Goodbye revenge shopping: the euphoria of luxury is over (for now)

In September, it was Richemont chairman Johann Rupert who put everyone on notice: luxury is in the throes of a contraction. Two months later, this slowdown has become a ‘normalisation’ which, it seems, frightens brands and multinationals to a certain extent, while it terrifies their suppliers who do not have the means to wait (too long) for the market to get back on track


When, in early September 2023, Richemont chairman Johann Rupert uttered the phrase ‘We’ve seen the squeeze‘ referring to consumption, it was not an icy shower. Instead, you know when a student has the feeling that he or she has got the classwork just handed in wrong? Rupert was the professor who gave the assignment a lousy grade, confirming the student’s feelings. Rupert, with that sentence, certified it. The stock market reacted to that statement by blowing 25 billion dollars in a single day. Since then, however, everyone has understood that the euphoria of post-pandemic revenge shopping is over and, above all, that luxury is not completely immune to crises. On the other hand, the geopolitical and economic scenario is among the worst imaginable.

Goodbye revenge shopping

More than two months after Rupert’s ‘We’ve seen the squeeze’, the quarterly reports of brands and multinationals have arrived, along with data, studies, and projections. Now, the question is not whether there really is a slowdown; it is how long it will last. At the moment, most analysts point to the second half of next year as the likely turning point. Altagamma, for example, predicts that the personal luxury goods category (where fashion items and accessories are included) will end the year with 4% growth. While in 2024, leather goods will grow by 6.5% and footwear by 5%.

Beware of economists

But Rachid Mohamed Rachid, president of Mayhoola, Valentino‘s parent company, not only confirms Rupert’s statements but also distrusts the ability of economists to understand what will happen in the future. “I have been in government, and I have worked closely with economists. They are perfectly capable of explaining what happened in the past, but they have no idea what will happen in the future. Therefore, you have to rely on your instincts.

Better to talk about normalisation

As the weeks went by, however, in the statements of those involved, the slowdown in Luxury became a ‘normalisation of growth‘. It was unthinkable to maintain +20% in revenues for years, so it was ‘normal’ (indeed…) to expect a slowdown. In this context, it is interesting to see how on the one hand there are firefighters trying to put out the fire and reassure the market with statements of confidence. They sound like, ‘Yes, we are slowing down, but we are still growing. The future is bright. Be serene’.

One of these is Toni Belloni, managing director of LVMH, who points out that luxury has been growing non-stop for 20 years. ‘In the short term,’ he says, ‘it will grow by an average of 5-6%’. OTB‘s Renzo Rosso is less pragmatic: ‘Luxury never goes into crisis. It is a sector that allows you to invest and focus on sustainability, which is what the public is asking for’. On the other hand, however, there is the market, which is reacting in fear. The performance of luxury stocks in the last six months has been negative. Tod’s -17%, LVMH -20%, Moncler and Ferragamo -21%, Prada -25%, Kering -27%, Richemont -29%, Burberry -33%. Only Cucinelli (-2%) and Hermés (-3%) limited the damage.

Why did it slow down

A deeper analysis leads us to three conclusions. First, the slowdown in luxury was mainly caused by the would-be buyer. “Real luxury consumers continue to buy. Maybe a little less, but they do not compromise on the quality of what they buy,” Barclays’ Enrico Massaro tells the Financial Times. The second, the maisons, for financial reasons, want to see their turnovers grow. Even if this does not lead to a proportional increase in sales volumes, they focus on the ultra-rich to stem revenue losses, but “sooner or later they will need to broaden their consumer base again,” says Federica Levato of Bain & Co. Thirdly, luxury needs to lighten its inventory. It has full warehouses and is conspicuously slowing down production while waiting to clear inventories.

Unconvincing confidence

Ultimately, the optimism and confidence of luxury managers do not fully convince investors. But neither do they convince the companies in the supply chain, who see the empty order drawer and have to think about how to handle the situation. And they must do it now, without the possibility of waiting until the second half of next year. Without, also, the complacent serenity of Bruno Pavlovsky, president of Chanel‘s fashion business, who tells WWD that his label will have to ‘play with the economic situation. I see no reason why Chanel cannot continue to grow. Maybe there will be lower growth in the near future, but I am happy about that’. Lucky him.

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