As the quarters go by, the luxury sector continues to face the same challenges. First and foremost, a difficult macroeconomic environment that is leading consumers to adopt increasingly demanding behavior, resulting in a deterioration in demand for luxury goods. In addition, the sector is also faced with the persistent slowdown of the Chinese market, the main driver of sales in the luxury goods sector. In these conditions, most brands are experiencing a decline in sales to a greater or lesser extent. Only a handful are managing to hold their own.
In the midst of the third-quarter slowdown affecting the major luxury players, only three stocks seem to stand out: Prada, Hermès and Cucinelli. While Kering has been particularly hard hit, LVMH has not escaped the sector’s gloom.
However, glimmers of hope are emerging with the new Chinese government measures.
Prada and Hermès continue to impress with double-digit growth rates
The Prada Group, listed in Hong Kong since 2011, has once again reported double-digit quarterly growth (+18%), defying the slowdown in global demand for luxury goods. This makes 15 consecutive quarters of growth! This exceptional performance is due to the resilience of the Prada brand and the sustained momentum of Miu Miu, positioning the Group as a rare exception in the sector.
Indeed, Miu Miu’s unique identity, as exemplified by the style of the mini-skirt and underwear lingerie, has increased its desirability and influence in the women’s fashion industry. Miu Miu, while enjoying continued double-digit growth, remains relatively modest, contributing around 25% of total retail sales.
Although Prada does not seem totally immune to the economic slowdown in China, the Group confirms its ability to maintain a progressive margin trajectory, signalling its confidence in its ability to achieve a margin above its medium-term target (20%) for the third year running.
For its part, Hermès once again did not disappoint, with sales growth of over 13%. Thanks to a very wealthy and loyal clientele, its business was relatively unaffected by the loss of consumer confidence in China. However, Hermès’growth in the Asia-Pacific region (excluding Japan) decelerated during the summer months to 1%, compared with 5.5% in the second quarter. However, this was more than offset in Japan (+22.8% in the third quarter).
As usual, Hermès is not giving an annual target, but the operating margin of 40% could be maintained, despite negative currency impacts.
Cucinelli appears to be the third and last luxury brand to do well. The cashmere specialist saw its revenues grow by +12.4% over the first 9 months of the year. This dynamic performance was made possible by a desirable quiet luxury offering, price increases and numerous new store openings. Optimistically, the Italian fashion house is even aiming for 10% growth for the full year 2024, which many market players consider to be wishful thinking.
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