Luxury brands are counting on Americans to keep up with spending

Luxury brands are on the decline in China as major cities struggle to control the Covid-19 case. So far no one was able to send in the perfect solution, which is not strange.

Shanghai, which accounts for about 15 percent of mainland China’s luxury stores, has just begun to emerge from a deadlock. Beijing, where another 13% of the country’s designer shops are located, is in the “shadow” blockade, with schools, restaurants and bars closed. LVMH Moët Hennessy Louis Vuitton luxury companies like LVMUY – 0.62%

and Gucci’s owner, Kering, says the reduction is even lower in cities with no restrictions, as a result of the decline in domestic tourism. Most of the European brands listed came out in the first quarter as sales in mainland China fell by 30% to 40%, according to UBS UBS. – 1.10%


Sales of luxury personal goods (high-end handbags, watches, and the like) rose in the U.S. before the Pandemic, with China being the world’s largest consumer in the industry, accounting for one-third of all spending on such products in 2019. According to Bain & Company. They were Americans with just over a fifth of the market. To the surprise of the public, this was overturned in 2021 when Americans bought 32% of the value of luxury goods and the Chinese only 23%. Luxury brands are therefore compensating with U.S. buyers to offset some of the pain caused by the recent closures in Beijing and Shanghai.

Data for the first few weeks of the second quarter of the US is mixed. Luxury spending rose 8% in April compared to the same month in 2021, based on credit and debit card transactions followed by Bank of America..

But this is a 16% slowdown in the first quarter of 2022.

Some of the buyers who pushed last year’s boom are backing down. Consumer purchases, which earned less than $ 50,000 a year, fell 9% in April compared to the same month in 2021. These buyers boosted luxury brands in 2021, doubling their spending on designer goods compared to 2019. Wealthy consumer spending rose. 30% lower than pandemic levels. Government stimulus checks, individual investor stock market earnings and excess savings are drying up. Higher food and gasoline prices are forcing consumers with fewer reductions.

Wealthy buyers still look good. Consumer goods card transactions, which earned more than $ 125,000 a year, rose 21% in April compared to a year earlier, just a slight slowdown in the 28% rate recorded in the first quarter. The general trend suggests that while the hunger for luxury goods in the U.S. continues to be rampant, only basic customers of brands can afford to splurge.

Returning to China, major luxury labels are confident that sales will decline as restrictions rise. But a weak second quarter could continue to weigh on stock prices in the short term. The largest luxury stocks in Europe have fallen by an average of 32% since the beginning of the year, compared with an 18% drop in the MSCI Europe index. Hermès International RMS 2.25%

and Kering has been particularly hard hit.

Wealthy Americans still have high hopes for luxury brands, but today most U.S. consumers have more important things to spend money on than a $ 1,000 bag.

Write Carol Ryan at

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Luxury brands are counting on Americans to keep up with spending

Source link Luxury brands are counting on Americans to keep up with spending

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