As China’s weakness continues, luxury groups are hoping for the US
Mimosa Spencer
PARIS (Reuters) – Global luxury goods companies are expected to pull out all the stops this year to get U.S. shoppers to splash out on diamond bracelets, quilted leather bags and other designer fashion amid forecasts for further market weakness in China.
Retail executives are looking to tap into wealth linked to a strong stock market in the United States and add to cryptocurrencies, as potential tariffs from US President-elect Donald Trump boost the dollar’s ability to buy European luxury goods.
U.S. credit card spending on luxury brands improved in December, turning positive for the first time in more than two years, up 1% year over year.
Luxury goods companies including LVMH and Kering are hoping American consumers will come to the rescue after decades of relying on brisk business from Chinese buyers.
The 363 billion euro ($373.16 billion) global luxury goods market is struggling with the lowest sales volume in years. China’s property crisis and sluggish economy are weighing heavily on appetite for designer clothes and handbags, while consumers in Europe, faced with rising costs, have also put a stop to flashy purchases.
The industry has had a rollercoaster stock market ride since post-pandemic spending expansion began to slow for more than a year, prompting several downward revisions to forecasts late last year. LVMH has lost more than 30 billion euros on the market in the past six months.
Last year may have been one of the sector’s weakest, with sales down 2%, according to earlier estimates from consultancy Bain & Company.
Flexibility
Cartier-owner Richemont’s year-end sales report on Thursday provided the first insight into the health of high-end demand, as the watch business is more exposed to Chinese consumers than other luxury groups.
Rival LVMH, which owns powerhouse brands Louis Vuitton and Dior, kicks off the sector’s earnings season on January 28, with business updates expected in the coming months ahead of the crucial year-end holiday season.
The first signs of the last quarter indicated that business was still difficult in China, some signs of improvement were seen in the US market, analysts expect overall sales volatility to remain.
Barclays analysts are reporting a modest decline in fourth-quarter sales from the previous quarter, citing support from malls and government stimulus efforts following a trip to China in December.