Luxury brands booming

Passengers pass by Louis Vuitton’s duty free shop at Incheon International Airport, which opened in September last year. Sales of foreign luxury brands have increased dramatically over the last five years in Korea despite an economic slump here. (Photo : Yonhap)

Louis Vuitton, Gucci stingy in social contribution

Sales of foreign luxury brands in Korea tripled in the last five years thanks to local consumers’ constant fever for Louis Vuitton, Gucci and Prada, an online information provider said Wednesday.

According to Chaebul.com, combined sales of top 10 foreign luxury brands reached 1.9 trillion won in 2011, 2.9 times more than that of 2006 when it marked 648.9 billion won.

French luxury brand Louis Vuitton topped the list earning 497.4 billion won last year followed by Gucci which sold 296 billion won of goods.

Prada came third with 251.3 billion won in sales in 2011, up 9.3 times from five years ago and expanding its presence fast in the local market. Experts say the Italian brand is gaining popularity here thanks to its relatively low prices in the outlet market and wide range in its men’s collection.

Beverly, Swatch and Ferragamo saw two to three times increase in sales during the same period while Sisley, Swarovski, Bulgari and Rolex also rounded up at the top 10 with tens of billions won of revenues.

Industry watchers say the flocks of Chinese tourists in Korea also contributed to the strong sales of foreign brands here. Louis Vuitton launched its duty free branch at Incheon International Airport in September 2011 to attract international customers, mostly from China.

Luxury brands are popular in the wedding market as well. More and more new brides and grooms buy these brands as wedding presents. They say luxury brands can hedge against inflation as they keep their value for a long time.

In terms of net profit, Prada earned the most in 2011 with 53.2 billion won followed by Beverly and Gucci which posted 25.9 billion won and 23.7 billion won, respectively. The top 10 brands raked a combined 187 billion won of net income in 2011, 4.1 times higher than five years ago.

The luxury brands, however, were reluctant to donate to society. The 10 largest foreign luxury brands donated a total of 1 billion won to Korean society in the six-year period from 2005 to 2011 accounting for 0.14 percent of their whole net profit at the time.

Swatch, Sisley and Bulgari never donate, while Prada donated 760,000 won over five years. Louis Vuitton and Gucci gave 310 million won and 160 million won in donations, respectively, accounting for 0.18 percent of their net income.

Beverly donated 220 million won during the same period, while Rolex gave 150 million won at the time. Ferragamo and Swarovski gave 100 million won and 70 million won, respectively, a sign of their stinginess.

Instead, they were busy sending their money back to their home countries. Average dividend-to-net income ratio of the 10 brands marked 38.8 percent during the six years. Sisley paid 88.4 percent of their income as dividends, while Louis Vuitton paid more than half of their profit to their shareholders.

The dividend ratio is higher than their Korea counterparts. The average dividend ratio of Korea’s top 10 listed companies reached 13.7 percent last year. Samsung Electronics, the nation’s biggest listed company by revenue, paid 8.2 percent of its net income to the shareholders in 2011. Hyundai Motor, the No. 2 listed company, marked 10.1 percent of dividend-to-net profit ratio last year.

Critics say that foreign luxury brands have been mum to the criticism. “Foreign luxury brands repeat the bad habit of not donating while they make an enormous amount of money in the domestic market,” Jeong Seon-seop, head of Chaebul.com, was quoted as saying by Yonhap. <The Korea Times/Kim Jae-won>

news@theasian.asia