If you follow the news these days, much of it is about doomsday predictions: a war in Europe, skyrocketing inflation around the world and many other problems. News outlets continue to say that we are amidst a global economic recession. However, as companies have just released their quarterly sales and earnings numbers, one thing stands out. Luxury brands are not feeling any slowdown – at least for now.
LVMH’ sales increased 28% year-over-year in the first half of 2022 to a whopping €36.7bn whilst profits rose even faster at 34% to €10.2bn. Most of the growth is coming from Europe (47% growth) and the US (24% growth) while Asia has been lagging and growing a mere 1%. Other luxury brands are experiencing similar trends. Versace’s quarterly revenue just grew nearly 30% and Yves Saint Laurent’s sales grew 31%. This trend is not limited to fashion brands. Ferrari reported a more than 20% increase in sales, profits and shipments and simultaneously raised its outlook for the year 2022. However, CEOs aren’t celebrating just yet. As Bernard Arnault, Chairman and CEO of LVMH, said: “LVMH has enjoyed an excellent start to the year […] We approach the second half of the year with confidence, but given the current geopolitical and health situation, we will remain vigilant and count on the agility and talent of our teams to further strengthen our global leadership position in luxury goods in 2022.”
So why haven’t luxury brands seen any impact yet despite retailers like Walmart or Target slashing their forecasts? Why may another 2008 be avoided for luxury brands? Part of the answer probably lies in a change in the consumer. The proliferation of social media has probably altered the perception of luxury forever. People are much more comfortable sharing and showing their status. The young generation wants to maintain their social image and considers spending on luxury brands a necessity. At the same time there has been an increase in buyers from developing nations where first-generation wealth is more and more emerging.
Time will tell if the industry has celebrated to early but for now it seems all business as usual in the world of luxury brands.
