Luxury suffers sixth worst year in decades
According to analysts at HSBC Holdings, based on their sales estimates for the previous year, luxury sales growth, excluding currency fluctuations, could be just 2,0% this year, making 2024 the sixth-worst year in the last two decades (businessoffashion.com).
The stagnation in the luxury segment was revealed when LVMH reported its first-half results. Organic sales growth slowed to 3% from 1% in the second quarter, with China remaining a weak point for the group and currency fluctuations weighing on profitability. Major players such as Kering, Ferragamo and Burberry are in the red.
LVMH is at its lowest in two and a half years, down more than 30% of its value. Kering, which has failed to revive its golden goose Gucci, has hit a seven-year low. Burberry just lost its place on the FTSE 100, sending its market value to its lowest in 100 years.
Only Hermès and Prada can boast of a stable position.
The luxury segment's deterioration is primarily due to declining demand for luxury goods in the U.S. and, most importantly, China, which accounted for 23 percent of global luxury consumption last year, according to Bain & Co. As the country's economy worsened, Chinese consumers have adapted in their own way, wearing luxury, mixing high-end brands with cheaper ones, and preferring to spend on experiences.
Beijing's economic outlook for the second half of the year is "flashing red or pretty close to red," according to Eswar Prasad, a professor of international trade and economics at Cornell University, as reported by CNBC. China's manufacturing has also recently begun to slow, due to a housing market slump and short-term problems with domestic demand, particularly private investment and household consumption.
Analysts have different predictions about how long the crisis might last. From a macroeconomic perspective, the main unknowns remain the development of the Chinese economy, the outcome of the US presidential election in November, and the future of US-China relations.
(Based on materials from Worldfootwear.com)
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