Kering

FR0000121485

KER

KER

The European luxury market has faced a significant downturn in recent months, with shares in high-end clothing, handbag, and jewelry companies losing value. This slump has been largely driven by a slowdown in China's economy, which has reduced spending by the country's wealthy consumers on luxury items.

Once seen as Europe's answer to the US tech giants, these luxury firms have lost nearly a quarter-trillion dollars in market value since March. Iconic brands like Burberry $BRBY (+3,11 %) have even been ejected from major stock indexes due to the decline. Companies like Kering $KER (+2,91 %) (owner of Gucci) and Hugo Boss $BOSS (+3,75 %) have seen their share prices drop by almost half in the past year.

The recent earnings reports from major luxury brands have highlighted the significant impact of the post-pandemic spending bubble's deflation. Companies like Kering, Burberry, and Hugo Boss have issued profit warnings, signaling struggles to maintain their previous levels of success. For instance, LVMH $MC (+2,48 %) , a leader in the luxury sector, reported that its crucial leather-goods unit saw only a 1% growth in quarterly organic revenue, a stark contrast to the 21% growth experienced a year earlier. This downturn primarily affects brands that cater to a broader market, while those targeting ultra-wealthy consumers, such as Hermès $RMS (+3,41 %) and Brunello Cucinelli $BC (+3,68 %) , have largely avoided the brunt of the earnings decline. Hermès, for example, reported robust sales growth, indicating that its focus on exclusivity and high-quality craftsmanship continues to resonate with affluent customers.

Consumer preferences are also shifting, with a growing emphasis on sustainability and ethical practices, particularly among younger generations like Millennials and Gen Z. These groups are increasingly looking for brands that align with their values, which may influence their purchasing decisions moving forward.

In light of these developments, it would be interesting to hear from the community:

• Do you still value luxury brands, and if so, which ones do you consider worth the investment?
• How do you perceive the impact of current economic conditions on your willingness to purchase luxury items?
• Are you more inclined to support brands that demonstrate sustainability and ethical practices?
• What factors do you consider when deciding whether to invest in a luxury item?
• How has your perception of luxury brands changed over time, and what do you think the future holds for the luxury market?

Your thoughts and experiences can shed light on the evolving landscape of luxury consumption and help gauge whether luxury brands can maintain their status in a changing market. Share your perspective on the current state of the luxury industry and how it aligns with your personal values and purchasing habits.