Crisis taking the shine out of luxury

Chanel fashion’s decision to call off a prestigious but costly global art show is the latest sign that even the shine of the luxury industry is beginning to wear thin due to the crisis.

While big profits are still on the cards for the luxury sector in the months ahead, global sales are down, prices stagnating, and less and less new boutiques opening.

“This is the sector’s toughest crisis in decades,” said Annie Girac, a consultant for Euler Hermes SFAC credit insurance firm.

Paris-based Chanel on Friday announced a premature end to the Chanel Mobile Art exhibition, a high-end arty tribute to its quilted bag-with-chain that travelled from Hong Kong to Tokyo to New York and had been due to continue to London, Moscow and Paris.

“In the current context we have to arbitrate. We prefer to refocus on our strategic investments,” Chanel said.

In just a year, said a Paris bank analyst, solid groups such as Switzerland’s Richemont, which owns the brands Cartier and Montblanc, or France’s LVMH, which owns Vuitton and Gucci, have lost 40 per cent of their share value.

“We had never seen anything like this,” he said.

Italy’s Bulgari is expecting a fall in profits this year while Tiffany in the US has warned of a possible staff cut due to a third quarter drop in turnover.

Meanwhile LVMH, the world’s leading luxury conglomerate, saw its third quarter growth sliced 50 per cent in comparison to the first two terms in 2008.