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Business: Sales of personal luxury goods are set to fall 2% this year, making it one of the weakest on record, with price hikes and economic uncertainty shrinking the industry’s customer base, according to consultancy Bain & Company.
According to Bain, a closely watched report on the €363 billion ($386 billion) market, estimates China’s sales will drop 20-22%, a nasty drag following a years-long boom before the pandemic fueled by the wealthy and growing middle class. Forecasts are currency-adjusted.
This is the first time the personal luxury goods industry has declined since the 2008-09 crisis, apart from the pandemic, according to Bain partner Federica Levato said to Reuters.
The report issued on Wednesday will probably increase investors’ concerns that this downturn of the sector, which has forced shares in LVMH and Kering, could be broader and longer than expected.
According to Levato, global sales of high-end personal items, such as clothing, accessories, and beauty products, is expected to be flat at constant exchange rates during the holiday season. However, China’s performance remains in negative territory.
These steps by companies, to brand their goods at a higher price range than before, combined with the weak consumer psychology owing to international wars, economic issues in China, and general elections throughout the world, have seen most of the consumers, especially the youth, desist from buying.
“The number of luxury consumers has reduced from 400 million to 350 million over the last two years,” Levato says.
This is partly through the strategies that brands choose to pursue, including on pricing, according to Ms Erickson, which also underpin growth prospects for the market.
High prices are part of what’s holding consumers back, Bain said, even as the outlet channel kept coming out ahead, driven by the quest for value among shoppers.
The personal luxury goods sector will grow 0-4% at constant exchange rates in 2025, Bain said, driven by sales in Europe and the Americas, though China is likely to recover only in the second half of the year.
“Levato said one uncertainty is now removed with Donald Trump’s victory in the U.S. presidential election, while potential interest rate and tax cuts might stimulate Americans to spend more.”.
Conversely, Bain finds luxury spend on experiences – hospitality and dining, for example-will increase this year.
