In anticipation of LVMH’s and Kering’s results for the six months to 30 June 2024 which will be released this week; Louise Deglise-Favre, Apparel Analyst at GlobalData, a leading data and analytics company, offers her view: “Luxury investors will be nervously awaiting the release of LVMH and Kering’s Q2 FY2024 results this week, as both conglomerates showed warning signs of a significant slowdown in Q1, with reported sales dipping 1.6% and 11.3% respectively.
Despite its initial resilience, the luxury market is finally suffering from the impacts of lasting inflation in Europe and the US which is dampening spend among aspirational shoppers, as well as the economic downturn in China, especially with the crash of the real estate market heavily affecting the middle class. Burberry has already released disappointing results for the three months to June 2024, with its retail sales dropping 22.2%, though the British brand is disproportionally affected by the UK’s cull of tax free shopping.
“Throughout the rest of 2024, in this delicate climate, strong brand equity will be crucial for luxury brands, and only those that appeal to the ultra-wealthy or have superior fashion credentials are likely to succeed. For example, Hermès is expected to continue its outperformance, after 13% reported revenue growth in Q1, as its leather goods remain status-signifying items among the highest echelons of society. Brands such as Miu Miu and Loewe are also expected to triumph thanks to their highly desirable designs and ability to consistently stay ahead of trends.
“Like in Q1, LVMH is expected to have fared much better in Q2 than Kering, as the group’s labels have much stronger brand images. Many of Kering’s brands are currently struggling to find their position within the market, as they are too expensive for aspirational shoppers, yet not expensive enough to capture the attention of the ultra-wealthy. Besides, its main brand Gucci is still in the middle of a huge turnaround in identity with a necessary yet profound change in aesthetic under new creative director Sabato de Sarno.
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