Luxury brands and retailers feeling pinch from global economic meltdown

Luxury brands and retailers who had expanded into emerging markets such as China, India and Russia in the past few years were betting that the failing US economy would not dramatically hurt their sales and profits---so they said just a few months ago.

Today the Wall St. Journal reports that a majority of these companies including Bulgari, LVMH Moet Hennessy Louis Vuitton, Gucci, Prada and even Bottega Veneta are being hurt and are scaling back operations including new store openings and major new product introductions. Virtually all major markets world-wide are in some type of meltdown now with luxury brand consumers noticeably reducing their spending. Even fabulously wealthy investors and celebrities are taking a hit and cutting back spending. The psychological impact of losing $100 million on paper even if you still have another hundred million hanging around does change one's mindset about the need for so many luxury items.

The Chinese who were most likely going to be the saviors of this tumbling world economy are also feeling the effects and their more affluent populace has already cut back on luxury items especially cars, jewelry and electronics.

I thought it quite arrogant when I read some months ago the Louis Vuitton folks along with Bulgari puffed their chests out and were quoted as saying they would NOT be impacted by the US economic woes. It seemed inevitable that since economies are tied together globally these days that no one would escape unaffected. Hermes, who still claims modest but sales growth nonetheless world-wide, along with Louis Vuitton went as far as to raise prices around the globe to "prove" they were invincible to petty US financial troubles. Well, I think they over-hyped their success and won't be so arrogant in the future.

Watching out for you everyday.

Eli