The Hot New Trend for Gucci and Chanel: Middle America

Once concentrated in a handful of places, wealth has spread to new parts of the U.S. in recent years, with cities such as Atlanta and Austin, Texas, emerging as new tech hubs, for example. The rise of these new wealth centers is driving the strategy, luxury companies say, drawing them beyond traditional U.S. mainstays of New York and California.

China’s strict approach to containing Covid-19 has further bolstered the case for U.S. investment. In a bumper year so far for luxury revenues, China has been a laggard, its performance as a high-end market undone by strict lockdowns in Shanghai and other major cities—restrictions that executives say they fear could be repeated.

That has convinced some brands to bulk up their U.S. presence, ending an era in which expanding in China dominated luxury executives’ thinking, people at these companies say.

“We’ve shifted our attention to the U.S.,” said

Isabelle Guichot,

chief executive of French fashion group

SMCP SAS,

which owns brands including Sandro and Maje. She cited the “remarkable growth” in luxury spending in the country. “The U.S. is the key point for the coming year.”

With U.S. sales surging,

Prada

1913 0.45%

SpA also says it is making “huge investments in upgrading current U.S. stores and looking into opportunities in new cities.”

Amid a postpandemic boom in luxury spending, strong growth in the U.S. drove luxury earnings in the first half of 2022, helping brands overcome disappointing Chinese sales.

LVMH Moët Hennessy Louis Vuitton SE

LVMUY -2.24%

said its U.S. sales increased 28% in the six months ended Jun. 30 compared with the same period last year. Gucci owner

Kering SA,

KER -2.12%

in the same period, reported a 23% rise in revenue in the country, while sales there gained 29% for Hermès International SCA and 22% for Prada.

Luxury brands are plowing ahead with U.S. expansion plans, even as mainstream retailers warn that U.S. consumers could reduce their spending in the face of surging inflation. Affluent consumers are more insulated from such problems and are less likely to change their spending habits, luxury executives say.

The big luxury groups have reported significantly more sales growth in the U.S. than in other regions since prepandemic 2019. For example, Kering’s North American sales roughly doubled in the first half of 2022 compared with the same period of 2019, while its Asian and European sales increased by 21% and 14% respectively. Figures from LVMH and Prada show a similar trend.

Expanding in China was the priority for so long that luxury brands were slow to spot new opportunities emerging in the U.S., said Erwan Rambourg, the head of consumer and retail research at HSBC.

“Luxury was pretty much a play on Chinese consumption,” Mr. Rambourg said. “Now it’s much more balanced, with American consumers being front and center.”

The experience of the pandemic unshackled affluent American consumers who might previously have felt guilty about splurging on luxury products, fueling the continuing U.S. boom, according to Mr. Rambourg. Luxury brands have also been effective in tapping into a new cohort of young U.S. consumers with marketing drives such as LVMH’s recent Tiffany campaign starring Beyoncé and Jay-Z, he said.

Kering, which also owns Saint Laurent and Bottega Veneta, says it plans to capitalize on fast-rising U.S. demand by opening more than 30 new U.S. stores over the next couple of years, including Gucci boutiques in New Orleans and St. Louis, and a Saint Laurent store in Detroit. A new Gucci store in Columbus—the company’s first stand-alone store in Ohio—opened in July, with another new store in Austin having opened in April.

“These cities have changed structurally, it’s not just a spike,”

Francois-Henri Pinault,

Kering’s chief executive, told reporters earlier this year when outlining the group’s U.S. growth plans, describing what he saw as a permanent shift that had turned these cities into long-term markets for luxury brands.

LVMH brands are similarly expanding, with openings planned soon for Givenchy in cities including Atlanta and Philadelphia. Flagship brand Louis Vuitton already has a bigger U.S. footprint than many of its rivals and is opening new types of stores in existing locations, including its first dedicated men’s store in California in July, for example.

Prada is revamping its existing stores and opening new ones, chiefly in Florida, Michigan and Texas, to capture rising demand there, the company said. Budgets for capital expenditure that were once dominated by China are now being channeled into the U.S., it added. That is enabling a swift rollout: After Prada found a new location in East Hampton, N.Y., in April, the store opened for business in July.

Hermès plans to open a store in Naples later this year, having recently opened in Austin, which has become a magnet for luxury brands thanks to the city’s burgeoning tech-industry wealth among employees of companies such as

Oracle Inc.

and

Tesla Inc.,

which have recently built offices and factories there.

Chanel SA has already opened 15 new fragrance and beauty boutiques in the U.S. in recent months, including its store in Troy, and plans six more this year, including in Oak Brook, Ill., and Nashville, Tenn.

SMCP plans to increase its U.S. store count to 50 from around 40 by the end of next year, said Ms. Guichot. Cities such as Scottsdale, Ariz., “that weren’t on our radar before” are among those being targeted.

Still, the cost of opening a U.S. store, which is higher than opening an equivalent store in Europe or Asia owing to relatively steep construction costs, means the company must temper its rate of openings to exercise cost control, Ms. Guichot said.

Hiring people to staff new stores is another challenge when many U.S. businesses are struggling to recruit, according to Ms. Guichot. Competition for experienced personnel is intense with so many luxury brands expanding in the U.S. at the same time, requiring companies to offer lucrative packages to prospective hires, further padding the cost of their American expansion programs, she added.

Even so, the potential of untapped U.S. markets makes it worthwhile. “The trend has been confirmed: extremely strong growth in the U.S.,” Ms. Guichot said.

