The luxury industry has been turbulent recently, with frequent changes at the top of several top luxury groups.
The CEO of the top luxury cashmere brand Noyou Pian Ya was transferred to the deputy CEO of Louis Vuitton, the CEO of the watch department took over as the CEO of Nuo Youpianya, and the CEO of Fendi was changed to the deputy CEO of Dior; Kering recruited new CEOs for Saint Laurent and Balenciaga at the beginning of this year.
The frequent adjustment of the top management certainly reflects the determination of enterprises to take the initiative to change. But behind this, there may be pressure and anxiety that has to change – judging from recent performance, everyone’s situation is not optimistic:
- Hermès’ growth rate fell by 10 percentage points from the same period last year;
- Kering recorded double-digit declines, and Gucci sales have fallen for five consecutive quarters;
- LVMH Group’s sales fell far short of market expectations, with revenue from the alcohol business plummeting;
- Burberry, whose profits plummeted by 94%, announced on the day of its earnings report that it would lay off about one-fifth of its global workforce, hoping to save £60 million in fiscal 2027.
According to McKinsey, the economic profits of the luxury industry have nearly tripled between 2019 and 2024. This is mainly due to the fact that most brands have implemented price increase strategies – after several years of price increases of only 1%-2%, brands have significantly increased prices from 2019 to 2023, accounting for about 80% of the growth of the luxury industry.
But by 2025, there will be obvious signs of slowdown, and the price increase law will also be invalid.
Revenue: LV fell short of expectations, Burberry’s profits plummeted, and generally weak growth
Judging from the recent overall performance, the performance of top luxury goods groups is generally not ideal, and there is a certain gap with market expectations.
- Hermès recorded sales of 4.1 billion euros in the first quarter, a year-on-year growth rate of 7%, which was not only far lower than the 17% in the same period last year, but also less than the market expectation of 9.8%.
- LVMH’s revenue in the first quarter of this year fell 3% year-on-year to 20.311 billion euros, lower than analysts’ expectations of 21.14 billion euros.
- Kering was even worse, with first-quarter sales of only 3.883 billion euros, down 14% year-on-year, and the group’s CEO directly admitted in the performance statement, “This is a difficult start.”
- Burberry’s total revenue in the first quarter fell 17% year-on-year to £2.461 billion, and adjusted operating profit was only £26 million, a year-on-year plunge of 94%, the highest decline among luxury groups.
- Prada Group is one of the few “top students” to hand over a stunning report card, with revenue in the first quarter of this year increasing by 13% year-on-year to 1.341 billion euros, exceeding market expectations of 1.33 billion euros, largely due to the strong growth of its brand Miu Miu. (Click here to read the relevant analysis “Why is MiuMiu’s performance soaring?) 》）
- Richemont Group is also not bad, with first-quarter revenue up 7% year-on-year to 5.17 billion euros, slightly higher than market expectations of 4.98 billion euros.
Changes in performance were quickly transmitted to the capital market. LVMH’s stock price ushered in a wave of volatile downward movement, falling nearly 13% during the year, and its market value was surpassed by Hermès. UBS, JPMorgan Chase, Deutsche Bank, Jefferies Group, etc. are still in the pit, almost simultaneously lowering LVMH’s target price, and Morgan Stanley, which is the most ruthless, directly cut LVMH’s target price from 740 euros to 590 euros. Statistics show that Prada’s stock price has soared 37.16% in the past year and has risen nearly 12% this month, leading a number of luxury groups.
The luxury industry has come to a crossroads of change.
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Brand: The core brand carries the banner, and the multi-brand strategy is tested
When the industry is in a headwind state and the market as a whole is down, the performance of each brand is also further differentiated, and it is crucial to have a reliable core brand.
Prada and Kering are the most stark. Prada’s MiuMiu’s revenue soared by 60% in the first quarter of this year, becoming the group’s most powerful performance engine, while Kering’s revenue fell by 25% and 8% respectively due to the revenue of Gucci and YSL, which have fallen for five consecutive quarters, causing overall performance to be in trouble. LVMH, which has the largest brand lineup, has been cold, partly to blame for the brands that are “dragging their feet”. Although it is not clearly stated in the financial report, it can be seen from the executives’ speeches that the performance of Sephora, Dior and others is not satisfactory.
