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First quarter luxury earnings show brands' strengths and weaknesses

By Don-Alvin Adegeest


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Hermès campaign Credits: Hermès

French luxury conglomerates serve as bellwethers for the wider industry, and the first-quarter revenue results have provided insight into both the strengths and weaknesses of the sector, shedding light on the preferences and behaviours of luxury consumers worldwide.

While certain companies exceeded analysts' expectations, others experienced a slowdown in growth, particularly in light of challenging market conditions in China. At the pinnacle, Hermès demonstrated robust growth, with revenues soaring by 17 percent, underscoring the continued spending power of the global elite on high-end goods. Conversely, Kering issued a cautious outlook, anticipating a potential revenue decline of up to 45 percent, signalling a shift as aspirational shoppers tighten their purse strings, notably impacting brands like Gucci, which saw an 18 percent downturn in China.

The Asia-Pacific region remains pivotal for the luxury market, yet recent seasons have witnessed subdued sales amid China's economic challenges. Although Chinese consumers are resuming travel and shopping activities, their preferences have evolved, with Japan emerging as the preferred destination for luxury tourism, according to the Financial Times. LVMH, which saw revenue of its fashion and leather goods grow 2 percent in Q1, compared to 17 percent in the period last year, said its stores in Japan saw an increase of Chinese sales.

The affluent are still shopping

Smaller luxury groups such as Prada (up 11 percent) and Brunello Cucinelli (up 16.5 percent) reported positive sales in the first quarter, with the latter renowned for its discreet luxury offerings favoured by an affluent clientele.

For years, aspirational shoppers drove growth in the luxury sector, but escalating prices of small accessories and inflationary pressures are prompting a shift in consumer behaviour. During economic downturns, discretionary purchases, including luxury goods, often take a backseat as consumers prioritise essential spending. Consequently, luxury brands are navigating a landscape where the spending habits of aspirational shoppers are becoming more cautious.

Moreover, the luxury sector's performance is intricately linked to the global economy, with brands catering to the ultra-wealthy facing relatively minor disruptions compared to those targeting aspirational consumers, highlighting the resilience of high-end market segments in uncertain times.

Brunello Cucinelli
Executive Management