Write to Trefor Moss at Trefor.Moss@wsj.com

Once concentrated in a handful of places, wealth has spread to new parts of the U.S. in recent years, with cities such as Atlanta and Austin, Texas, emerging as new tech hubs, for example. The rise of these new wealth centers is driving the strategy, luxury companies say, drawing them beyond traditional U.S. mainstays of New York and California.

China’s strict approach to containing Covid-19 has further bolstered the case for U.S. investment. In a bumper year so far for luxury revenues, China has been a laggard, its performance as a high-end market undone by strict lockdowns in Shanghai and other major cities—restrictions that executives say they fear could be repeated.

That has convinced some brands to bulk up their U.S. presence, ending an era in which expanding in China dominated luxury executives’ thinking, people at these companies say.

“We’ve shifted our attention to the U.S.,” said

Isabelle Guichot,

chief executive of French fashion group

SMCP SAS,

which owns brands including Sandro and Maje. She cited the “remarkable growth” in luxury spending in the country. “The U.S. is the key point for the coming year.”

With U.S. sales surging,

Prada

1913 0.45%

SpA also says it is making “huge investments in upgrading current U.S. stores and looking into opportunities in new cities.”

Amid a postpandemic boom in luxury spending, strong growth in the U.S. drove luxury earnings in the first half of 2022, helping brands overcome disappointing Chinese sales.

LVMH Moët Hennessy Louis Vuitton SE

LVMUY -2.24%

said its U.S. sales increased 28% in the six months ended Jun. 30 compared with the same period last year. Gucci owner

Kering SA,

KER -2.12%

in the same period, reported a 23% rise in revenue in the country, while sales there gained 29% for Hermès International SCA and 22% for Prada.

Luxury brands are plowing ahead with U.S. expansion plans, even as mainstream retailers warn that U.S. consumers could reduce their spending in the face of surging inflation. Affluent consumers are more insulated from such problems and are less likely to change their spending habits, luxury executives say.

The big luxury groups have reported significantly more sales growth in the U.S. than in other regions since prepandemic 2019. For example, Kering’s North American sales roughly doubled in the first half of 2022 compared with the same period of 2019, while its Asian and European sales increased by 21% and 14% respectively. Figures from LVMH and Prada show a similar trend.

Expanding in China was the priority for so long that luxury brands were slow to spot new opportunities emerging in the U.S., said Erwan Rambourg, the head of consumer and retail research at HSBC.

“Luxury was pretty much a play on Chinese consumption,” Mr. Rambourg said. “Now it’s much more balanced, with American consumers being front and center.”

The experience of the pandemic unshackled affluent American consumers who might previously have felt guilty about splurging on luxury products, fueling the continuing U.S. boom, according to Mr. Rambourg. Luxury brands have also been effective in tapping into a new cohort of young U.S. consumers with marketing drives such as LVMH’s recent Tiffany campaign starring Beyoncé and Jay-Z, he said.

Kering, which also owns Saint Laurent and Bottega Veneta, says it plans to capitalize on fast-rising U.S. demand by opening more than 30 new U.S. stores over the next couple of years, including Gucci boutiques in New Orleans and St. Louis, and a Saint Laurent store in Detroit. A new Gucci store in Columbus—the company’s first stand-alone store in Ohio—opened in July, with another new store in Austin having opened in April.

“These cities have changed structurally, it’s not just a spike,”

Francois-Henri Pinault,

Kering’s chief executive, told reporters earlier this year when outlining the group’s U.S. growth plans, describing what he saw as a permanent shift that had turned these cities into long-term markets for luxury brands.

LVMH brands are similarly expanding, with openings planned soon for Givenchy in cities including Atlanta and Philadelphia. Flagship brand Louis Vuitton already has a bigger U.S. footprint than many of its rivals and is opening new types of stores in existing locations, including its first dedicated men’s store in California in July, for example.

Prada is revamping its existing stores and opening new ones, chiefly in Florida, Michigan and Texas, to capture rising demand there, the company said. Budgets for capital expenditure that were once dominated by China are now being channeled into the U.S., it added. That is enabling a swift rollout: After Prada found a new location in East Hampton, N.Y., in April, the store opened for business in July.

Hermès plans to open a store in Naples later this year, having recently opened in Austin, which has become a magnet for luxury brands thanks to the city’s burgeoning tech-industry wealth among employees of companies such as

Oracle Inc.

and

Tesla Inc.,

which have recently built offices and factories there.

Chanel SA has already opened 15 new fragrance and beauty boutiques in the U.S. in recent months, including its store in Troy, and plans six more this year, including in Oak Brook, Ill., and Nashville, Tenn.

SMCP plans to increase its U.S. store count to 50 from around 40 by the end of next year, said Ms. Guichot. Cities such as Scottsdale, Ariz., “that weren’t on our radar before” are among those being targeted.

Still, the cost of opening a U.S. store, which is higher than opening an equivalent store in Europe or Asia owing to relatively steep construction costs, means the company must temper its rate of openings to exercise cost control, Ms. Guichot said.

Hiring people to staff new stores is another challenge when many U.S. businesses are struggling to recruit, according to Ms. Guichot. Competition for experienced personnel is intense with so many luxury brands expanding in the U.S. at the same time, requiring companies to offer lucrative packages to prospective hires, further padding the cost of their American expansion programs, she added.

Even so, the potential of untapped U.S. markets makes it worthwhile. “The trend has been confirmed: extremely strong growth in the U.S.,” Ms. Guichot said.

Write to Trefor Moss at Trefor.Moss@wsj.com