China's Slowdown Causes Luxury Industry Struggles in H1

Big luxury conglomerates are reporting disappointing results for the first half of the year. LVMH's turnover dropped 1% y-o-y to US$45.3bn, with net profits dropping 14% to US$7.9bn. Similarly Kering said its turnover decreased to US$9.8bn, down 11% y-o-y, while net profit nearly halved to US$953m. Earlier, preliminary earnings reported by Cartier indicated a 27% drop in sales in China and Swatch Group reported an 11% decrease overall. A significant factor influencing these results are the challenging Asian markets, where high inflation, a real estate crisis and rising unemployment, especially among younger generations, is impacting demand, with the exception of Japan where a low yen is luring in tourists from South Korea, China and the US. Especially Chinese consumption, a major growth engine in recent years, is stagnating, as China's rich and wealthy, in a trend dubbed "luxury shame", shy away from showing off their fortune with expensive items. Analysts believe that the second half of the year will likely continue to be difficult, as the luxury market is going through a stage of normalization after years of strong growth, moving away from "aspirational shoppers" to refocus on high-net-worth individuals, a strategy that has proven to be successful for Hermès in the past months. 

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China's Slowdown Causes Luxury Industry Struggles in H1

China's Slowdown Causes Luxury Industry Struggles in H1

China's Slowdown Causes Luxury Industry Struggles in H1

China's Slowdown Causes Luxury Industry Struggles in H1

China's Slowdown Causes Luxury Industry Struggles in H1