On July 23, LVMH, the industry’s largest player by almost any measure, reported that overall revenue growth was up 2 percent in the first six months of 2024 when compared to the same period in 2023. The picture was much worse at industry laggard Kering, which reported a decline of 11 percent during the same period, with a whopping 20 percent decline at Gucci. Earnings reports by Hermès and Moncler, released on June 25, were less troubling with H1 growth rates up 12 and 11 percent. Yet even though these were well off the post-pandemic highs and Q2 outturns were significantly weaker than those in Q1.
Repeated poor attempts to forecast the state of the luxury market show how difficult it is to predict how industries will perform in the short-run. Yet, the leading indicators are not good. First, the numbers out of China were bad. For LVMH, H1 revenue growth in Asia (excluding Japan) was -10 percent and for Kering it was -22 percent. Hermès’ sales were up 6.8 percent, yet this was less than a third of the 24 percent growth rate recorded in H1 2023. Moreover, while Hermès has consistently been a strong industry performer, its strongest growth segments in H1 were its higher priced leather goods and saddlery sector (which contributes just over 40 percent of total group revenues) while its lower priced priced silks/textiles and perfume/beauty sectors (collectively less than 10 percent of revenues) came in at -1.7 percent and 3.9 percent. This lends some support to the view that the aspirational customer really is cooling their luxury spending.
If there is any empirical veracity to the oft repeated maxim that the wealthiest 2 percent of global consumers account for 40 percent of luxury spending, then the inverse shows that 60 percent of luxury revenues are at risk for at least the rest of the year and into Q1 2025.
Investors certainly believe this to be true as luxury equities have tanked since early May while the broader stock market has continued to trend upwards. The Fashion Strategy Weekly All Luxury Stock Index has fallen over 11 percent since May 1 while the S&P 500 has risen by 6.5 percent.