The luxury market has been facing one of its hardest slumps of all time, reporting tumbling sales and crumbling earnings that seem to only down-spiral quarter after quarter.
In hopes of exiting the luxury slump, multiple luxury fashion groups and houses have been forced to devise new strategies to restore their earnings to profitable levels.
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Because of this concerning pattern, various fashion groups have had to shed their less profitable counterparts, and independent brands have had to be acquired by bigger companies or accept the fact that closures may be in their near future.
Many top luxury groups reported concerning declines in their half-year earnings results.
In its last reported earnings, LVMH (LVMHF) , the parent company of Louis Vuitton, Dior, and Fendi, reported revenue decreases of 1% and profit declines of 15% compared to last year.
Kering (PPRUF) , the parent company of YSL, Bottega Veneta, and Gucci, also reported tumultuous first-half earnings. Revenue decreased 11%, and net income declined nearly 51% compared to the year prior.
Therefore, after decades of only targeting an exclusive clientele, the luxury market has had to suck up its pride and take a drastic turn by tapping into a different target audience in an effort to salvage its once highly-coveted brands.
Luxury joins forces with retail fashion to goose sales
Luxury brands have begun expanding their clientele by partnering with retail companies geared toward middle-class communities to generate more profits and create more brand awareness.
However, this is not a new occurrence but rather a potential trend.
Related: LVMH closes deal with a controversial luxury rival
The apparel company H&M (HNNMY) has released multiple collaborations with some of the most popular luxury designer brands, including Versace in 2011, Balmain in 2015, Giambista Valli in 2019, and Paco Rabanne in 2023, to name a few.
Although H&M is currently going through some hurdles, the company reported flat net sales with a 51% increase in gross profits compared to the year prior, as reported in its Q3 earnings report for 2024.
Target (TGT) has also collaborated with various luxury fashion brands like Alexander McQueen in 2009, Missoni in 2011, and its latest with Diane Von Furstenberg this year.
Unsurprisingly, such renowned brands would want to join forces with Target, as the company has proven very profitable.
According to Target's 2024 half-year earnings report, net sales increased by 2%, and its revenue is 4.3% higher than last year.
Gap partners with Cult Gaia to potentially check off another profitable partnership
Gap (GPS) is an American apparel brand that has targeted its market towards middle-class families for over five decades. Still, in the last couple of years, the brand decided to expand its horizons by partnering with luxury brands.
To bring more affordable high-end clothing into its customers' closets, Gap partnered with Kering's Spanish luxury fashion house Balenciaga in January 2022, then with musical artist Kanye West's brand Yeezy in September of the same year, and with LA-based womenswear brand Dôen in May of this year.
Although luxury brands may be struggling to reach their sales quota, these exclusive partnerships proved to be incredibly successful for Gap.
According to Gap's Q2 earnings report for 2024, sales increased by 5% compared to last year, and comparable sales were up 3% yearly.
With such profitable partnerships, more luxury brands wanted to join in on Gap's money-making collaborations.
More Retail:
- Popular luxury brand invests in 'sober market'
- Louis Vuitton parent makes major deal to boost sagging sales
- LVMH closes deal with a controversial luxury rival
On Monday, Gap announced its newest collaboration with LA-based luxury brand Cult Gaia to launch an apparel collection geared towards women and kids, which is set to launch on Thursday.
As of Thursday's market close, The Gap Inc.'s GAP stock is up nearly 98.5% over the past year.
Luxury brands seem to be doing everything they possibly can to exit the luxury slump, and this strategy may be their saving grace.
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