LVMH and other luxury brands saw a huge leap in sales at the beginning of this year. Luxury goods from several brands continued to be purchased by a rising middle class and China reportedly accounted for 25 percent of worldwide sales. LVMH also saw an increase in its market capitalization but as the year progressed sales declined and so did its market cap. Luxury brands are expected to face a reverse in fortune in the first quarter of next year and will recoup a little in the second quarter of 2024.
A weakening economy in the latter part of the year and a need for experiences rather than purchases, post-pandemic are two major reasons why the luxury goods markets are seeing a decline. Chinese shoppers have slowed down purchases and a revival in shopping by this large segment of consumers can improve the fortunes of luxury makers in the second quarter of 2024.
Although the first quarter next year is expected to be dull according to most if not all experts, a revival is expected in the second quarter as people will begin to travel more and shop more.
One luxury goods maker that has bucked the trend is Hermes. The bag and scarf maker generally has a long list of customers who have to, wait for weeks and even months to purchase iconic bags for thousands of dollars and the company’s stock seems to be steady or rise each quarter.
Luxury goods makers including LVMH and Richemont are not seeing such demand and their stock prices remain about 15 percent below their 2023 peak. There is a market pullback and tech stocks are also gaining higher prices due to various innovations and more.
Tourism and demand from China are expected to fuel growth in luxury goods next year. However, the pandemic peak might not be reached again as traveling is becoming as important if not more important than shopping for several consumers.
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