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According to Barclays, growth should continue in Europe for luxury goods, driven by consumption in China and the United States.
British bank Barclays unveils a report entitled “European Luxury Goods 2022 Outlook” . In 2022, the report predicts an upswing in the luxury goods sector with single to double-digit organic growth, driven once again by the US and China.
“The outlook for European luxury goods companies remains very promising despite the recent strong rebound in sales,” says Erwan Rambourg, global head of consumer and retail research at HSBC in New York. “The irony of the past 18 months is that the uncertainty generated by COVID-19 restrictions has forced management teams to be more nimble, less risk-averse, bolder and helped them make tough decisions they may have put off before the crisis on staffing, rents, digital transformation and more.”
Meanwhile, luxury goods “offer some meaning and relief to consumers” in troubled times, according to Rambourg, and “brand awareness has exploded on social media and traditional advertising” thanks to heavy investments during the pandemic.
“We have seen very good results in the luxury industry, given the wealth effect, and given that consumers still have healthy amounts of savings, as well as low unemployment and consumer confidence,” said Oliver Chen, managing director and senior equity research analyst at Cowen & Co.
China and the U.S. as growth markets
China and the U.S. should continue to drive growth, while Europe will gradually recover as local spending picks up, according to Barclays’ outlook. The bank touted the steady growth of China’s middle class, which Bain expects to account for as much as 45 percent of luxury spending by 2025.
“The rollout of a property tax in pilot cities will be a focus in 2022,” Barclays warned. “More broadly, we expect regulatory updates on China to be highly watched in the space next year, as this can have a big impact on consumer sentiment.”
“In a closed world, the focus has been on the local customer base and they have responded very well by finally getting some attention,” Rambourg said. “Europe seems to be closing in a bit, but that shouldn’t hurt sales significantly.”
Wellness and accessories
Another category to watch is beauty, health and wellness. “Investing in your face, skin care and wellness is in many ways the new luxury, just like health is the new wealth,” Chen said.
According to Luca Solca, senior analyst for luxury goods research at Bernstein “leather goods, jewelry and beauty are still likely to be on the rise, relative to other product categories.” “The big companies are likely to outperform,” Rambourg said. “In handbags and accessories, Dior, Louis Vuitton, Chanel, Hermes and now Gucci and Prada also are showing strong signs of recovery.” In addition, he expects strong growth in jewelry, driven by Tiffany & Co, now owned by the LVMH group and sector leader Cartier, which “continues to impress” .
“Finally, I think footwear will be a big focus, because it’s the best way to generate repeat purchases. And so, whether it’s specialists like Christian Louboutin or generalists like Dior, the category will be supported by many initiatives,” Rambourg says.
CSR and diversification
“We believe that Millennials and Generation Z consumers will continue to ask companies to step up their ESG efforts in 2022,” Barclays agreed in its report. “We believe Burberry and Kering are clear leaders in reducing carbon intensity.” Companies in the luxury sector are catching up with the new CSR standards and making efforts in this direction, as evidenced by the recent B-corp certification obtained by the Chloé brand (Richemont Group).
In terms of diversification for luxury groups, Barclays believes that the LVMH group “the key aggregator of the sector, will probably continue to redefine the true meaning of luxury and this implies that the added categories may be all suspect, like hotels (Belmond) or tourism (Rimowa) when they advertise these things. I recommend expecting the unexpected, because offerings in existing categories won’t change the story much and won’t move the needle.”
Indeed, more and more luxury companies are diversifying and investing in areas that are more or less distant from them, such as Bvlgari Hotels or investments in promising sectors such as Kering which has invested in Vestiaire Collective.
Read also > STOCK MARKET : EVERGRANDE SEEKS TO REASSURE, BARCLAYS STRENGTHENS IN LUXURY
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According to Barclays, growth should continue in Europe for luxury goods, driven by consumption in China and the United States.
British bank Barclays unveils a report entitled “European Luxury Goods 2022 Outlook” . In 2022, the report predicts an upswing in the luxury goods sector with single to double-digit organic growth, driven once again by the US and China.
“The outlook for European luxury goods companies remains very promising despite the recent strong rebound in sales,” says Erwan Rambourg, global head of consumer and retail research at HSBC in New York. “The irony of the past 18 months is that the uncertainty generated by COVID-19 restrictions has forced management teams to be more nimble, less risk-averse, bolder and helped them make tough decisions they may have put off before the crisis on staffing, rents, digital transformation and more.”
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According to Barclays, growth should continue in Europe for luxury goods, driven by consumption in China and the United States.
British bank Barclays unveils a report entitled “European Luxury Goods 2022 Outlook” . In 2022, the report predicts an upswing in the luxury goods sector with single to double-digit organic growth, driven once again by the US and China.
“The outlook for European luxury goods companies remains very promising despite the recent strong rebound in sales,” says Erwan Rambourg, global head of consumer and retail research at HSBC in New York. “The irony of the past 18 months is that the uncertainty generated by COVID-19 restrictions has forced management teams to be more nimble, less risk-averse, bolder and helped them make tough decisions they may have put off before the crisis on staffing, rents, digital transformation and more.”
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