As inflation rises, so do LVMH’s Hublot’s timepieces

The backstory:

• Inflation has been running at record highs, all of which can be tied to the pandemic.

• Between COVID-19 stimulus packages that injected trillions of dollars into the economy, low interest rates and businesses struggling to make and ship things, in the United States, inflation has reached 7%, when the aim is around 2-3%.

• Part of the reason why there was an initial struggle to meet demand, putting upward pressure on inflation, is that many businesses decreased their inventory and placed fewer orders with their suppliers, not expecting much demand.

• But then, demand skyrocketed with the help of COVID-19 relief checks at a much faster rate than many businesses expected, which led to many product shortages.

• For example, in 2021, Hublot watch stock was reduced by 30-40% at its boutiques and retailers, according to the chief executive officer. But then the company saw a strong rebound to record levels by value in 2021, with strong demand in the US.

• Hublot’s products, on average, sell for about 20,000 francs (US$21,500).

The development:

• Hublot’s CEO Ricardo Guadalupe has said that the prices of its watches will increase 3-4% in April or May of this year to reflect the rise in the cost of production and raw materials, such as gold and diamonds.

• “Almost all our suppliers are increasing prices,” said Guadalupe. The costs for steel and titanium are also increasing. Diamond suppliers have raised prices by 10-15%.

• Guadalupe added that “The main problem is the production and the supply chain,” and that all of Hublot’s high-end Swiss watch rivals are expected to boost prices. “We have to do it anyway, and since everybody is doing it, it is acceptable.”

• “The last three months have been unbelievable from the sell-out point of view.”

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