Core Viewpoint - The luxury goods industry is experiencing a slowdown in growth due to excessive price increases, which have led to declining revenues and profits for major brands like Chanel and Burberry [2][6]. Pricing Strategy - Many luxury brands have relied on price increases to drive performance, but this strategy is now backfiring as consumer demand diminishes [2][6]. - Chanel's revenue fell by 5.3% to $18.7 billion, and net profit dropped by 28.2% to $3.4 billion, marking the first decline in both metrics since the pandemic [2]. - Burberry reported a 17% decrease in revenue to £2.461 billion and a 94% drop in adjusted operating profit [6]. Price Increases and Consumer Sentiment - Luxury brands have raised prices at a rate exceeding inflation, with Chanel's 2.55 handbag price increasing by 120% from 2019 to 2024 [4]. - The average price increase across luxury brands has surpassed 50%, leading to a significant reduction in consumer interest [6]. - The perception of value among consumers has shifted, with many now feeling that prices are too high, impacting their purchasing decisions [9]. Market Dynamics - The Asia-Pacific market, particularly China, has been a significant growth driver for luxury brands, contributing over 30% to global luxury goods consumption [8]. - The second-hand luxury market is also experiencing a downturn, with previously stable prices for brands like Chanel and Hermes now declining [9]. - The interconnectedness of the first and second-hand markets means that a lack of confidence in resale values can adversely affect new product sales [9]. Brand Strategies and Adjustments - In response to declining sales, brands like Burberry are restructuring and planning to reduce prices on certain products to regain consumer interest [10]. - The luxury market is witnessing a shift as brands attempt to recalibrate their pricing strategies to align with consumer expectations and market conditions [10].

Core Viewpoint - The luxury goods industry is facing a slowdown in growth due to excessive price increases, which have begun to suppress consumer demand and negatively impact company revenues and profits [1][5]. Group 1: Company Performance - Chanel reported a 5.3% decline in revenue to $18.7 billion and a 28.2% drop in net profit to $3.4 billion for 2024, marking the first time since the pandemic that both revenue and profit have decreased [1][3]. - Burberry's latest financial results showed a 17% decrease in revenue to £2.461 billion and a 94% drop in adjusted operating profit to £26 million [4]. - The CEO of Burberry acknowledged that the company's previous high-end pricing strategy led to a misalignment with its core audience, resulting in excessive product pricing [4]. Group 2: Pricing Strategy - Luxury brands have been increasing prices at a double-digit rate annually since 2020, outpacing inflation and leading to a significant rise in average selling prices [2][5]. - For instance, the price of Chanel's 2.55 handbag surged by 120% from RMB 38,100 in May 2019 to RMB 84,000 in March 2024 [2]. - The aggressive pricing strategy has resulted in a 50% average price increase across the industry, which has diminished consumer interest in luxury goods [5]. Group 3: Market Dynamics - The luxury market's growth has been heavily reliant on Chinese consumers, who accounted for over 30% of global personal luxury goods consumption [6]. - The second-hand luxury market is experiencing a downturn, with previously stable prices for brands like Chanel and Hermes beginning to falter [7]. - The perception of luxury goods as investment items is changing, with consumers becoming more cautious about high-priced purchases [8]. Group 4: Future Outlook - Companies are now considering price adjustments to regain consumer interest, with Burberry planning to lower leather goods prices and Mulberry aiming to keep 60% of its products priced below £1,095 [8].