Fast fashion is staging a speedier exit from Russia than its big-ticket luxury peers. While the likes of Sweden’s H&M and British ecommerce group Asos have suspended sales in Russia – for both practical and moral reasons following the invasion of Ukraine – the swish doors of luxury houses remain open.
On the ground reports suggest high-end jewelers and other purveyors of luxury goods still do a brisk trade, a corollary of sorts to the queues snaking behind cash machines. Indeed, the boss of LVMH-owned Bulgari recently spoke of a probable short-term boost in business.
No wonder. Designer handbags, watches and other bling operate as sorts of crypto assets for the analogue world. They are easier to carry out of the country than cash when many Russian banks are shunted off the Swift global payments messaging system. They can offer superior stores of value as the ruble plummets and inflation spirals upward.
Longer term, sanctions are unlikely to have much impact on the sector. Russian exposure is small, below that of the fast-fashion chains. LVMH derives about 1.3 per cent of revenues from the country. Its peers are more exposed, with 2 to 5 per cent, but still not much.
Overall, Bernstein estimates Russians and Ukrainians account for up to 5 per cent of luxury spending. Yet only half of that happens on home turf, with the balance in Shanghai, Milan and elsewhere. Russian buyers tilt more towards hard luxury, such as watches and jewelery.
Some pain should follow. Shoppers’ travels will be curtailed. Russian buyers’ appetite for luxury goods buoyed business last year, when the pandemic sapped demand around the globe, according to Bain & Co.
Reputational damage by continuing operations in Russia, even as war escalates, is risky. LVMH has sought to offset that with a € 5m donation to the International Committee of the Red Cross. LVMH issued assurances that the group “stands alongside” those severely affected by the war. No matter what, the purveyor of pricey luggage should not suffer much from the fallout of this war.
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