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Business Times
21-07-2025
- Business
- Business Times
When will luxury's perfect storm pass?
LUXURY is out of fashion. The sector is facing a perfect storm. Chinese spending, the industry's growth engine for so long, has stalled. There are question marks over whether US shoppers, who held much promise after President Donald Trump's election in November, will pick up the bling baton. And over-aggressive pricing has shut out many younger customers who gorged on Gucci handbags and Rolex watches during the pandemic. It will take time for this indigestion to work its way out of the system. Add in the threat from tariffs and a weak US dollar, which translates into less revenue in euros, and it is little wonder the MSCI Europe Textiles, Apparel and Luxury Goods Index has lost about a quarter of its value since February. The second-quarter reporting season, which starts in earnest this week, is likely to be grim. But over the past week, there have been some glimmers of hope. The worst is not over exactly, but it might soon be. For a start, the appetite among Chinese consumers for Cartier Love bangles and Burberry trench coats does not seem to be getting any worse. A NEWSLETTER FOR YOU Friday, 2 pm Lifestyle Our picks of the latest dining, travel and leisure options to treat yourself. Sign Up Sign Up Chinese spending in Japan is contracting – with Richemont's sales in the country down 15 per cent in the three months to the end of June, compared with a 59 per cent increase in the year earlier – due to the stronger yen. This will be a drag on sales across the industry. But Swatch said it has seen the first signs of improvement in China, with a pickup in online sales and a reduction in stocks of watches at third-party retailers. Swatch chief executive officer Nick Hayek often looks on the bright side. But Richemont also saw a 7 per cent fall in sales in China, Hong Kong and Macau in its fiscal Q1, about half the rate of decline in the preceding three months. This was echoed by Burberry Group, which generates about 30 per cent of sales from Chinese consumers at home and abroad. Chief financial officer Kate Ferry said the British luxury brand was also seeing a quarter-on-quarter improvement and 'a little bit of stabilisation' in China. In the US, financial markets appear to be shrugging off the tariff trauma, with the S&P 500 index reaching a new high and Bitcoin touching a record US$120,000. Given that US luxury demand is correlated with financial wealth, this bodes well. It is possible this is feeding into demand for Brunello Cucinelli cashmere already: The tech bros' favourite outfitter said sales excluding currency movements rose 11 per cent in Q2, and it forecast a 10 per cent increase this year. Investors should not get ahead of themselves, though. Some of the surprises so far have been company-specific. Cucinelli sells to the 1 per cent, and while it might not have a logo, it has become a signifier that the wearer is part of an exclusive club that can afford to pay US$400 for a T-shirt and US$8,000 for a cable knit cardigan. Not many other brands command this type of clientele. Richemont's jewellery is also shining bright, thanks to the luxury market maturing – many who bought bags 20 years ago are shifting to baubles – and the fact that price increases for leather goods have made bangles and necklaces better value for money. As for Burberry, which reported a 1 per cent decline in fiscal Q1 same-store sales – less than the almost 4 per cent fall that analysts had expected – this compares with a period a year ago when same store sales slumped 21 per cent. LVMH, the industry bellwether, reports Q2 earnings this week, and they will not be pretty. The behemoth has gone from being one of the strongest performers to one of the weakest, thanks to its reliance on leather goods, which are suffering the most from consumer fatigue. It is also facing some company-specific issues, such as a hard landing after spectacular growth at Dior, difficulties in its drinks division and supply chain problems at Loro Piana, a rival to Cucinelli. Yet, even though we are probably closer to the bottom of the bling bloodbath than the top, many valuations are pricing in the worst. LVMH is trading on a forward price-to-earnings ratio of about 19.5 times, towards the bottom of its five-year average, while Prada shares have lost about 30 per cent since February, as investors took fright at its 1.3 billion euros (S$1.9 billion) purchase of Versace. While the earnings side of the equation could fall further, this looks harsh. Not all luxury stocks are showing a bust. Investors in Hermes International are paying about 50 times the next 12 months' earnings because the brand typically outperforms in tough times, given that demand for its iconic Birkin and Kelly bags outstrip supply. Burberry's shares have more than doubled since September. A successful turnaround, and the company being able to keep any challenges in check, is already priced in. Kering stock has risen about 14 per cent since the Gucci owner named Renault's Luca de Meo as its new CEO last month. That looks optimistic. Even if de Meo is able to sell Kering's 30 per cent stake in Valentino, he still has 10.5 billion euros of net debt and creative transitions at most of the company's brands to deal with. For investors, a return to bling's boom years still looks far off. But by the time we get to fashion month in September, conditions might look a little less grim. New designers at Chanel, Dior and Gucci are likely to delve into the archives for inspiration this fall. A brighter luxury market would be another retro trend worth embracing. BLOOMBERG
Fashion Network
21-07-2025
- Business
- Fashion Network
When Will Luxury's Perfect Storm Pass?
