The luxury brands industry appears to be under pressure globally with lacklustre demand in China taking its toll.
Some luxury brand companies are set to release their quarterly results and investors are worried.
Initially, Chinese demand had lifted after Covid restrictions on the mainland, but that demand has now waned.
LVMH is the world’s biggest luxury group and is set to report its earnings on April 16, followed by rivals Kering, Prada and Hermes a week later. Burberry and Richemont follow in May.
Reuters is reporting that Kering warned last month that first quarter sales would be down by 10% rather than the 3% expected by analysts. The group blamed a slump in sales in Asia from its star label, Gucci.
But its poor performance prompted concern that other high end fashion labels may be also struggling in China.
An analyst at HSBC told Reuters that Chinese tourists in Hong Kong, Macau and Singapore also do not seem to be the “spending kind”. Kering’s problems in China are part of the reason why its valuation is lagging compared to that of its rivals. Kering shares have lost 15% since its warning, with LVMH down 7%.
Hermes is seen as less vulnerable than its rivals thanks to its wealthier client base but is also down 2%.
Analysts say that faced with rising cost of living, shoppers have become more selective about high end merchandise.
They say sales growth is expected to slow even for faster growing companies, such as Prada, whose label Miu Miu has become a hit with younger Chinese shoppers. But first quarter retail sales for Prada globally are expected to increase 9.3%. Globally, there is consensus that economic growth will pick up with many countries already showing progress.
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