Low-cost luxury goods boost sales

Luxury brands hit hard by the recession are crediting the introduction of "lower-priced" goods for keeping quarterly profits from slumping further.

Coach Inc., based in New York, said fiscal first-quarter profit fell slightly to $140.8 million US, but revenue rose as new, lower-priced handbag lines helped boost sales.

Of course, low prices are in the eye of the beholder.

About 50 per cent of Coach's handbags are now priced under $300, compared to 30 per cent a year ago.

Coach cited the success of its Poppy collection, a lower-priced line of handbags, shoes and other accessories targeted at younger customers. It was launched in July, with prices ranging between $200 and $600. That compares to Coach's Madison collection, which has handbags going for more than $4,800.

"For over a year, we have been addressing the very weak retail climate in the U.S. and abroad," chair and CEO Lew Frankfort said in a statement. "We have adapted our pricing and product strategies to be successful in what will become the 'new normal.'"

Many luxury goods makers are using the same strategy to adapt to the new frugality among wealthy clients.

On Monday, LVMH Moet Hennessy Louis Vuitton, the world's largest luxury-goods company and maker of such brands as Fendi and Givenchy, said third-quarter sales slipped 0.6 per cent, hindered by the consumer-spending implosion.

"I don't think we can say the crisis is over, but we can start to see the light at the end of the tunnel, even though the light is far away," LVMH chief financial officer Jean-Jacques Guiony told the Wall Street Journal.

New York consulting firm Bain & Company has forecast that the luxury-goods industry likely won't fully recover until 2011 or 2012.