Last week, a series of sales drops, regulatory decisions and trade disagreements hampered the plans of several companies across the luxury industry. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, and the Glossy Beauty Podcast for interviews from the beauty industry. –Danny Parisi, sr. fashion reporter
Luxury’s difficult week
The struggles in the global luxury market continued last week. In the U.S. and the rest of the world, luxury companies reported being stymied by lowered sales, reduced demand in important markets, and the possibilities of regulation and legislation that would put a damper on their plans.
In luxury watches, exports of Swiss watches to the rest of the world dropped a precipitous 16% in March, the biggest drop since the beginning of the pandemic. That falloff was primarily driven by reduced demand in China, where sales fell 42% last month. Exports to Hong Kong, one of the biggest watch markets in the world, fell even more, by 44%.
Over the last few months, I’ve asked multiple watch experts why a category that seems to be bringing more consumers and attention is seeing such a significant decline. Watchfinder’s Edouard Caumon owed the trend to the luxury watch boom in 2021 and 2022. Sales of expensive watches soared in those years, but they’re now evening out to a more normal distribution.
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But there is more to the story, as overall luxury spending has been declining over the last two quarters. Just last week, Bank of America announced that luxury spending was down 12% in March. Even the mighty LVMH reported a hit to its revenue last week, as I wrote about in the Luxury Briefing.
Among other current obstacles in luxury, Tapestry’s plan to acquire Capri Holdings, which would instantly make it one of the biggest luxury conglomerate groups, hit a snag last week. While the deal was approved by regulators in the E.U. and Japan, U.S. authorities are reportedly considering blocking the transaction.
The FTC is allegedly planning to sue to block the deal over antitrust concerns and is meeting this week to decide if and how that block will be issued. If it is blocked, it would scrap an $8.5 billion deal that’s been in the works for a year. It would also prevent the creation of a major American counterpart to the European luxury conglomerates including LVMH and Kering.
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Outside the U.S., there is no shortage of issues related to luxury goods. France and China have had multiple trade disputes in recent weeks. These involve investigations backed by France into China’s electric vehicle subsidies and investigations backed by China into the dumping practices of European cognac makers. The escalating series of investigations between European countries and China have put a strain on trade relationships, to the point that LVMH CEO Bernard Arnault weighed in. On Thursday, he expressed hope that France and China can settle any disputes and continue improving trade relationships.
LVMH seeks to expand its watch sales and demand for watches in China diminished last month, so it makes sense that Arnault would be particularly invested in strengthening those ties.
