Paris-based high-end luxury goods manufacturer Hermes held a rare two-day apparel sale on May 23-24 at the Conrad Hotel in Hong Kong's Admiralty district, offering up to 50% off certain items. The event is reportedly an attempt to shift excess inventory, reports Yicai.com, the website of Shanghai's China Business News.
Hermes's 2014 financial report released in March shows the company's net profit at 7.1 billion yuan (US$1.15 billion), up 8.7% year on year. Despite a stable overall global performance, revenue from perfumes and timepieces fell by 8% and 17%, respectively, due to slumping sales in the Chinese market, affected by the government's ongoing frugality and anti-graft drive. The manufacturer also faces inventory pressure regarding apparel.
Axel Dumas, the brand's chief executive, has hinted at the possibility of an overall price cut in China. Considering the deflating euro and that the price tag of Hermes products in China has been 40% higher than in Europe, there is certainly room for a cut, according to the report.
Deflation of luxury brands is rare as the manufacturers carefully set price increases for their products each year to create a sense that their value holds, if not increases, over time.
The anti-graft probes in China have dealt a blow to the country's luxury market, however. In April 2014, several luxury brands increased their prices by 15% to make up for losses from decreased sales volume. In March, Chanel reversed the trend by introducing a series of price cuts, followed by luxury watch maker Patek Philippe and TAG Heuer, which announced a slash in product prices by 18% in China and 20% in Hong Kong, respectively.