The sector is facing a perfect storm. Chinese spending, the industry's growth engine for so long, has stalled. There are question marks over whether US shoppers, who held much promise after President Donald Trump 's election in November, will pick up the bling baton. And over-aggressive pricing has shut out many younger customers who gorged on Gucci handbags and Rolex watches during the pandemic. It will take time for this indigestion to work its way out of the system. Add in the threat from tariffs and a weak dollar, which translates into less revenue in euros, and it's little wonder the MSCI Europe Textiles, Apparel and Luxury Goods Index has lost about a quarter of its value since February. The second-quarter reporting season, which starts in earnest this week, is likely to be grim. But over the past week, there have been some glimmers of hope. The worst isn't over exactly, but it might soon be. For a start, appetite among Chinese consumers for Cartier Love bangles and Burberry trench coats doesn't seem to be getting any worse. Chinese spending in Japan is contracting — with Richemont 's sales in the country down 15% in the three months to the end of June, compared with a 59% increase in the year earlier period — due to the stronger yen. This will be a drag on sales across the industry. But Swatch AG said it had seen the first signs of improvement in China, with a pickup in online sales and a reduction in stocks of watches at third party retailers. Swatch Chief Executive Officer Nick Hayek often looks on the bright side. But Richemont also saw a 7% fall in sales in China, Hong Kong and Macau in its fiscal first quarter, about half the rate of decline in the preceding three months. This was echoed by Burberry Group Plc, which generates about 30% of sales from Chinese consumers at home and abroad. Chief Financial Officer Kate Ferry said the British luxury brand was also seeing a quarter-on-quarter improvement and 'a little bit of stabilization' in China. In the US, financial markets appear to be shrugging off the tariff trauma, with the S&P 500 Index reaching a new high and Bitcoin touching a record $120,000. Given that US luxury demand is correlated with financial wealth, this bodes well. It's possible this is feeding into demand for Brunello Cucinelli SpA's cashmere already: The tech bros' favourite outfitter said sales excluding currency movements rose 11% in the second quarter, and it forecast a 10% increase this year. Investors shouldn't get ahead of themselves, though. Some of the surprises so far have been company specific. Cucinelli sells to the 1%, and while it might not have a logo, it has become a signifier that the wearer is part of an exclusive club that can afford to pay $400 for a T-shirt and $8,000 for a cable knit cardigan. Not many other brands command this type of clientele. Richemont's jewellery is also shining bright, thanks to the luxury market maturing — many who bought bags 20 years ago are shifting to baubles — and the fact that price increases for leather goods have made bangles and necklaces better value for money. As for Burberry, which reported a 1% decline in fiscal first-quarter same-store sales — less than the almost 4% fall that analysts had expected — this compares with a period a year ago when same store sales slumped 21%. LVMH, the industry bellwether, reports second-quarter earnings this week, and they won't be pretty. The behemoth has gone from being one of the strongest performers to one of the weakest, thanks to its reliance on leather goods, which are suffering the most from consumer fatigue. It is also facing some company-specific issues, such as a hard landing after spectacular growth at Dior, difficulties in its drinks division, and supply chain problems at Loro Piana, a rival to Cucinelli. Yet even though we are probably closer to the bottom of the bling bloodbath than the top, many valuations are pricing in the worst. LVMH is trading on a forward price-to-earnings ratio of about 19.5 times, toward the bottom of its five-year average, while Prada SpA shares have lost about 30% since February, as investors took fright at its €1.25 billion ($1.5 billion) purchase of Versace. While the earnings side of the equation could fall further, this looks harsh. Not all luxury stocks are showing a bust. Investors in Hermes International SCA are paying about 50 times the next 12 months' earnings because the brand typically outperforms in tough times, given that demand for its iconic Birkin and Kelly bags outstrip supply. Burberry's shares have more than doubled since September. A successful turnaround, and the company being able to keep any challenges in check, is already priced in. Kering SA stock has risen about 14% since the Gucci owner named Renault 's Luca de Meo as its new CEO last month. That looks optimistic. Even if De Meo is able to sell Kering's 30% stake in Valentino, he still has €10.5 billion of net debt and creative transitions at most of the company's brands to deal with. For investors, a return to bling's boom years still looks far off. But by the time we get to fashion month in September, conditions might look at little less grim. New designers at Chanel, Dior and Gucci are likely to delve into the archives for inspiration this fall. A brighter luxury market would be another retro trend worth embracing. Bloomberg Opinion
Fashion Network
21-07-2025
- Business
- Fashion Network
When Will Luxury's Perfect Storm Pass?
