the luxury market than another notch downwards in the European economy,” Perks added.

But, regardless of elsewhere in the world, many luxury brands are enjoying high sales figures and profits, with impressive results this year.
Here are some brands that have made their mark on the high-end fashion market and come away with the financial results to prove it.

Ted Baker
British designer brand Ted Baker announced a 22.1 per cent increase in group revenue for its third quarter, in comparison to the same period last year, showing that there are still opportunities to grow during difficult trading times. Retail sales for Ted Baker rose by 24.6 per cent over this period, with UK figures proving particularly positive.
These results come as the brand explored new markets, opening further concessions in leading department stores in the Netherlands, Ireland and Spain, as well the first concessions in Germany.

Of course, this international brand is not content with sticking its heels in and remaining within the European market, and has also expanded its ecommerce offerings, while witnessing positive reactions in Asia and the US.

Commenting on its recent trading results announcement, Ray Kelvin CBE, Founder and Chief Executive of Ted Baker, praised the figures, while adding that they were “in line with our expectations”.

“We are very encouraged by the reaction to the brand and collections in our new markets where we are investing for the longer term development of the brand and further new store openings are planned for the coming months," he added.
Kelvin continued: “Whilst we are pleased with our performance to date, full year results will as always be dependent on trading over the key Christmas period.”

Burberry is another British brand making waves in the luxury market and capitalising on its outstanding reputation for quality.

Total revenue growth was up eight per cent last quarter, in comparison to the previous year, while retail revenue shot up by ten per cent.
Burberry has pinpointed its better quality sales and tight control of discretionary spend as key growth drivers, as well as a continued investment in developing and expanding the product range and its market spread.

This includes retail investment focus in flagship markets, such as Rome and London, while also concentrating on brand control and upgrading its logistics network.
Discussing the results, Burberry's Chief Executive Angela Ahrendts said: “In retail/wholesale, which accounts for over 90 per cent of our business, Burberry delivered seven per cent revenue growth, 11 per cent profit growth and a further improvement in operating margin, all in a challenging external environment.”

Ahrendts also praised Burberry’s focus on staying relevant, as the brand continues to invest in retail, digital and technology growth initiatives.

Michael Kors
Perhaps leading the luxury brand success stories is American-based designer and brand Michael Kors.

Reporting a fiscal second-quarter EPS increase of 96 per cent, it certainly beat forecasts, with revenue also surpassing expectations by jumping a staggering 74 per cent compared to year-on-year figures.

While the main growth was seen in North America, with a strong performance in all segments, the brand also recorded an impressive 97 per cent rise in sales in Europe.
“Our performance is a reflection of Michael Kors’ brand strength, innovative fashion design and the successful execution of our growth strategies,” commented John Idol, Michael Kors’ Chairman and Chief Executive, upon revealing the results.
Idol continued to praise “another outstanding quarter” for the firm, in which “exceptional sales growth” was demonstrated across business segments and geographies.

“We continue to gain brand acceptance in Europe as evidenced by the 97 per cent sales growth we achieved in this region,” he added. This was due to its “compelling assortment of luxury merchandise and exceptional service in a jet set environment”, Idol went on to say.

“We remain very excited about the long term growth prospects for our company as a global luxury lifestyle brand,” he concluded. The company is now hoping for yet another high growth quarter, especially in Europe, where it is keen to widen the brand’s appeal among new markets and reach out to the international consumer.

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