Shoppers Cut Back on Designer Splurges

Luxury brands are losing some luster as aspirational (and deep-pocketed) shoppers cut back on designer splurges

Snaggin’ a new Louis clutch… on your Pinterest board. Last week, LVMH, the world’s largest luxury group, dropped less-than-stellar results after years of lavish consumer spending on its iconic brands like Louis Vuitton and Dior. LVMH’s fashion and leather goods, its biggest category, saw sales grow 9% — well below the 20% growth it posted in the first half of the year. Sales for its wine and spirits brands like Hennessy and Moët took a 14% tumble.

• Old throne: Last month the luxury titan lost its status as Europe’s most valuable company to Ozempic maker Novo Nordisk as the spending slowdown took a bite out of its market cap.
• New probs: LVMH is the first luxe heavyweight to report earnings this quarter, and could give more color on what to expect from rivals’ results. It’s not looking pretty…

Designer doldrums… High-end brands rely heavily on spending from China, where the economic rebound hasn’t been rebounding. Last month, Chinese luxury spending at home and abroad was about 80% of 2019 levels, and experts think a full recovery could take a while. In the US, brands like Gucci’s Kering and Cartier parent Richemont said aspirational shopping had nearly dried up as consumer savings dropped to the lowest level in nearly a year.

• Window-shop: Some high-income shoppers (think: $100K+/yr) started opting for discount retailers like Walmart and Dollar Tree. In Europe, wealthy shoppers who splurged this summer have cut back too.

Luxury’s golden age is less glittery… Last year, strong demand led lots of brands to splurge on huge ad campaigns and hike prices 8% (FYI: the historical average is about 1%). But with consumption at a crossroads and inflation still high, more folks are choosing groceries and getaways over a fresh $5K bag. The slowdown is likely here to stay: while global luxury sales are expected to grow from $415B this year to half a trillion by 2027, overall luxe spending is expected to keep slowing.