Two luxury giants, Prada and Hermes, are experiencing remarkable sales growth in Japan, not just from tourists taking advantage of the weaker yen, but significantly from the robust purchasing power of local Japanese consumers.
"Not very many foreigners buy Hermes in Japan, and the Chinese tend to buy in China"
Japan's currency may be on a downward trajectory, but this has not deterred Japanese customers from indulging in luxury goods. On Tuesday, the Prada Group reported a 55% increase in sales revenue in Japan, reaching 309 million euros, or approximately $334 million, for the first half of this year. This marks the highest year-over-year growth among all its regions, with Japan contributing 13% to Prada’s total revenue
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The allure of the weak yen has indeed drawn Chinese shoppers to Japan, leading to a surge in luxury purchases. Notably, LVMH, the industry bellwether, reported a 57% increase in Japanese sales for the first half of 2024. According to LVMH’s CFO, this growth is largely driven by Chinese tourists flocking to Japan to capitalize on the favorable exchange rate.
However, Prada’s success in Japan is not solely attributed to tourism. The company highlighted a strong local consumer base as the primary driver, with locals accounting for 65% of Japan's sales. "Locals are holding up extremely well," said CEO Andrea Guerra during the company's earnings webcast. This sentiment is echoed by Hermes, which also reported robust sales from Japanese customers. "Not very many foreigners buy Hermes in Japan, and the Chinese tend to buy in China," stated Axel Dumas, executive chairman of Hermes International.
Hermes saw a 9% increase in sales revenue in Japan for the first half of the year, a testament to the brand’s enduring appeal among affluent Japanese consumers. Hermes’ products have become quintessential status symbols for the wealthy, who are less susceptible to economic downturns. This resilience is a crucial factor in Hermes' steady performance in Japan.
On the other hand, Prada's appeal spans a broader demographic. Prada-owned Miu Miu has emerged as a favorite among Gen Z luxury shoppers and young celebrities like Sydney Sweeney and Olivia Rodrigo. Miu Miu reported an astounding 93% jump in revenue for the first half of the year, comprising nearly a quarter of Prada's total revenue. This meteoric rise underscores the brand's ability to resonate with younger, fashion-forward consumers.
Prada’s overall net revenue saw an 18% increase, reaching 2.26 billion euros during the first half of the year. This impressive performance underscores the strategic positioning and brand strength of Prada in capturing diverse market segments.
The success stories of Prada and Hermes in Japan highlight the nuanced dynamics of the luxury market in a fluctuating economic environment. While the weak yen has certainly played a role in attracting international shoppers, the unwavering support from local Japanese consumers is a testament to the enduring allure and perceived value of these luxury brands.
As we navigate through 2024, it will be intriguing to observe how these brands continue to adapt and thrive in Japan's unique market landscape. Stay tuned to Dassaris for more insights and updates on the luxury fashion industry.
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