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2024 will not be a vintage year for luxury goods<\/strong><\/b>…<\/p>\n <\/p>\n The latest HSBC report<\/strong><\/b> on the sector, dubbed \u201ca Cruel Summer\u201d (a nod to one of singer Taylor Swift’s hit songs), has drastically revised downwards its previous estimates for the second half of 2024.<\/strong><\/b><\/p>\n <\/p>\n Looking at the performance<\/strong><\/b> (or lack thereof…) of eight global luxury stalwarts (Burberry, Herm\u00e8s, Kering, LVMH, Richemont, Swatch, Moncler and Prada)<\/strong><\/b>, the bank’s analysts now expect average organic growth of 3% in the third quarter and 4% in the fourth.<\/strong><\/b><\/p>\n <\/p>\n For the full year<\/strong><\/b>, the outlook for organic growth<\/strong><\/b> is now just 2.8%, instead of the 5.5%<\/strong><\/b> initially envisaged.<\/p>\n <\/p>\n <\/p>\n This would make 2024, according to HSBC, \u201cthe sixth worst year for the luxury goods sector in the last 20 years<\/strong><\/b>\u201d. Even if we remain on a growth trend, and therefore on a financial year without comparison with the annus horribilis of 2020,<\/strong><\/b> marked by a plunge of almost 20%,<\/strong><\/b> and to a lesser extent, 2009, with an 8% drop.<\/strong><\/b><\/p>\n\n <\/p>\n \u201c We no longer expect a return to double-digit growth in the third or fourth quarter of 2024,<\/strong><\/b> despite a much easier basis for comparison. Our new forecasts take into account the weak macroeconomic environment and the flow of negative sectoral news<\/strong><\/b> received over the summer,\u201d explains the report.<\/p>\n <\/p>\n The average forecasts calculated by HSBC, however, conceal considerable disparities.<\/strong><\/b><\/p>\n <\/p>\n \u201c Polarization<\/strong><\/b> should continue to be stronger than ever, as the 3% average organic growth we forecast for the third quarter of 2024 is a mix of strong declines (Gucci -18% … Burberry -10%) and fine growth (Herm\u00e8s +10%, Prada group retail +21%)<\/strong><\/b> \u201c says HSBC. And this compared with a third-quarter 2023, which was itself \u201cthe lowest basis of comparison of the year for the eight companies covered\u201d by the report.<\/p>\n <\/p>\n <\/p>\n This projection is in line with the results for the first half of the year.<\/strong><\/b><\/p>\n <\/p>\n While Lvmh, Kering, Salvatore Ferragamo, Burberry and Lanvin<\/strong><\/b> did not fare so well<\/strong><\/b>, with double-digit falls in their results, Herm\u00e8s and Prada<\/strong><\/b> posted enviable performances<\/strong><\/b>, indicating that the appeal of these two Houses remained strong.<\/p>\n <\/p>\n HSBC’s gloomy outlook for 2024 is obviously linked to the slowdown in two key<\/strong><\/b> luxury markets<\/strong><\/b>, China and the USA<\/strong><\/b>, and to uneven performances in Europe.<\/p>\n <\/p>\n <\/p>\n In the Middle Kingdom, consumers are \u201cholding back on spending despite solid savings<\/strong><\/b> \u2018, while Americans,<\/strong><\/b> particularly those with an aspirational profile, \u2019seem to be priced out of the market, or at least affected by inflationary pressures<\/strong><\/b> and a high interest rate environment\u201d.<\/p>\n <\/p>\n Europeans<\/strong><\/b>, meanwhile, have adopted a wait-and-see attitude,<\/strong><\/b> \u201cprobably victims of \u2018greedflation\u2019, with many brands having increased their prices after the covid crisis\u201d without any real inflationary justification.<\/p>\n <\/p>\n Japan<\/strong><\/b>, the only mature market still doing well, is benefiting from demand for luxury goods that \u201chas remained very strong,<\/strong><\/b> stimulated by Chinese tourism, other Asian tourist flows and also a little American tourism\u201d.<\/p>\n <\/p>\n HSBC’s analysis is corroborated by other recently published studies, which show that Chinese and American consumers are less keen on<\/strong><\/b> ultra-high-end products.<\/p>\n <\/p>\n <\/p>\n At Barclays Bank, Wendy Liu and Carole Madjo<\/strong><\/b>, two analysts specializing in China<\/strong><\/b>, have indicated that \u201cthe upturn in this market will not occur for three to four years!<\/strong><\/b> They pointed out that \u201csentiment on the ground is much more cautious than it was six months ago\u201d and that \u201cit is now clear that Chinese weakness is structural\u201d.<\/strong><\/b><\/p>\n <\/p>\n In a similar vein, investment firm TD Cowen conducted a survey of 2,000 Chinese consumers<\/strong><\/b> on their financial outlook, spending preferences and expectations in a wide range of categories, including luxury goods.<\/p>\n <\/p>\n Against a backdrop of relatively stable spending intentions, luxury goods stand out as one of the categories on which Chinese consumers plan to spend less<\/strong><\/b>. Of the minority who plan to reduce their spending in 2024, 46% plan to do so on luxury goods.<\/p>\n <\/p>\n Admittedly, around 30% of the Chinese surveyed still intend to buy luxury goods over the next six months<\/strong><\/b>, a more than respectable percentage in a population of over 1.4 billion! The authors of the study temper this figure, however, by pointing out that declared intentions don’t always materialize<\/strong><\/b>…<\/p>\n <\/p>\n <\/p>\n Across the Atlantic, a comparison ofAffluent Consumer Research Company (ACRC) surveys<\/strong><\/b> conducted last June and September among 400 and 250 affluent American consumers<\/strong><\/b> respectively (with an average household income of around $300,000 and a net worth of $2.3 million, excluding the value of their principal residence) also points to increased caution among the latter<\/strong><\/b>.<\/p>\n <\/p>\n In June, only 9% had made no luxury purchases in the past year. In September, this figure had almost doubled to 17%.<\/p>\n <\/p>\n And for the next 12 months, 28% said last September they planned to spend less on luxury goods, and an equal proportion planned to make no purchases in this segment<\/strong><\/b>. Only 16% planned to spend more.<\/p>\n <\/p>\n While we don’t expect a radical decline in luxury spending, growth is likely to be modest<\/strong><\/b> as consumers focus on value and longevity rather than pure luxury\u201d.<\/p>\n <\/p>\n <\/p>\n Despite the gloomy outlook for 2024, HSBC’s latest report offers a note of hope for the luxury goods industry.<\/p>\n <\/p>\n Its analysts forecast 7% growth for the sector in 2025<\/strong><\/b>. Luxury goods are expected to return to high single-digit growth \u201cas early as the first quarter of 2025<\/strong><\/b>\u201d and \u201cprobably double-digit growth in the second quarter of 2025<\/strong><\/b> \u201d. In fact, \u201cthe lower the base, the stronger the rebound\u201d.<\/p>\n <\/p>\n After the rain, the fine weather…<\/p>\n <\/p>\nSixth worst year in 20 years<\/h2>\n
Large gap<\/h2>\n
Chinese, Americans and Europeans spend less<\/h2>\n
No upturn in China for three or four years!<\/h2>\n
Caution among affluent consumers across the Atlantic<\/h2>\n
A note of hope<\/h2>\n
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