A profit warning from Gucci, fall in revenue from Watches of Switzerland, and a stall in sales at LVMH have investors asking whether luxury companies have hit a stumbling block. One firm is proving to be a bit of an exception however.
The malaise at luxury companies has been generally blamed on an economic downturn in China, with demand squeezed as shoppers have less disposable income to spend on handbags on watches.
“Mainland China is proving to be tough,” an HSBC analyst said in a note. ‘Mainstream luxury’… is not doing well.”
However, one company has stood out from the rest: Miu Miu.
Italian fashion giant Miu Miu reported an 89 per cent growth in first-quarter sales this year, and took the top spot of the latest instalment of the Lyst index, a quarterly ranking of the trendiest fashion brands. Hermés also grew by 17 per cent in the quarter.
When it comes to luxury, branding is key – and Miu Miu seems to have cracked the code.
How did Miu Miu buck the trend? Tiktok.
Its slashed micro-mini skirts for Spring/Summer 2022 took social media by storm, appearing everywhere from magazine covers to Tiktok dances and sending demand for mini-skirts to a three-year high, according to Lyst. Since then, it has gone from strength to strength.
Miu Miu was trending again last week after its sheepskin and resin £350 hair clips garnered more than 42 million views and sold out on Chinese online clothes seller Tmall.
“Miu Miu’s strong performance is a testament to the strategy and disciplined execution implemented over the past years,” group chief executive Andrea Guerra said in the company’s last report. “We continue to progress in our journey towards retail excellence, enriching our product range and driving customer engagement to nurture our brands’ desirability.”
“Sharpness of positioning, creativity and communication will be critical this year,” Guerra added. “While the industry is experiencing new dynamics, we retain our ambition to deliver solid, sustainable and above market growth.”
“[Miu Miu’s success] partly comes down to brand strength and customer loyalty, which in turn drive not just volumes but the pricing power which for many investors characterises the luxury goods industry,” investment analyst at AJ Bell, Russ Mould, said.
The company also caters to a younger demographic than parent company Prada and traditional retailers like Burberry and Gucci. It has had particular success with its “Miu Miu girl” branding with Gen Z in China, enlisting Thai and K-pop stars and allowing it to out-compete peers in the region.
“[Miu Miu’s brand ambassadors] don’t just have pretty faces, but also represent the brand ethos of a younger, more rebellious version of the intellectual persona the group aims to project,” Europe-based China luxury marketing expert Vanessa Wu told Chinese media outlet Jing Daily.
The firm has managed to create a brand which taps into the Chinese fashion trends Gen Z shoppers are looking for.
“There’s a clear product strategy that is very much reflecting what’s on trend,” Wu added.
The company is, however, aware of a “more challenging market environment,” chairman and executive director Patrizio Bertelli said, who noted that the Group must “maintain flexibility and agility to respond to constantly evolving industry dynamics while continuing to innovate and invest across our business.”
“The challenges that have faced the industry have included weakness in China and Hong Kong,” Mould said, adding that “inflation is putting the squeeze on the purchasing power of more aspirational customers rather than the truly plutocratic ones.”
This has increased competition for well-heeled shoppers and made consumers more sensitive to price changes, making good branding ever more important.
“It is possible that some brands have pushed prices a bit too far,” Mould said.