By D. Maan, Jadetimes News
Luxury Brands Suffer as Chinese Consumers Rein in Spending
An economic slowdown within China and a political crackdown by Beijing on ostentation hurt some of the world's biggest luxury brands. LVMH, the world's largest luxury group, said sales fell 14 percent in Asia, excluding Japan, in the three months to the end of June. That was a deterioration on a 6% decline in the first quarter. It's not alone; many of its peers, too, have been seeing a slowing of sales in the world's second largest economy.
Penetration in China for luxury goods has lost momentum as Chinese shoppers become more careful with their purchases, and state censors have closed social media accounts of some influencers showing off their luxury goods. In all, revenue growth has tailed off to 1% for the period. Still, LVMH's chairman and chief executive is keeping quietly optimistic. "The first-half results reflect LVMH's remarkable resilience in a climate of economic and geopolitical uncertainty," Arnault said in a statement to investors. "While remaining vigilant in the current context, the Group approaches the second half of the year with confidence."
Shares in LVMH, which owns 75 high-end brands including Louis Vuitton, Dior, and Tiffany & Co., have slumped by almost 20% over the past year. Other luxury brands are feeling it, too. Burberry said sales in mainland China dropped more than 20% from a year earlier. Swiss watchmaker Swatch Group, owner of brands such as Blancpain, Longines, and Omega, posted a 14.4% decline in first half 2024 sales, hurt by weak Chinese demand. Richemont, the parent company of Cartier, posted a 27% year on year slide in sales in China, Hong Kong, and Macau for the quarter closing June 30. Hugo Boss also cut its sales forecasts for the year as weak consumer demand in markets like China and the UK weighed on the business.
Other major luxury players, including Hermes and Gucci owner Kering, will also report their latest financial results this week. Recent data from China indicate that the economy is still struggling to recover from the pandemic downturn, with second quarter growth and June retail sales figures falling below expectations.
It has also been hit by the Chinese government's clampdown on online displays of luxury. In May, the state controlled Global Times reported that an internet celebrity known as Wanghongquanxing had been banned from social media amid a clampdown on online shows of wealth. He had more than four million followers on Douyin, China's version of TikTok. A number of other popular influencers have had their accounts deleted in a campaign which China's internet watchdog says is targeting "vulgar" and ostentatious content.
The luxury goods sector, closely aligned with the fortunes of the Chinese economy, has been taking a lot from China's lingering economic difficulties. Top brands have had to adjust strategies in an evolving landscape.
