Luxury is set for its worst sales performance in the last 15 years apart from the pandemic-hit 2020. Yet, the downturn has not been universal, and some brands have continued to perform well, especially those that have continued to succeed in China despite the country’s slowing demand for luxury.
So, how much of the industry’s slowdown is due to China? Looking at balance sheet data for a sample of brands to give us a top-down perspective. Revenue growth in China, as we expect, has been weaker than in the recent past.
The below figure looks at the progression of reported quarterly revenue growth in Asia, excluding Japan, over the year. Though these numbers include economies other than China, this is a decent proxy. Included here are two firms that have had positive overall revenue growth this year (Hermès and Prada Group) and two that have experienced a revenue decline (LVMH and Kering). Year-over-year quarterly revenue growth declined across the board, and it was deep and sharp. Even Hermès saw Asia sales slump to near zero by the third quarter after almost hitting 10 percent growth in the first quarter. The only exception was Prada Group, which was underpinned by explosive growth at Miu Miu. (See this Fashion Strategy Weekly post on Prada for our take on what Miu Miu is doing right).