Why high inflation and a volatile stock market aren’t slowing down the luxury shoe market
Relentless inflation and steep inventory declines aren’t dampening demand for luxury shoes, at least not yet.
Now more than ever, American consumers are ditching their casual shoes and clothes and opting for dressier styles, as more and more people return to the office and to special occasions. In fact, retail sales tracker The NPD Group reported in June that January-March athletic shoe sales were down 8.2% from the same period in 2021.
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This market shift is also visible in the earnings reports of some of the biggest luxury companies. On its fiscal fourth quarter conference call in June, Capri Holdings Ltd., which owns Michael Kors, Jimmy Choo and Versace, reported increased dress shoe sales for all three of its brands. CEO John Idol said on the call that Versace saw more than 100% growth in its luxury fashion footwear category as consumers responded positively to dress styles featuring the brand’s Greca and Medusa motifs.
Similarly, at Jimmy Choo, Idol noted that “glamorous styles performed well, reflecting the continued success of dress shoe sales, boosted by a return to the office and social activities. We were also delighted that sales of wedding dresses more than doubled from the previous year, as it is often the first point of contact with the brand.
Overall retail sales remain well above last year’s levels. The US Census Bureau reported in June that retail and foodservice sales in May 2022 totaled $672.9 billion, marking an 8.1% jump from May 2021. This surge in sales comes as inflation in the United States hits a record high. According to the Bureau of Labor Statistics, consumer prices rose 8.6% in May from a year ago, the largest 12-month increase since the period ending in December 1981. In Meanwhile, the stock market had its worst first half since 1970, with the S&P down 21% from its January high.
Shoe prices rose 4.5% in May from a year ago, according to the Footwear Distributors and Retailers of America (FDRA). This increase, although the slowest in six months, still represents a faster than usual rate of growth. The FDRA predicts shoe prices in 2022 could likely rise at the fastest rate in decades. Men’s footwear increased by 2.8%, women’s by 5.6% and children’s by 5%. Shoe prices are up 6.1% year-to-date compared to the first four months of 2021.
But Robert Burke, chairman and CEO of New York-based fashion and retail consultancy Robert Burke Associates, told FN that demand for luxury goods has not seen any slowdown due to the inflation. “There is a general attitude among luxury consumers, and even some aspirants, that they want to enjoy life, whether it is buying luxury goods, traveling to luxury destinations or simply living their life. — because there was a suppressed ability to do it during COVID,” Burke said. “So there’s a bit of the Roaring Twenties coming back.”
Liza Amlani, director and co-founder of consultancy Retail Strategy Group, predicted high-end spending would continue despite rising prices. “I wouldn’t expect any significant change in demand for luxury footwear, apparel and accessories,” Amlani said. “In fact, luxury is most likely going to grow with more collaborations and expanded product assortments. … I doubt the luxury consumer will be too concerned about gas prices, and in turn, won’t lift the nose when he sees the price of a Louboutin or an Adidas x Gucci collaboration.
Courtesy of Gucci
She noted that most luxury brands have already increased their prices to reflect increases in supply chain and raw material costs. “Now they can focus on how and where they want to shop. Bland and boring basics will no longer suffice,” she said.
Dana Swindler, CEO of Minneapolis-based luxury specialty store MartinPatrick3, told FN that her customers show no price sensitivity. “As a local specialty retailer, we are very pleased with the state of the luxury market,” Swindler said. “In fact, a new Four Seasons hotel just opened two blocks from our store. And our neighborhood, the North Loop, is seeing a lot of activity with tourists returning from New York, Chicago and LA”
For Swindler, the worry still lies in the supply chain. Her store, which also offers an interior design service, is struggling with 12-14 month delivery delays on furniture and other materials. “When it comes to apparel and footwear, we are experiencing slow deliveries, but not a shutdown like we have seen during peak COVID times,” he added.
But not everyone is so lucky. Designer Neil Rodgers, whose product sells for $350 to $895, told FN he sees a direct correlation to stock market performance and sales that day. “A good day in the market usually means a busy selling day,” Rodgers said. “In terms of the economy, we expect things will probably get worse before they get better.”
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