High price tags give boost to luxury retailers
First-quarter earnings results showed that the affluent consumer isn’t willing to reel in their spending, even if it means paying a higher price.
Why it matters: High-end retailers have reported upbeat profit forecasts, buoyed by the high-income consumer, as luxury companies are able to maintain or raise the prices of their goods.
Driving the news: Wall Street analysts estimate that revenue and earnings for some of the top luxury names are going to be even higher this year, “suggesting that the affluent shopper is fully engaged,” Jharonne Martis, director of consumer research at Refinitiv, says.
Context: Spending growth on a year-over-year basis was the highest among millennials, at 17%, and high-income consumers, at 16%, according to McKinsey.
Reality check: While luxury goods makers have performed financially well, retailers that cater to a less affluent demographic have been feeling the inflation pinch.
- Walmart and Target reported quarterly profit declines, citing higher freight and labor costs as well as customers shifting to more value items, prompting companies like them to offer more promotions and discounts.
Yes, but: Lululemon CEO Calvin McDonald said that despite raising the prices on some of its merchandise, the athleisure company has “not seen any negative impact to our sales volume as a result.” First-quarter revenue increased 32% to $1.6 billion.
- Leisure travel is back as well and so are the willing shoppers. Macy’s said its quarter was boosted by international tourist traffic, especially travelers from Central and South America as well as Europe. Macy’s saw sales climb 14% in the first quarter.