Luxury purchasing power slows down

In the third quarter, sales of Louis Vuitton and Dior slowed down while Gucci and Yves Saint-Laurent even decreased.

Considered a barometer of the luxury industry, the business situation in the past 3 months of LVMH Group - which owns many brands such as Louis Vuitton, Dior, Tiffany - was no longer as strong as in the first half of the year.

Specifically, the newly announced third-quarter revenue reached 19.96 billion euros, up 9% compared to the same period in 2022. This figure is significantly lower than the 17% growth in the first half of this year. Sales of LVMH's mainstays such as leather goods and luxury fashion were no exception, increasing only 9% in the last quarter compared to 20% in the first 6 months.

Other companies have struggled even more, with French conglomerate Kering seeing its sales fall 9% in the third quarter to €4.46 billion. CEO François-Henri Pinault attributed the decline to the impact of decisions to strengthen the exclusivity of its brands, as well as external challenges including an unfavorable macroeconomic environment and a decline in demand for luxury goods.

A Gucci store in Berlin, Germany on January 22, 2021. Photo: Reuters — A Gucci store in Berlin, Germany on January 22, 2021. Photo: *Reuters*

Gucci, which accounts for half of Kering’s global business, saw its third-quarter revenue fall 7%. As Gucci is one of its most profitable brands, the underperformance weighed on Kering’s overall operating profit. Another subsidiary, Yves Saint-Laurent, also showed signs of weakness, with sales down 12%.

Luxury industry analysts are concerned about the purchasing power of the Chinese market, which had been a boon for Gucci, Dior and Louis Vuitton until 2020. Recovery has been slow since the lockdown was lifted earlier this year. “The Chinese watch market has recovered more slowly than expected,” said Sylvain Dolla, CEO of Swatch Group, which owns the Tissot watch brand.

Hermès, on the other hand, has been doing well. In the third quarter, the French leather bag brand reported a 15.6% year-on-year increase in sales, after a 25% increase in the first half. Chief financial officer Eric du Halgouët said business in China, Macau, Taiwan and Hong Kong was “strong.” However, Hermès acknowledged that there are still macroeconomic challenges facing China in the short term.

“The long- and medium-term growth potential remains strong,” Du Halgouët added. This forecast is helping Hermès continue to invest in opening one to two stores a year. It is preparing to open a store in Chengdu, primarily to sell handbags to those who have not yet traveled to Europe.

Phien An ( according to Le Monde )

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