Factors such as the continuous upgrading of mass consumption, the continuous improvement of the business environment, the increasingly abundant retail channels, and the accelerated return of high-end consumption have jointly pushed my country's luxury goods market to a new level.
HSBC released the latest luxury industry forecast on the eve of the second quarter financial reporting season. It is expected that driven by the luxury price increase mechanism and the strong rebound in the European and American markets, the sales of major global luxury brands in the second quarter are expected to reach mid-single digits. With growth ranging from single digits to low double digits, the overall profit margin of the industry will be the same or even higher than last year, supported by the price increase strategy of luxury brands.
In view of the increasing range and frequency of price increases for luxury brands in recent years, HSBC predicts that the sales of Hermès , Gucci parent companies Kering Group and LVMH will record sales of nearly 11%, 14% and 17% respectively in the first half of this year. growth, the profit margin will reach 37.5%, 36.8%, and 28% respectively.
Prada Group’s sales in the first half of the year are expected to record a 12% growth, of which direct retail growth may be 13%, wholesale business will remain flat, and EBIT will soar 81% year-on-year to 300 million euros. By brand, HSBC expects sales of Prada to increase by 12%, and Miu Miu and Church sales to increase by 10%.
In comparison, Burburry, which is less able to withstand pressure, may have flat retail sales in the first quarter of fiscal year 2023 as of the end of June, with the Chinese market falling by 40%. Other markets grew 20% year-on-year.
However, HSBC pointed out that the growth momentum of the luxury goods industry in the second quarter and the first half of the year largely came from the price increase at the beginning of this year that was much higher than in the past.
According to an earlier report by Fashion Business Express, Chanel’s classic handbags have increased by more than 60% in the past three years, and Prada’s entry-level handbags have increased by as high as 70%. LVMH, Kering Group and Chanel bluntly stated in their 2021 financial reports that they will continue to increase the prices of their brand products this year to cope with global inflation and continued high transportation, labor and material costs.
According to HSBC, the reason why the sales volume of luxury goods groups is positively correlated with price increases is that the main audience of luxury brands have a higher ability to withstand risks and need to use scarce luxury goods to demonstrate their identity, status and Financial resources, and the financial attributes of some luxury goods have also attracted a wave of middle-class consumers to buy them.
Just as luxury brands have gradually evolved from the " twenty-eight law " to the "one-nine law", the phenomenon of rich people getting richer has emerged after the epidemic, and luxury brands are setting their sights on the wealthier people at the top of the pyramid.
Coincidentally, Chanel also stated after releasing a record-breaking performance report that it will open the world's first private boutique in Asia this year to distinguish ordinary consumers from high-spending VIP customers, thereby solving the customer flow during peak periods in the store. Due to quantity issues, VIP customers do not have to queue in regular stores to purchase products.
Another source revealed that in recent years, Chanel has successively closed some stores that only sell accessories or shoes, and has increased the proportion of ready-to-wear products in its stores, aiming to bind high-net-worth individuals at the highest level of the pyramid who are not price-sensitive. consumer.
In 2021, Chanel's sales surged 49.6% year-on-year to US$15.6 billion, a record high. It also recorded a growth of 22.9% compared with 2019. Its operating profit soared 170.6% to US$5.46 billion. It not only fully recovered to the pre-epidemic level, but also It is the first time in the past three years that it has overtaken LVMH’s fashion leather goods department, Hermès and Kering Group.
Regarding the Chinese market, HSBC admitted that the growth of luxury brands in this market will slow down or even decline in the second quarter. The revenue of most luxury brands in the Chinese market will drop by 25% year-on-year in the second quarter, but it will be affected by the United States, Offsetting the positive performance in Europe, Japan, South Korea and other markets, " is not only in the Chinese market, but leading luxury goods groups such as LVMH, Kering Group, Hermès and Richemont also have stable sales in Europe, the United States, Japan and other regions. Influence".
The purchasing power of Japanese consumers is increasing significantly with the relaxation of epidemic-related policies, and Europe will also see a significant rebound stimulated by Milan, Paris and London Fashion Week. At the same time, wealthy Middle Eastern and American tourists have returned to Europe, and long queues have once again formed in front of major luxury brand stores.
According to a research report on personal luxury goods consumption in Gulf countries released by the Middle East luxury retailer Chalhoub Group in cooperation with the Fashion Council of the Saudi Ministry of Culture, sales of personal luxury goods in member countries of the Gulf Cooperation Council reached US$9.75 billion in 2021. , 23% higher than in 2019, with luxury fashion as the main growth driver. and in the United Arab Emirates accounted for the highest proportion, reaching 49%.
The U.S. market will be affected by the high base in the first fiscal quarter. Luxury goods sales growth may slow down in the second quarter, especially in May and June. However, compared with the same period in 2019, major luxury goods groups The performance of the US market is still on the growth track.
What needs to be alerted is that the views of most wealthy people around the world on luxury goods are changing. Many wealthy consumers gradually feel that buying luxury goods is a very troublesome thing.
A survey of affluent consumers and the middle class released by Deloitte last month showed that 74% of respondents expressed concern about the continued high cost of living, and 54% predicted that they would The financial situation will not improve and believes that now is the time to invest in gold or real estate rather than buying non-essential luxuries.
The HSBC valuation model shows that the PE valuation of the luxury goods industry in the next year has been lower than the pre-epidemic level, while the growth of the European and Japanese markets lacks sustainability, and investors are skeptical about the luxury goods market in the second half of 2022. Attitude, the second quarter of this year may be the last carnival of the luxury goods industry.
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