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In numbers: Bad start for luxury in 2016

The struggle of international luxury group has been confirmed in their recently released quarterly results.

The luxury industry has had a iather bad start to the year and, as of today, it continues to face growing challenges on all fronts.

 

There are many factors driving this slowdown, primarily the general economic downturns, especially from China, and a sharp drop in the flow of tourists to cities like Paris, Milan, Hong Kong and other main shopping hubs.

 

The struggles of several international luxury groups have been confirmed by their recently released quarterly results.

 

Kering

French luxury group Kering posted its results for the first quarter of 2016, showing a rise in sales and revenue, but falling short of analysts’ expectations.

 

Released earlier this week, Kering posted a revenue growth of 2.6 per cent and overall sales of €2.724 billion across its different brands.

 

In a previous Reuters’ poll, analysts predicted a €2.767bn in sales.

 

“Kering’s solid first-quarter 2016 performance in a challenging market environment bears testimony to our focus on driving organic growth,” François-Henri Pinault, Kering’s chairman and CEO, said in a statement.

 

Kering’s flagship brand, Gucci, reported a growth of 3.1 per cent in sales and considerably drove up the sales growth for the group, showing the positive results of a creative management reshuffle that took place over the past few months.

 

Gucci’s sales grew by 4.8 per cent in the last quarter of 2015.

 

The new creative energy is maintained at Gucci and the brand’s new collections continue to draw an enthusiastic response. We are confident that we can extend our growth trajectory over the full year thanks to our multi-brand mode,” Pinault added.

 

In comparison, however, sales at Bottega Veneta, the second-biggest brand for Kering, dropped by 8.3 per cent. The low influx of tourists, especially to Western Europe, was given as the main reason behind the poor performance.

 

Meanwhile, Yves Saint Laurent, another Kering brand, which just appointed Anthony Vaccarello as creative director last month, saw its sales grow by 27 per cent.

 

Vaccarello will present his first collection with the brand in October.

 

Kering has been actively positioning itself as a sustainable group. Earlier this January, it was ranked as one of the 100 most sustainable companies in the world, by the Corporate Knight’s Global 100 Index, released at the World Economic Forum in Davos.

 

LVMH

The Fashion and Leather Goods unit at LVMH, under which brands like Louis Vuitton and Dior operate, showed flat sales growth, falling two to three per cent behind analysts’ expectations.

 

The unit had previously seen two to three per cent growth in the past two quarters.

 

Meanwhile, the Watches and Jewellery unit saw seven per cent growth this quarter. Overall, all of the businesses units at LVMH generated a four per cent revenue growth for the group during the first quarter of 2016.

 

Sales during the time period generated €8.62bn, less than Thomson Reuters’ mean forecast of €8.72bn.

 

“The US market is strong and Europe remains well-oriented, except for France, which is affected by a fall in tourism,” LVMH said in a statement. “Asian markets are varied, but Japan continues to progress,” the global agency reported.

 

Richemont

 

Richemont is yet to release results for the first quarter of 2016, but had already expressed that it expects sales and performance to remain challenging given the current market situation.

 

The company’s sales dropped four per cent in the last quarter of 2015, with slow sales in Japan and Europe pulling performance down.

 

Earlier this week, Richemont confirmed reports claiming the group is looking to cut jobs, but clarified that it is limiting cuts to 100 jobs only, less than the previously claimed 350.

 

Richemont is set to post its annual 2015 financial results by May 20.

 

Several industry reports and forecasts suggest that, thanks to the prevailing challenges, the luxury industry would hit a new low this year, signaling that it may have to adapt to a new, lower norm.