Luxury brands seek a miracle inside their (ostentatious, overpriced) bag of tricks

A rough earnings season has high-end retailers fearing a prolonged slump.

There’s nothing like a little retail therapy after a long day — popping over to the mall, taking your mind off everything, and dropping a casual $26k on a Gucci crocodile handbag.

Illustrations of signature handbags from linked luxury fashion brands Gucci, Yves Saint Laurent, Bottega Veneta, and Balenciaga. Each bag has a red downward arrow highlighted in its design, alongside its corresponding percent dip in sales.

If that habit isn’t feeling super sustainable to you, you’re not alone.The luxury goods industry, which boomed post-pandemic, is now looking more unsteady than a stilt walker wearing Manolo Blahniks.Which brands are mired in a slump?First, some snazzy names did bear good news this past quarter, though they were few and far between:

  • Hermes grew revenue 7% YoY (though its prices also shot up 7% this year).High-end eyewear — often among the cheapest entry points to luxe brands — is holding up nicely, with French luxury conglomerate Kering reporting a 34% lift, credited to its Maui Jim acquisition.
  • That’s about where the nice business news ends, per Fortune:
  • Outside of Maui Jim, Kering had a disastrous quarter, plunging 13% overall, with sales down across all its notable fashion houses, including Gucci, Yves Saint Laurent, Bottega Veneta, and Balenciaga.The latest earnings from fellow French luxury giant LVMH — owner of Louis Vuitton, Christian Dior, Tiffany & Co., Hublot, and more — also worried investors, with Q3 showing a sharp downturn in sales growth.
  • So, what’s going on here?LVMH blamed its lackluster performance on “post-covid normalization of demand” and high inventory levels, while Kering pointed to “challenging macroeconomic conditions.”The part they aren’t saying out loud: the outsized role that China plays in fueling their industry.When demand is soaring in China, designer brands flourish — but the world’s second-largest economy is currently bottoming out. Consequently, an index of top European luxury brands has lost ~$175B since March, per The Messenger.It’s not just China, of course: No matter where you live, when basics like gas and groceries are wildly expensive, it’s hard to feel good spending ~$2k on a Yves Saint Laurent pencil skirt, even if the tartan perfectly complements the rest of your wardrobe.

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