It was an exciting third quarter in the world of luxury fashion. The balance of power is shifting as global demand for luxury goods appears to be waning.
The luxury industry is shifting its focus to the super-rich as the middle class cuts back on spending, the Washington Post said in an op-ed this week. Gucci owner Kering reported a 13 percent decline in third-quarter sales, with its main brand Gucci reporting a 14 percent decline. Brands like Hermes and Brunello Cucinelli, on the other hand, are flourishing.
The reason for this is the differences in the customer base, with the wealthy having less confidence in their spending while the rich continue to spend, according to the Washington Post. Kering, particularly Gucci, previously targeted younger, fashion-conscious customers who are now affected by inflation, leading to a shift towards upper-class customers despite short-term challenges. As quiet luxury becomes more ubiquitous, brands are adapting their strategies and product offerings to appeal to more high net worth individuals.
As Kering continues to reinvent Gucci, investors are skeptical, with the group’s shares down around 17 percent this year. Kering must aim for a more traditional luxury image to close the valuation gap with rivals such as LVMH.
Prada’s results will be interesting, as the Milan-based company recorded 21 percent retail sales growth in the first half of 2023.