Louis Vuitton, Gucci, expected to point to wider luxury sector recovery in Q1

By

Astrid Wendlandt

Published
Apr 8, 2017

“Gucci is on fire and its sales growth in some regions has been in the very high double digits,” an industry source said on condition of anonymity. The brand’s sales growth is likely to be impressive also because it is compared to last year’s low base when the brand’s turnaround was in its early days.

The same positive trend is expected at Louis Vuitton, which benefited from the industry’s recovery and innovative designs for both accessibly priced and high-end leather goods.

Gucci and Louis Vuitton’s respective parents, Kering and LVMH, declined to comment.

Global Blue, the VAT refund provider, said tourist spending in Europe accelerated in the first quarter with tourist spending up 17 percent year-on-year in February, in line with January figures.

Several executives at the Condé Nast International luxury conference in Oman said they had noticed a clear improvement in trading in the first quarter, which bode well for the rest of the year. The luxury goods industry last year was stung by terrorist attacks that kept tourists away from major European capitals while Russian and Middle Eastern buyers suffered from low oil prices.

Patrick Chalhoub, chief executive of the Chalhoub group, a major luxury distributor in the Middle East, said it looked as though luxury demand in the region had reached a trough in the autumn last year and was now picking up.

 “The market reached a bottom last year and is slowly improving. By September, we should see concrete positive results,” Chalhoub told Fashion Network in an interview.

He said the group estimated luxury sales in the Middle East to rise between 1-3 percent in 2017 after a 1 percent drop in 2016. Globally, the market is forecast to rise in low-single digits but analyst could revise up their forecasts after big groups such as LVMH and Kering publish their first-quarter sales later this month.

“I think there has been a rebound since President Trump was elected,” Jimmy Choo Chief Executive Pierre Denis said in an interview. Denis said the news lifted stock markets and therefore consumers’ net asset value and “feel-good factor” that prompted consumers to open their wallets again. Jose Neves, chief executive of online fashion retailer Farfetch, said there had been a definite up-tick in recent months.  

“We have very good visibility through our network of 500 stores and 200 brands, and we have genuinely noticed a pick-up in the first quarter,” he told Fashion Network in an interview at the luxury conference. Aside from Europe, Neves said there were positive trends in China, Russia, Japan and Brazil.

However, Neves, like many other fashion executives, said poor trading at US department stores, hit by online competition and an oversized network, was a major concern for the industry.  

He warned the trend could be “toxic” as it meant excess inventory and a slimming down of department stores that could take two to three years to complete.