Luxury Market Slump: LVMH Loses Its Crown

Stock SpotlightWednesday, Nov 13, 2024 8:58 am ET

1min read

This year marks a challenging period for the luxury goods sector, predicted to decline by 2%—one of the weakest performances on record. According to Bain & Company, factors such as price hikes and economic uncertainty are shrinking the industry's customer base.

The market, valued at 363 billion euros ($386 billion), is particularly hit by a staggering 20-22% drop in Chinese sales. This downturn follows years of growth spurred by affluent buyers and a thriving middle class, disrupted by the pandemic.

This marks the first decline for the luxury goods industry since the 2008-09 crisis, excluding the pandemic, said Bain partner Federica Levato. The downturn has impacted shares of major players like LVMH and Kering, raising concerns that the slump might be more severe and prolonged than initially anticipated.

Global sales across luxury clothing, accessories, and beauty products are expected to remain flat during the holiday season at constant exchange rates, with China still underperforming.

Luxury brands, aiming to elevate their product pricing, are facing backlash from consumers. Economic pressures, including geopolitical tensions, China's economic struggles, and worldwide elections, have deterred many buyers, particularly younger ones, from making purchases.

The luxury consumer base has decreased by 50 million over the past two years, from approximately 400 million, reported Levato. Future growth in the sector will depend heavily on brand strategies, especially pricing decisions.

Interestingly, outlet channels are thriving as consumers seek value amid rising costs. Bain projects that by 2025, the personal luxury goods sector could grow between 0% and 4% at constant exchange rates, with Europe and the Americas leading recovery efforts, while China's market is anticipated to rebound in the latter half of the year.

In contrast, spending on luxury experiences like dining and hospitality is expected to rise, offering a silver lining amidst challenges faced by the personal luxury sector.

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