Key facts
- Luxury goods sector faces challenges from weak fashion sales and reduced spending due to the Middle East conflict.
- Jewellery is emerging as a strong growth segment within the luxury market, offering steady growth and higher margins.
- Richemont reported a 24% surge in jewellery sales for the quarter ending June 30.
- LVMH's Watches and Jewellery division is projected to grow, with expectations raised by analysts.
- Kering and Hermes also reported strong performance in their jewellery segments.
- Traditional luxury categories like leather bags and shoes are experiencing declining consumer desirability, especially among younger demographics.
The global luxury goods sector, valued at $400 billion, is navigating a challenging period marked by weak fashion sales and reduced consumer spending, particularly impacted by the conflict in the Middle East. Analysts anticipate a return to growth by 2026 after two years of contraction, but current spending patterns show a significant shift away from traditional items like leather bags and shoes.
Jewellery is emerging as a bright spot, offering steady growth and higher profit margins compared to "soft luxury" goods. This increased appeal is partly due to a perceived lack of innovation in high-end fashion and a rally in gold prices, which enhances jewellery's attractiveness as an investment. Companies are increasingly emphasizing their jewellery offerings to capture this growth.
Richemont, owner of prominent jewellery houses like Cartier and Van Cleef & Arpels, reported a substantial 24% increase in jewellery sales for the quarter ending June 30. LVMH, which owns Bulgari and Tiffany, is also expected to see improvements in its hard luxury segment, with analysts revising growth expectations upward for its Watches and Jewellery division. Smaller brands are also experiencing success, prompting fashion-focused players to increase their focus on jewellery.
Conversely, categories like high-end bags and shoes are facing headwinds, with declining consumer desirability, especially among younger consumers. This poses a potential challenge for brands like Hermes, whose business model has historically relied heavily on its iconic bag franchises. Consultancy Bain & Company notes that post-COVID dynamics have created a more difficult environment for these categories, requiring new strategies to regain consumer interest.