Luxury brands seek a miracle inside their (ostentatious, overpriced) bag of tricks – The Hustle

By wazup on October 30, 2023 Comments Closed / 98 views

There’s nothing like a little retail therapy after a long day — popping over to the mall, taking your mind off everything, and dropping a casual $26k on a Gucci crocodile handbag.

If that habit isn’t feeling super sustainable to you, you’re not alone.The luxury goods industry, which boomed post-pandemic, is now looking more unsteady than a stilt walker wearing Manolo Blahniks.Which brands are mired in a slump?First, some snazzy names did bear good news this past quarter, though they were few and far between:

Hermes grew revenue 7% YoY (though its prices also shot up 7% this year).High-end eyewear — often among the cheapest entry points to luxe brands — is holding up nicely, with French luxury conglomerate Kering reporting a 34% lift, credited to its Maui Jim acquisition.

That’s about where the nice business news ends, per Fortune:

Outside of Maui Jim, Kering had a disastrous quarter, plunging 13% overall, with sales down across all its notable fashion houses, including Gucci, Yves Saint Laurent, Bottega Veneta, and Balenciaga.The latest earnings from fellow French luxury giant LVMH — owner of Louis Vuitton, Christian Dior, Tiffany & Co., Hublot, and more — also worried investors, with Q3 showing a sharp downturn in sales growth.

So, what’s going on here?LVMH blamed its lackluster performance on “post-covid normalization of demand” and high inventory levels, while Kering pointed to “challenging macroeconomic conditions.”The part they aren’t saying out loud: the outsized role that China plays in fueling their industry.When demand is soaring in China, designer brands flourish — but the world’s second-largest economy is currently bottoming out. Consequently, an index of top European luxury brands has lost ~$175B since March, per The Messenger.It’s not just China, of course: No matter where you live, when basics like gas and groceries are wildly expensive, it’s hard to feel good spending ~$2k on a Yves Saint Laurent pencil skirt, even if the tartan perfectly complements the rest of your wardrobe.