Major luxury brands experience slump as wealthy shoppers in China hold back

While China is experiencing an economic slowdown and the ruling Government continues to crack down on ostentatious displays of wealth in the country, some of the top global luxury brands are feeling the pinch.

In a report first published by the BBC, LVMH – which operates several top brands such as Louis Vuitton and Dior and is the world’s biggest luxury group – says sales in Asia, which includes China but not Japan, fell by 14 per cent in the three months leading to the end of June. This is a further deterioration from a six per cent decline in the first quarter of the year.

The situation has left LVMH, home to around 75 high-end brands, with shares dropping by almost 20 per cent in the last year. Despite so, the company remains optimistic, with the group’s chairman and chief executive Bernard Arnault issuing a statement to say the company is cautiously optimistic.

Further, reports detail how Chinese shoppers are cutting back on expensive purchases, and more and more social media accounts are being taken down which feature influencers and socialites showing off their own luxury goods.

Indeed, last month, Chinese-government backed social media network Weibo, the main platform for social media usage in the country, issued a statement that it was busy working how to manage “undesirable value-orientated content”, including content “showing off wealth and worshipping money”.

Other brands feeling the pinch in China include upmarket British fashion label Burberry, which shared that its sales in mainland China had fallen by over 20 per cent compared to a year earlier.

Swatch Group, the Swiss watchmaker that owns Blancpain, Longines, and Omega, reported a 14.4 per cent decline in sales for the first half of 2024 compared to the same period last year, citing weak demand in China as a contributing factor.

Richemont, which owns Cartier, experienced a 27 per cent year-on-year decrease in sales in China, Hong Kong, and Macau for the quarter ending 30th June.

German fashion giant Hugo Boss has revised its sales forecasts for the year downwards due to concerns about weak consumer demand in markets such as China and the UK.

Other prominent luxury goods companies, including Hermes and Gucci-owner Kering, are expected to release their latest financial results this week.

Recent data from China indicate that the economy is still struggling to rebound from the pandemic downturn, with both second-quarter growth and June retail sales figures falling short of expectations.