For a start, appetite among Chinese consumers for Cartier Love bangles and Burberry trench coats doesn't seem to be getting any worse. Chinese spending in Japan is contracting — with Richemont 's sales in the country down 15% in the three months to the end of June, compared with a 59% increase in the year earlier period — due to the stronger yen. This will be a drag on sales across the industry. But Swatch AG said it had seen the first signs of improvement in China, with a pickup in online sales and a reduction in stocks of watches at third party retailers. Swatch Chief Executive Officer Nick Hayek often looks on the bright side. But Richemont also saw a 7% fall in sales in China, Hong Kong and Macau in its fiscal first quarter, about half the rate of decline in the preceding three months. This was echoed by Burberry Group Plc, which generates about 30% of sales from Chinese consumers at home and abroad. Chief Financial Officer Kate Ferry said the British luxury brand was also seeing a quarter-on-quarter improvement and 'a little bit of stabilization' in China. In the US, financial markets appear to be shrugging off the tariff trauma, with the S&P 500 Index reaching a new high and Bitcoin touching a record $120,000. Given that US luxury demand is correlated with financial wealth, this bodes well. It's possible this is feeding into demand for Brunello Cucinelli SpA's cashmere already: The tech bros' favorite outfitter said sales excluding currency movements rose 11% in the second quarter, and it forecast a 10% increase this year. Investors shouldn't get ahead of themselves, though. Some of the surprises so far have been company specific. Cucinelli sells to the 1%, and while it might not have a logo, it has become a signifier that the wearer is part of an exclusive club that can afford to pay $400 for a T-shirt and $8,000 for a cable knit cardigan. Not many other brands command this type of clientele. Richemont's jewelry is also shining bright, thanks to the luxury market maturing — many who bought bags 20 years ago are shifting to baubles — and the fact that price increases for leather goods have made bangles and necklaces better value for money. As for Burberry, which reported a 1% decline in fiscal first-quarter same-store sales — less than the almost 4% fall that analysts had expected — this compares with a period a year ago when same store sales slumped 21%. LVMH, the industry bellwether, reports second-quarter earnings this week, and they won't be pretty. The behemoth has gone from being one of the strongest performers to one of the weakest, thanks to its reliance on leather goods, which are suffering the most from consumer fatigue. It is also facing some company-specific issues, such as a hard landing after spectacular growth at Dior, difficulties in its drinks division, and supply chain problems at Loro Piana, a rival to Cucinelli. Yet even though we are probably closer to the bottom of the bling bloodbath than the top, many valuations are pricing in the worst. LVMH is trading on a forward price-to-earnings ratio of about 19.5 times, toward the bottom of its five-year average, while Prada SpA shares have lost about 30% since February, as investors took fright at its €1.25 billion ($1.5 billion) purchase of Versace. While the earnings side of the equation could fall further, this looks harsh. Not all luxury stocks are showing a bust. Investors in Hermes International SCA are paying about 50 times the next 12 months' earnings because the brand typically outperforms in tough times, given that demand for its iconic Birkin and Kelly bags outstrip supply. Burberry's shares have more than doubled since September. A successful turnaround, and the company being able to keep any challenges in check, is already priced in. Kering SA stock has risen about 14% since the Gucci owner named Renault 's Luca de Meo as its new CEO last month. That looks optimistic. Even if De Meo is able to sell Kering's 30% stake in Valentino, he still has €10.5 billion of net debt and creative transitions at most of the company's brands to deal with. For investors, a return to bling's boom years still looks far off. But by the time we get to fashion month in September, conditions might look at little less grim. New designers at Chanel, Dior and Gucci are likely to delve into the archives for inspiration this fall. A brighter luxury market would be another retro trend worth embracing.
Fashion Network
21-07-2025
- Business
- Fashion Network
When Will Luxury's Perfect Storm Pass?
