What to Expect: The Luxury Recession in 2024
Now is not the time to buy a designer bag. New or second hand! Watch and wait my friends because this exponential growth has come to an end. With a combination of a cost of living crisis, high rates of redundancies across the private and public sector, multiple western interest wars, and the need to repay debt accrued during the lockdowns…. The luxury market is suffering. YSL has even dropped their prices!! No matter your income bracket, people are pulling back. Here’s what you need to know:
First I’ll go over 12 months of stock results and who owns who.
Secondly I’ll get into what I believe this means for you.
I’ve taken a snapshot of nine luxury brand groups and individual brand stocks and about 85% of them are down by 20% +.
While these images and stock exchange acronyms may look confusing… Here’s a break down of who owns who and how they’re all been doing over the past 12 months:
Kering owns: Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen and many others. (↓- 40%)
LVMH owns: Louis Vuitton , Tiffany, Dior, Fendi, Givenchy, Marc Jacobs, Stella McCartney, Loewe, Kenzo and many others. (↓-16%)
Christian Dior: Very confusing, but ‘Christian Dior SE’ is the main holding company of LVMH, owning a controlling stake in it (owning 40.9% of its shares and 59.01% of its voting rights). So, while Louis Vuitton doesn't own Christian Dior, they are connected through their parent company, LVMH. (↓- 15.5%)
Estee Lauder Group owns: Bobbi Brown, Clinique, M.A.C., Tom Ford Beauty, Le Labo, La Mer, GLAMGLOW and many others. (↓- 44%)
Swatch Group owns: Omega, Blancpain, Breguet, Certina, ETA, Glashütte Original, Hamilton, Harry Winston, Longines, Mido, Rado, and Tissot. (↓- 25%)
Richemont (Compagnie Financière Richemont S.A) owns: Cartier, Chloé, IWC Schaffhausen, Montblanc, Net-a-Porter, Piaget, Van Cleef & Arpels and many more. (↓- 2.4%)
Now for the independents:
Burberry Group : (↓- 57%)
Hermes: (↑+ 7%)
Prada: (↑+ 4.4%)
While stocks aren’t the whole source of truth, they provide a snapshot of confidence in the brand and it’s ability to make a profit… And there isn’t a huge amount of confidence right now, as you can see.
The only exception to major losses were Richemont (likely due to high interest in Van Cleef and Cartier), Hermes and to my surprise, Prada!
For Hermes, I would be surprised if this growth trajectory changes given the popularity of the Kelly and Birkin bag as status symbols due to their scarcity.
Remember how in demand Gucci was 3-6 years ago? I remember walking past the store and seeing long lines outside from people dying to get their hands on a belt, t-shirt, loafer or scarf… Well, times have changed for the once ‘it’ brand.
Gucci, (where Kering gets around 50% of its sales and more than two-thirds of its profits), saw its revenues drop 18% to $2.2 billion due to a slump in the Asia-Pacific region.
Saint Laurent (also owned by Kering) has resulted to dropping their prices on many of their items.
So, what does this snapshot gleam for us middle class luxury lovers?
I think it’s telling to save our pennies as, demand is lower… And thats when businesses need to pivot in order to get back on track.
Here’s my predictions of what all this may mean for you:
Prices will get better, you’ll have more options, but you should wait… Because although these brands are hurting, they are going to hurt even more in 4-6 months time.
Designer brands will try and win back the working class by adding new, more affordable products to their ranges.
More sales, more price decreses. Saint Laurent will not be the only brand to decrease, I’m quite certain of this.
Generous sales at department stores where luxury stores have a presence.
An influx of second hand designer items on Facebook Marketplace
Auction houses will be busier with luxury item sales (bags, watches, shoes)
The second hand watch market will continue to decrease in price (especially Rolex where second hand watches are often more expensive than new watches due to scarcity)
I personally will be waiting to get my hands on my dream bag, a Lady Dior (Princes Diana’s favourite) as the secondhand market will be a lot better for this bag soon… I think!
