Introduction to the Luxury Industry’s Challenges
When the athletes began to return their Olympic medals from 2024 after corroding Paris Olympic medals, it was an omen of things. The medals were designed by French jeweler Chaumet, the LVMH, a luxury giant giant. Although the French coin produced the medals, LVMH suffered bad advertising after making a spectacle of the company sponsorship of the games.
LVMH’s Decline
LVMH based on Paris is not corroded, but it doesn’t work well either. At the end of 2022, the company’s market value rose high enough to control Bernard Arnault, his founder and chairman, who controls about half of the company’s shares, the richest man in the world. Since then, the share price has recorded a remarkable decline. The conglomerate, which has 75 brands such as Louis Vuitton, Dior and Jewelers Bulgari and Tiffany & Co., suffers from sales after a boom.
Half-Year Results
The half-year results published on July 24 show that sales of 4% have dropped by the same six-month period of 2024. The profits from recurring business went back by 15% and amounted to € 9 billion ($ 10.5 billion). Sectors such as wine, spirits, fashion and leather goods recorded income and the profit gain drops in the first half of the year. While his watches, jewelry, perfumes and cosmetics companies remained stable.
Rising Prices and Excess Stocks
LVMH is not the only thing that suffers. Kering, which is also based in Paris and has Gucci, Bottega Veneta and Yves Saint Laurent, reported in the first half of the year about a significant decline in sales. "Luxury is in a spiral of death," said Katharine K. Zarrella. "After a decade of almost unrestricted growth, the sector bombies worldwide. Analysts indicate fewer affected buyers, which in their expenses and slows down the demand in China." Zarrella saw bad signs everywhere, such as rising prices and poor quality. In addition, more brands overstock sell on discount outlets.
Painful Tariffs from the USA
Uncertainty about tariffs is another headache for the industry. The Trump government has currently won a 15% tariff on goods from the European Union and a tariff of 39% on Swiss goods. This could have real consequences for the important US market. Many luxury goods are made in France or Italy, and many watches come from Switzerland. In general, people spend freely for personal luxury goods if they are optimistic about the future. But these tariffs could go up, go down or disappear.
Chinese Buyers Become More Cautious
While some brands in China do well, others are far below so high that Imke Wouters, partner in the advice of Oliver Wyman and a retail expert with 15 years of experience in China. With a view to the future, Wouter believes that the industry will have a moderate growth than in the recent past. "It is not like the high days when all luxury brands went well," she said. There will be winners and losers. US tariffs for European luxury goods do not have the Chinese buyers, but geopolitical uncertainty takes them closer to the house.
Future of the Luxury Industry
With many buyers who hold back, the luxury goods industry since the 2008-2009 financial crisis could be faced with its most significant setback without counting the covid shock. A new report from Bain & Company suggests that luxury sales decreased by 1% worldwide last year, and this year they continued. Bain analysts see a moderate decline of 2 to 5% for the industry by the end of the year, but believe that its prospects will be brighter in the future. Increasing global income, generational assets and a forecast increase in the number of people with a high network will further expand the pool of potential luxury buyers. However, brands have to rethink how they involve younger consumers through which top editions pass and build emotional connections that go beyond transactional loyalty.