Kering’s main brand, Gucci, performed poorly in the first quarter
Source: Financial report
Miu Miu is the main driver of Prada’s performance
Source: Financial report
It is undeniable that multi-brand development has its strategic significance: in the upward cycle of the industry, it can help the group quickly expand the market, seize more market share, and achieve diversified growth. However, the current experience of LVMH and Kering also shows that the multi-brand strategy has its limitations – high operating costs, easy to cause resource dispersion, blurred distinction between brands and even “internal friction”, which requires extremely high management capabilities at the top level.
Kering has made it clear that it will simplify the hierarchy and reorganize brand resources。This is considered to be a correction of the multi-brand strategy to some extent. In a period of overall downturn and turbulent performance, it is necessary to focus on core brand building, strengthen core competitiveness, and suspend the expansion or contraction of some underperforming and potential secondary brands in order to better cope with market uncertainty.
Kering brands
Source: Kering official website
Regional differentiation: North America stabilized, Japan surprised
In addition to brands, there are also major markets facing differentiation.
In the global map of the luxury industry, the two major towns of North America and Japan are still prominent: North America has stabilized, which is the “ballast stone” that most brands rely on; Japan, on the other hand, grew at a gratifying rate, becoming a rare bright spot in the overall sluggish environment.
Let’s look at the situation in North America first. In the first quarter of this year, Hermès achieved 11% growth in this market, and Prada also achieved a 9.9% increase. Although LVMH generally fell in major markets, it fell only 3% in North America, the smallest decline among all major markets; The same was true for Kering, with sales in North America down 13%, lower than other major markets.
On the one hand, this stability is due to the recovery of the local economy, which has injected vitality into the consumer market. According to statistics from data company Consumer Edge, in the first quarter of this year, the consumer spending of high-income people with an annual income of more than $150,000 in the United States remained stable, and some middle-aged and elderly consumers increased their spending on top luxury brands such as Hermès. On the other hand, in the past few years, luxury brands have laid the foundation for stable growth, including increasing local production capacity and opening additional stores.
Compared with stable North America, the strong recovery of the Japanese market is even more surprising. Richemont’s sales in the Japanese market surged by 25% for the year; Hermès sales in Japan increased by 17%, while the rest of Asia-Pacific except Japan increased by only 1%; Prada’s growth rate in Japan was as high as 18%, almost double that of the Asia-Pacific region (9.6%); Burberry’s sales in China, South Korea and South Asia all declined, with only the Japanese market maintaining a 1% year-on-year increase; Kering’s Asia Pacific region as a whole fell by 25%, but Japan fell by only 11%, which is a blessing in disguise.
Overall, the recovery of the Japanese market is mainly due to two major factors: first, the weak yen, soaring inbound tourism, especially tourists from China taking advantage of the exchange rate difference to rush to buy luxury goods, according to the statistics of the Japan Tourism Agency, in the past year, the total consumption and shopping consumption of Chinese mainland tourists in Japan were as high as 1.73 trillion yuan and 764.1 billion yen respectively, both ranking first in all countries, accounting for more than 20% of consumption; Second, the recovery of local consumption, the increase of high-end department stores and shopping malls, provides a good platform for luxury sales.
In the first quarter, the Prada Group’s sales in the Japanese market soared sharply
Source: Financial report
However, it is still unknown whether these two markets can continue to be strong in the future.
Japan’s problem is that due to rising prices and changes in the international situation, its economic stamina is slightly insufficient after entering the second quarter. In early May, the Bank of Japan lowered a number of annual economic expectations, with the median GDP growth rate lowered to 0.5%.
The situation in North America is more complicated, with the tariff turmoil temporarily subsided, but the domestic economy in the United States still shows signs of further deterioration compared to the first quarter. Dean Baker, founder of the Center for Economic and Policy Research, recently said that large domestic consumption in the United States is unlikely to continue in the next few months, and the consumer confidence index fell to its lowest level since the epidemic in April.
Category: Leather goods are still strong,
The performance of jewelry and alcohol is differentiated
In terms of market segments, North America and Japan are the fixed sea god needles; By business line,Leather Goods (Bags)It is undoubtedly the mainstay.
In the first quarter of this year, Hermès’ leather goods and harness business grew by 10%, with the new Médor and Mousqueton collections being widely praised by the market; LVMH’s fashion and leather goods division has revenue of 10.108 billion euros, accounting for half of the group; Gucci’s Softbit collection has also received a lot of praise, but unfortunately the potential has not been fully reflected in the performance due to the short launch time, in addition, its Bottega Veneta and Balenciaga brand leather goods business has also achieved good growth.
