The luxury market is recording record levels despite the slowdown

Hermès, LVMH, Ferrari: The luxury goods sector continues to shine with record profits and sales for major corporations in 2023. There are only a few exceptions, despite a slowdown in the market.

LVMH, the world’s number one luxury goods industry, set the tone with a nine percent increase in sales to over 86 billion euros and a net profit of over 15 billion euros (eight percent).

Shortly afterwards, Ferrari said it wanted to make a profit of 1 billion euros in 2023, and the Italian Zegna group scraped by 2 billion euros in sales.

The saddlery and leather goods manufacturer Hermès was best received by investors: net profit rose by 28 percent to 4.3 billion euros and sales rose by 16 percent to 13.4 billion euros.

Luxury goods companies’ results are rising as the market returns to normality after two years of double-digit growth rates.

“We have reached a point where we no longer need to grow as much,” said Bernard Arnault, CEO of LVMH, when presenting the company’s financial figures.

“I think a value between eight and ten percent is perfect,” he added, assuring that he would even slow down his main brands Louis Vuitton and Dior. When it comes to desirability, you shouldn’t try to target sales,” he said.

For others, the year was more complicated, such as Britain’s Burberry, which revised down its annual profitability target due to slowing demand for luxury goods.

Kering once again had a difficult 2023, according to CEO François-Henri Pinault, whose group is trying to revive its main brand Gucci. Kering’s net profit fell to under 3 billion euros and sales fell to under 20 billion euros. Sales were less than 20 billion euros.

A return to reality

Kering, which also owns the brands Yves Saint Laurent, Bottega Veneta and Balenciaga, is working on “elevating brands” to attract more affluent customers, François-Henri Pinault told the press.

The groups that have grown more in a slowing market are those that target a wealthier clientele and are therefore less exposed to inflationary fluctuations, such as Hermès or Richemont, the owner of the Cartier jewelry company.

“It used to be that everything you did, whether good or bad, worked,” explained Hermès CEO Axel Dumas during the presentation of the business results. “Today we find ourselves in a world in which, if “If you do something right, it works, if you do something wrong you have to pay for it. I don’t know if this is normalization or a return to reality.”

“In 2023, across the luxury market, there are brands that have done very well and others that have done less well,” he said, noting a polarization of the luxury industry.

A polarization that could also lead to market consolidation. In its latest study for Altagamma, which represents Italian luxury brands, Bain and Company estimates that by 2030 there will also be a new wave of mergers and acquisitions, driven by the need to address the industry’s biggest challenges.

When asked about a possible purchase of Richemont, Bernard Arnault praised CEO Johan Rupert as an exceptional leader whose strategy he did not want to disrupt. “I heard that he wants to remain independent. I think it’s very good and if he needs support to maintain his independence, I will be there,” he said. (AFP)

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