Currently losing momentum, the resilience of luxury giants is increasingly being called into question. In a sector where growth relies heavily on the United States and China, weak Asian consumption coupled with an uncertain geopolitical context in North America is preventing any sustained rebound. And even though Sino-US tensions seem to be lulling somewhat, it will be some time before we see a solid recovery in Chinese consumption and its impact on discretionary spending.
China, a primary driver
As mentioned above, luxury growth is playing out on two fronts: the US and, above all, China. In 2025, the conclusion is still clear: no China, no champagne. On Monday, May 19, the publication of retail sales figures below expectations, with growth of 5.1% instead of 5.5%, was enough to heighten the anxiety of a sector already under pressure.
Since the beginning of 2024, Asia excluding Japan has seen a 10% decline in sales every quarter. Meanwhile, the United States is not saving the day, with growth struggling to exceed 1% over the same period. "Consumer confidence remains weak at the start of the year, although retail and jewelry sales have improved, especially in March," note analysts at Bank of America. In this challenging environment, some companies with solid fundamentals are managing to stay the course, such as Richemont and Hermès, both of which are showing positive signs. However, others continue to feel the pinch and are showing increasingly worrying trends.
LVMH and Kering in turmoil
Two French luxury brands are showing increasingly marked signs of weakness. Starting with Kering. The parent company of Gucci is unable to turn things around. Gucci is even among the ten worst-performing brands according to BofA's ranking, and the recent change in artistic direction has done nothing to change the situation. Following a string of disappointing results, Kering is now trading at similar levels to those seen in the summer of 2016 and has earned a place in our infamous "A hiccup in recruitment at Kering" section . At this rate, François-Henri Pinault's group is slowly but surely sliding from "luxury" to "premium."
Another heavyweight in trouble is LVMH. Bernard Arnault's group is going through a turbulent period, with sales down. The wine and spirits segment, long considered an asset in the group's diversification, is now weighing heavily on its accounts. Appreciated yesterday for its cross-functional strength, this diversity now seems counterproductive, to the point of sparking rumors of a split. Since the beginning of the year, LVMH shares have fallen by around 22% and are trading at levels close to those of 2021.