The leather goods and fashion business supports half of the LVMH Group
Source: Financial report
In contrast, the performance of other business units varies greatly, and there is a clear differentiation between different brands. For example, LVMH’s alcohol business revenue fell by 9%, the highest decline among all businesses, and the watch and jewelry business also had zero growth; However, Kering, which has fallen, has performed relatively well under its three major jewelry brands, Pomellato, Qeelin and Boucheron.
The reason why leather goods are strong is that in addition to the most styles and strong brand promotion, there are also considerations such as value retention rate and second-hand market circulation rate. In the luxury world, there have been several myths about value preservation: according to a report by second-hand luxury e-commerce company Rebag, the value retention rate of Hermès Sellier Birkin bags has soared to 250% in the past year, and the value retention rate of classic models such as Chanel’s Classic Handbag and LV’s Speedy 25 has also exceeded 100%.
In contrast, “hard luxury” such as jewelry and watches are not in good market.
According to data from WatchCharts, a second-hand watch trading platform, as of the end of last year, the second-hand market trading price index of Rolex watches fell by more than 30% from its peak two years ago. Johann Rupert, chairman and founder of Richemont, also pointed out at the annual meeting that in order to cope with the decline in demand for expensive watches in the global market, the luxury watch industry must reduce production.
According to the latest data released by the Swiss Watch Industry Federation, in March 2025, the export value of Swiss watches to Chinese mainland fell by 11.5% year-on-year.
Source: WatchCharts
Strategy: The price increase method is invalid,
Genuine products encounter high imitation challenges
As mentioned at the beginning, in the face of challenges, various brands have responded with “price increases” in recent years.
In 2025, everyone will also adopt price increases – in February this year, Prada raised prices by 4% for about 45% of product lines, and Balenciaga also raised prices by 4% for about 25% of products. In April, the official website of LVMH’s Louis Vuitton China showed that products such as DIANE baguettes and Speedy Trunk 20 bags have increased in price by varying degrees; Hermès will further raise the price in the United States on the basis of the usual price increase of 6%-7% from May; Richemont’s Van Cleef & Arpels and Cartier have also joined the price increase since May, and the specific increase and coverage area are subject to further official confirmation……
In the official statement, there are still those old reasons: rising costs and inflationary pressures, and Hermès also specifically pointed out that the tariff turmoil is the main reason for the additional price increase in the United States. Interestingly, on May 12, the tariff turmoil ushered in a key turnaround, will luxury brands led by Hermès change their minds and give up price increases? Consumers believe that there is an answer in their hearts.
Whenever the performance is low, the price will increase, which has become an unwritten agreement in the luxury industry. This strategy can indeed enhance the brand’s high-end image to a certain extent and attract consumers who pursue uniqueness and scarcity. However, due to the increasing frequency of price increases in recent years and the continuous changes in the economic environment, the routine of price increases to boost profits may not be so useful.
It is worth noting that the loss of luxury consumers is accelerating. Taking the North American market as an example, data from Bain & Company shows that the number of luxury consumers decreased by 12.5% between 2022 and 2024.
Some believe that it is some sports leading brands that have stolen luxury customers with the concept of a healthy lifestyle. But an even more cruel fact is that the phenomenon of high imitations is sweeping Europe and the United States.McKinsey 2023 USAMarket researchIt shows that 31% of respondents have purchased a luxury replica (dupe) in the past 12 months, and consumers no longer hide it when wearing it, but take pride in “smart consumption”. According to a survey by the Boston Consulting Group, Gen Z consumers are more likely toBrand premiumTolerance decreased by 23% year-on-year, while the weight of material perceived value increased by 41%.
The high imitation, which was once regarded as a “copycat shame”, is rewriting the rules of the game.
On the whole, the luxury industry is indeed full of challenges: consumer groups continue to change, a group of old customers are lost, young consumers have begun to reflect on consumerism, and no longer blindly superstitious about the authority of luxury brands; The global economy is in turmoil, middle-class anxiety is escalating, and the rich seem to have fallen into luxury aesthetic fatigue; Business channels are facing changes, with the rise of online and the slowdown in the growth rate of self-operated channels, and some brands have been forced to close some stores……
But on the other hand, isn’t the reason why luxury goods can become luxury goods is because their product quality and reputation accumulated over the years can support them through the cycle? The industry has ups and downs, consumption is ever-changing, and this is also the only way for luxury goods to accumulate heritage.
