The Chanel store in Troy, Michigan, seems as far as possible from Manhattan’s Fifth Avenue as the Gucci store in Columbus, Ohio, is from Los Angeles’ Rodeo Drive.

Nevertheless, luxury retail is no longer confined to big cities, and is quickly moving into Middle America as the rich splash their cash, even amidst high inflation, The Wall Street Journal reports.   

As a result of China’s strict lockdowns, companies that rely heavily on that market, like Prada and LVMH, owner of Fendi and Tiffany & Co., are doubling down on stateside investments in places you wouldn’t expect. Chief executive of French fashion conglomerate SMCP SAS, Isabelle Guichot, explains: “We’ve shifted our attention to the U.S. for the coming year,” as luxury retail spending even among middle America continues to build.  

Tremendous US Growth

The numbers tell the story. LVMH’s sales are up 28% in the first six months of 2022 Year over Year (YoY) compared to last year, Hermes sales up 29%, and Prada sales up 22%. In fact, the post-omicron boom in luxury spending has resulted in more American luxury sales growth than any other region since 2019, with WSJ noting at a respective increase of 21% and 14%, Asian and European sales for Kering SA, the owner of Gucci, lag American sales, which doubled in the first half of 2022 compared to 2019.  

While the uptick in American luxury retail spending may be surprising considering months of consumers being barraged with news of continuous inflation, the trend itself dates back to last year, as the U.S. saw $63.3 billion in luxury sales in 2021, and American luxury spending soaring by 47% in 2020, WRAL TechWire reports.

Inflation has even hammered Salvation Army and its thrift stores, causing some to close. At the other end of the spectrum, Chanel has opened 15 new stores nationwide recently, including in Troy, Michigan, with plans for another new store in Oak Brook, Illinois.

Gucci and Chanel are being joined by other luxury brands like Hermes, which plans on opening a new store later this year in Naples, on the west coast of Florida.

A Tale of Two Consumers    

The saying “We’re all in the same storm but not in the same boat” applies to American consumers in today’s turbulent economy. The working and middle class have increasingly pulled back from discretionary spending, but the wealthy have continued to splurge on luxury goods, services and travel, curtailing only on their savings.

One can observe this in the sale and closures of 300 Save A Lot stores, a budget grocer, while Gucci, powered by strong demand for luxury goods, keeps powering on with record sales and new outlets.

While a majority of Americans, 61%, are living paycheck to paycheck, household savings rates are at lows not seen since 2008, and the rate of food insecurity is almost as high as the early days of the pandemic. Big Lots CEO Bruce Thorn said for his consumers, “We are now in a new chapter where high inflation is greatly limiting the ability of consumers to make discretionary purchases, especially of big-ticket items.” The broader landscape for many Americans remains marred by stagnant wages and a housing market on the brink.

Chief economist for Visa, Wayne Best, reports that wealthy consumers are the ones driving $257 billion in spending, with high-end brand Burberry naming the Americas as “the stand-out region” for its sales.

“None of us know what’s going to happen in the back half of the year with the consumer—but it appears that the luxury industry is quite robust and healthy,” Capri CEO John Idol tells CNBC.