By Mimosa Spencer
PARIS (Reuters) – Global luxury goods companies are expected to pull out all the stops this year to persuade U.S. shoppers to splash out on diamond bracelets, quilted leather handbags and other designer fashions, given forecasts for more market weakness in China.
Retail executives are looking to tap into wealth in the United States linked to the strong stock market and rise in cryptocurrencies, while potential tariffs from U.S. President-elect Donald Trump could support the dollar, raising Americans’ purchasing power for European luxury goods.
U.S. credit card spending on luxury brands in December improved, turning positive for the first time in more than two years, rising 1% year-on-year, based on data from Citi, thanks to better sales of leather goods and clothing.
The luxury goods companies, including LVMH and Kering, are hoping U.S. shoppers will come to the rescue after relying on brisk business from Chinese buyers for decades.
The 363 billion euro ($373.16 billion) global luxury goods market is wrestling with its lowest sales rates in years. China’s property crisis and sluggish economy are weighing heavily on appetite for designer clothing and handbags, while shoppers in Europe, faced with rising living costs, have also held back on splashy purchases.
The industry has had a rollercoaster stock market ride since the post-pandemic spending spree began to fade more than a year ago, prompting a number of downward adjustments to forecasts heading into the end of last year. LVMH has lost more than 30 billion euros in its market cap over the past six months.
Last year was likely to have been one of the sector’s weakest on record, with sales down 2%, based on previous estimates from consultancy Bain & Company.
VOLATILITY
Cartier-owner Richemont’s end-of-year sales report on Thursday will give the first insight into the health of high-end demand, as its watch business has greater exposure to Chinese consumers than many other luxury groups.
Rival LVMH, owner of powerhouse brands Louis Vuitton and Dior, kicks off the earnings season for the sector on Jan. 28, setting expectations for the coming months with a trading update on the crucial, end-of-year holiday period.
Initial signs for the final quarter suggest business was still difficult in China, while some signs of improvement emerged in the U.S. market, with analysts expecting overall volatility in sales to remain.
Barclays analysts, following a trip to China in December, are projecting a more moderate decline in fourth-quarter sales than in the previous quarter, citing support for the market from promotions from shopping malls and government stimulus efforts.