For a start, appetite among Chinese consumers for Cartier Love bangles and Burberry trench coats doesn't seem to be getting any worse. Chinese spending in Japan is contracting — with Richemont 's sales in the country down 15% in the three months to the end of June, compared with a 59% increase in the year earlier period — due to the stronger yen. This will be a drag on sales across the industry. But Swatch AG said it had seen the first signs of improvement in China, with a pickup in online sales and a reduction in stocks of watches at third party retailers. Swatch Chief Executive Officer Nick Hayek often looks on the bright side. But Richemont also saw a 7% fall in sales in China, Hong Kong and Macau in its fiscal first quarter, about half the rate of decline in the preceding three months. This was echoed by Burberry Group Plc, which generates about 30% of sales from Chinese consumers at home and abroad. Chief Financial Officer Kate Ferry said the British luxury brand was also seeing a quarter-on-quarter improvement and 'a little bit of stabilization' in China. In the US, financial markets appear to be shrugging off the tariff trauma, with the S&P 500 Index reaching a new high and Bitcoin touching a record $120,000. Given that US luxury demand is correlated with financial wealth, this bodes well. It's possible this is feeding into demand for Brunello Cucinelli SpA's cashmere already: The tech bros' favourite outfitter said sales excluding currency movements rose 11% in the second quarter, and it forecast a 10% increase this year. Investors shouldn't get ahead of themselves, though. Some of the surprises so far have been company specific. Cucinelli sells to the 1%, and while it might not have a logo, it has become a signifier that the wearer is part of an exclusive club that can afford to pay $400 for a T-shirt and $8,000 for a cable knit cardigan. Not many other brands command this type of clientele. Richemont's jewellery is also shining bright, thanks to the luxury market maturing — many who bought bags 20 years ago are shifting to baubles — and the fact that price increases for leather goods have made bangles and necklaces better value for money. As for Burberry, which reported a 1% decline in fiscal first-quarter same-store sales — less than the almost 4% fall that analysts had expected — this compares with a period a year ago when same store sales slumped 21%. LVMH, the industry bellwether, reports second-quarter earnings this week, and they won't be pretty. The behemoth has gone from being one of the strongest performers to one of the weakest, thanks to its reliance on leather goods, which are suffering the most from consumer fatigue. It is also facing some company-specific issues, such as a hard landing after spectacular growth at Dior, difficulties in its drinks division, and supply chain problems at Loro Piana, a rival to Cucinelli. Yet even though we are probably closer to the bottom of the bling bloodbath than the top, many valuations are pricing in the worst. LVMH is trading on a forward price-to-earnings ratio of about 19.5 times, toward the bottom of its five-year average, while Prada SpA shares have lost about 30% since February, as investors took fright at its €1.25 billion ($1.5 billion) purchase of Versace. While the earnings side of the equation could fall further, this looks harsh. Not all luxury stocks are showing a bust. Investors in Hermes International SCA are paying about 50 times the next 12 months' earnings because the brand typically outperforms in tough times, given that demand for its iconic Birkin and Kelly bags outstrip supply. Burberry's shares have more than doubled since September. A successful turnaround, and the company being able to keep any challenges in check, is already priced in. Kering SA stock has risen about 14% since the Gucci owner named Renault 's Luca de Meo as its new CEO last month. That looks optimistic. Even if De Meo is able to sell Kering's 30% stake in Valentino, he still has €10.5 billion of net debt and creative transitions at most of the company's brands to deal with. For investors, a return to bling's boom years still looks far off. But by the time we get to fashion month in September, conditions might look at little less grim. New designers at Chanel, Dior and Gucci are likely to delve into the archives for inspiration this fall. A brighter luxury market would be another retro trend worth embracing.
Yahoo
17-07-2025
- Business
- Yahoo
Swatch CEO ready to accept lower profit after tough first half
(Reuters) -Swatch Chief Executive Nick Hayek is counting on improvements in China in the second half of 2025, he said on Thursday, but is also ready to accept lower profits after the Swiss watchmaker's first half profit plunged. "It will not be a revolution, it will not be massive, but it's a trend in the right direction," Hayek told Reuters, referring to an improvement in Chinese consumer demand. Swatch, whose brands include Omega and Tissot, has been struggling with weak demand in China - which makes up 24% of group sales - for over a year, with sales once more sliding in the first half of 2025. The company would deal with the downturn, and had no plans to cut jobs in Switzerland, Hayek said. "We can cope with it. We can also accept to have less profits," Hayek said. "But we stick with our people." "We train them. We have our factories. We have our know-how. If there is a slowdown and the capacities cannot be filled, we start to develop new products."
