China’s Economic Slowdown Hurts Luxury Brands
China’s economic slowdown and government crackdown on displays of wealth are hurting top luxury brands. LVMH, a major luxury group, reported a 14% drop in sales in Asia (excluding Japan) from April to June, worsening from a 6% decline earlier in the year. This decline reflects a broader trend, as many luxury brands see reduced sales in China.
Chinese shoppers are buying fewer luxury items, and government censors are shutting down social media accounts of influencers flaunting their wealth. This crackdown impacts the visibility and appeal of luxury goods.
LVMH, which owns brands like Louis Vuitton, Dior, and Tiffany & Co, saw its overall revenue growth slow to 1%. Despite the challenges, LVMH’s chairman Bernard Arnault remains cautiously optimistic, highlighting the company’s resilience amidst economic and geopolitical uncertainty.
Shares in LVMH have dropped by nearly 20% over the past year. Other luxury brands are also struggling. Burberry reported a 20% drop in sales in mainland China, while Swiss watchmaker Swatch Group saw a 14.4% decline in the first half of 2024. Richemont, which owns Cartier, experienced a 27% drop in sales in China, Hong Kong, and Macau. Hugo Boss downgraded its sales forecasts due to weak consumer demand in China and the UK.
Upcoming financial results from Hermes and Gucci-owner Kering will provide more insights. Data from China shows the economy is still struggling to recover from the pandemic, with second-quarter growth and June retail sales falling below expectations.
Chinese authorities are also targeting online displays of luxury. In May, the Global Times reported that a popular influencer was banned from social media for showing off wealth. His Douyin account had over four million followers. Other influencers have faced similar bans, with China’s internet watchdog aiming to curb “vulgar” content.
This information is based on a report by the BBC.
https://www.bbc.com/news/articles/c29d8wk594lo