According to a report in Bloomberg, these companies that define kinda luxury, an gauge of luxury shares compiled by Goldman Sachs, have shed $240 billion in value from a March peak.Reason: A tough global economy and China’s economic downturn worsening. After a period of significant growth following the pandemic, these companies are reportedly now experiencing a decline in sales and profits. The report said that brands including Kering, Burberry and Hugo Boss gave issued profit warnings while at LVMH, quarterly organic revenue at its crucial leather-goods unit grew just 1%, versus 21% a year earlier.
What’s behind the loss in sheen
The spending slump in China, a major market for luxury goods, is particularly concerning. The country’s wealthy consumers, who were once eager to purchase high-end products, are now becoming more cautious due to the deteriorating economic conditions.
This downturn has had a significant impact on the stock market performance of luxury companies. As per Bloomberg report, Burberry, for example, has seen its market value plummet by 70% and has been removed from the FTSE 100 index. Other major players like Kering and Hugo Boss have also experienced substantial losses.
While some analysts remain optimistic about the future prospects of the luxury sector, there are concerns that the current economic climate may lead to a new normal of weaker revenue and tighter profit margins.