Luxury brands, including industry giants like LVMH, Burberry, and Swatch Group, are experiencing significant slowdowns in sales as Chinese shoppers reduce their spending. The downturn is reflective of broader economic challenges in China, impacting global luxury markets.
LVMH Sees Slowed Revenue Growth
LVMH, the world’s largest luxury group, reported a mere 1% revenue growth for the recent period. Despite this, Bernard Arnault, chairman and CEO, remains cautiously optimistic. He highlighted the group’s resilience amidst economic and geopolitical uncertainties and expressed confidence moving into the second half of the year. However, LVMH shares have plummeted nearly 20% over the past year. The company, which owns prestigious brands like Louis Vuitton, Dior, and Tiffany & Co., is not alone in feeling the pinch.
Burberry and Swatch Group Struggle
British luxury fashion label Burberry revealed a sharp decline in sales in mainland China, down over 20% compared to the previous year. Similarly, Swiss watchmaker Swatch Group, owner of brands such as Blancpain, Longines, and Omega, saw a 14.4% drop in sales for the first half of 2024, primarily due to weak demand in China.
Richemont and Hugo Boss Adjust Forecasts
Richemont, the owner of Cartier, reported a 27% year-on-year decline in sales across China, Hong Kong, and Macau for the quarter ending June 30. German fashion giant Hugo Boss also downgraded its annual sales forecasts, citing weak consumer demand in key markets, including China and the UK.
Economic Data and Regulatory Crackdown
Recent economic data from China indicate a sluggish recovery from the pandemic downturn, with second-quarter growth and June retail sales falling below expectations. Additionally, flaunting luxury brands online has come under scrutiny from Chinese authorities. In May, the Global Times reported the banning of internet celebrity Wanghongquanxing from social media due to a crackdown on ostentatious displays of wealth. His Douyin account, with over four million followers, was among several others targeted by China’s internet watchdog for promoting “vulgar” content.
Other luxury goods companies, such as Hermes and Gucci-owner Kering, are set to release their financial results this week. The performance of these brands will further illustrate the impact of economic and regulatory pressures on the luxury market in China.
