The luxury sector, including fashion, cars, and alcohol, faced a challenging 2024 marked by stagnant spending. A decline in Chinese demand and rising prices contributed to falling revenues and stock valuations for major brands. The ongoing trade war further threatens to prolong this downturn.
Bain & Company and Altagamma's report highlights a 2% decrease in the luxury personal goods market to €363 billion in 2024. A 20% drop in Chinese spending, attributed to weakened consumer confidence and shifting tourist patterns, exacerbates the crisis. LVMH's results reveal a 1.9% decrease in revenue, with the Fashion and Leather division experiencing a 5% decline, further illustrating the situation.
The impact on the stock market is significant. Since the announcement of reciprocal tariffs by the US, major European luxury companies experienced substantial losses: Salvatore Ferragamo (17%), LVMH (14%), Kering (14.1%), Hermès (3.75%), Richemont (12%), Burberry (14.5%), and Prada (13%). Burberry's losses are particularly severe at 32.2%.
Amidst the sector's decline, Prada acquired Versace for €1.25 billion. This move aims to bolster the Italian luxury sector against LVMH and Kering, despite both companies facing financial and creative challenges. Versace's underperformance since early 2023, due to positioning and pricing issues, makes its recovery a significant challenge for Prada.
While some experts argue that the impact of the trade war is currently limited due to the high price point of luxury goods, the long-term effects remain uncertain. The acquisition of Versace by Prada is viewed as a move to strengthen Italian presence in the global luxury market, but its success depends on maintaining each brand's distinct identity.