How luxury fashion companies have lost their luster as the super-rich feel the squeeze
The world’s largest luxury companies have lost almost £100 billion in the past year.
The fashion world was dominated this summer by updates on car accidents that rocked the industry.
Companies such as LVMH, Hermes, Prada, Gucci-owner Kering and British brands Burberry and Mulberry struggled with disastrous stock prices.
These are also tough times for Essilor Luxottica, the Italian-French owner of Rayban, Tapestry, the New York-listed owner of Coach, and Cartier parent company Richemont.
According to analysis for the Ny Breaking by investment platform AJ Bell, the value of these companies has fallen by £98.6 billion over the past 12 months.
Losses: LVMH, the world’s largest luxury conglomerate, whose brands include Givenchy, Celine, Stella McCartney and Louis Vuitton, has lost £81bn in a year
The Paris Olympics were supposed to set the stage for a glorious summer as tourists flocked to Europe to shop. But high-end groups have warned of lower profits and have had to slash prices.
Atmospheric music has turned somber since the post-pandemic “revenge spending” dried up a few years ago.
China, the world’s second-largest economy, is grappling with a property debt crisis and British consumers are being hit by inflation.
LVMH, the world’s largest luxury conglomerate, is responsible for most of the decline because of its sheer size. It lost £81 billion in a year – just under a quarter of what it was worth the previous year.
The French group, which manages brands such as Givenchy, Celine, Stella McCartney and Louis Vuitton, even lost its position as Europe’s largest company last September to Novo Nordisk, the maker of the slimming drug Ozempic.
But what is most worrying is the blows being taken by British heritage labels.
Burberry, which makes its trench coats in Castleford, West Yorkshire, is worth £5.4 billion less than last year, with shares down 65 percent.
A turnaround mission is underway after CEO Jonathan Akeroyd was sacked this summer. Handbag maker Mulberry has replaced Thierry Andretta at the helm with former Ganni boss Andrea Baldo.
Stunning: American pop star Taylor Swift in a Gucci dress
The value has fallen by 58 percent, taking £84 million off the value.
And the bargain valuations of both British fashion houses have raised fears they could be the next companies to be driven off the London Stock Exchange by private equity giants.
Both brands are adamant that the government should abolish the hated tourist tax in order to revive luxury spending in London.
Their cries for help went unheeded by the Conservatives, as it was former Prime Minister Rishi Sunak who abolished the refund scheme for tourists.
While Burberry and Mulberry are in deep trouble, not all luxury brands are struggling to the same extent.
Hermes has more or less maintained its £180bn valuation this year.
Its latest results, for the April-June quarter, showed it was overcoming the gloom felt elsewhere. Subtle designs, including its signature £12,000 Birkin bags, helped it keep selling goods in China.
“The Chinese clientele is a very sophisticated clientele that is looking for high-quality products, not necessarily with logos. This helps us,” says chairman Axel Dumas.
For the super-rich, Hermes is still a ‘must-have’.
Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, said: ‘Supply is deliberately kept well below demand, creating a sense of elusiveness. It adds to the appeal for the super-rich, who see owning such a hard-to-get bag as a status symbol.’
Jelena Sokolova, senior equity analyst at Morningstar, said: ‘Overall, the trend is towards “quiet luxury” versus more logo-driven products, following the success of TV shows like Succession, Instagram influencers like Gstaad Guy and potentially less need to flaunt wealth in a more subdued economic environment.’
But Gucci and Burberry are struggling because of revolving doors at the top and greater exposure to aspirational shoppers who aren’t super-rich.
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