Luxury Brands Pin Hopes on US Shoppers Amidst Global Market Weakness
As the global luxury goods market struggles with its lowest sales rates in years, high-end brands are turning their attention to the United States, where a strong stock market and rising cryptocurrencies are expected to boost consumer spending.
A Shift in Focus
After decades of relying on Chinese buyers, luxury companies like LVMH and Kering are now looking to tap into American wealth to drive sales. The US market is seen as a beacon of hope, with credit card spending on luxury brands increasing by 1% year-on-year in December, according to Citi data.
Challenges in China and Europe
Meanwhile, China’s property crisis and sluggish economy are weighing heavily on demand for designer goods, while European shoppers are holding back on luxury purchases due to rising living costs. The industry has experienced a turbulent stock market ride, with LVMH losing over 30 billion euros in market capitalization over the past six months.
Earnings Season Ahead
The upcoming earnings season will provide insight into the health of high-end demand, with Richemont’s end-of-year sales report on Thursday and LVMH’s trading update on January 28. Analysts expect overall volatility in sales to remain, with Barclays projecting a more moderate decline in fourth-quarter sales than in the previous quarter.
A Tale of Two Markets
While China’s luxury market is expected to continue its decline, the US market is showing signs of improvement. LVMH is forecast to report a 1% decline in fourth-quarter sales, while Birkin bag maker Hermes is expected to post a 10% sales rise. Kering, meanwhile, is seen posting a 12% decline in sales, highlighting a widening gap between stronger and weaker players.
Growth Prospects
The sector overall is expected to grow around 4% in 2025, with sales to Americans accounting for over a third of the global growth. However, not all brands are expected to benefit equally, with Caroline Reyl, head of premium brands at Pictet Asset Management, noting that “typically after difficult periods for the luxury industry, you have big winners and big laggards.”
Leave a Reply