Many people in Germany are currently having to tighten their belts. But for others, despite the war in Ukraine and drastic increases in energy and food prices, money is still loose. The luxury goods industry benefits from this.
Because of the dramatic price increases for energy and food, more and more people in Germany are having to tighten their belts. Savings are made – in food as well as in jewelry and clothing. From all? no The war in Ukraine and the galloping inflation don’t seem to be able to harm the luxury goods market so far. The luxury business is booming.
Gerd Müller-Thomkins from the German Fashion Institute (DMI) observes an “extreme polarization” of the market in the fashion trade. «The more expensive the better or the cheaper the better. But the middle is disappearing,” he said recently on the sidelines of a fashion fair in Düsseldorf. Axel Augustin from the Textile Footwear Clothing Trade Association (BTE) observes that the shops with well-off customers are currently doing much better than the competition. There are numerous customers who don’t have to pay attention to their money even now.
The electronics chains Media Markt and Saturn are also complaining about an overall declining desire to buy on the part of customers, but are observing significant differences depending on the price range. “The reluctance to buy affects the lower and middle segment,” said CFO Florian Wieser. The premium segment, on the other hand, continues to develop positively.
The luxury industry is immune
In fact, the luxury industry has so far been largely immune to the challenges posed by the pandemic, war and inflation. Luxury goods groups such as LVMH (Louis Vuitton Moet Hennessy), Kering (Gucci, Yves Saint Laurent, Balenciaga), Hermes and Prada all shone in the first half of the year with high sales growth and lavish profits. Business was particularly good in Europe and the USA.
LVMH reported that the earnings of its own fashion brands such as Louis Vuitton, Dior and Fendi had reached new record highs. But the business with champagne, cognac and watches was also excellent. In the first six months of this year, the luxury group’s sales rose by 28 percent year-on-year to almost 37 billion euros. Operating profit grew by 34 percent to more than 10 billion euros. Competitors such as Kering, Hermes and Prada also saw double-digit growth in sales and profits.
The Corona crisis had brought the luxury goods industry the biggest slump in its history in 2020. But that was a rather short interlude. According to a study by the management consultancy Bain, the global market for personal luxury goods such as clothing and jewelery will already exceed the pre-corona level in 2021 at 288 billion euros. And the upward trend currently seems unbroken.
“So far, Russia’s war against Ukraine and the resulting high inflation rate and economic slowdown have had hardly any impact on luxury brands,” say Bain’s experts in their current study on the luxury goods market, which they carried out together with the Italian luxury goods association Fondazione Altagamma.
“The luxury goods industry is once again showing a high level of resilience when it comes to crises,” emphasized Bain industry expert Marie-Therese Marek. This year, the total turnover of the luxury goods industry could even increase to 320 to 330 billion euros, despite the Ukraine war and inflation. (dpa)