Consumers Purchasing Luxury Goods Again Raise Hopes Of Recovery

Indications that consumers are getting comfortable spending on luxury product again was available from the good earnings reported by LVMH, the fashion conglomerate that owns brands such as Louis Vuitton, Fendi and Dior.

There was growth again in the last quarter in its fashion and leather goods division, LMVH reported on Thursday with a 12 per cent growth in revenues compared ot thee same period a year ago.

However, there can be difficulties in the coming months.  

Even though there has been a rebound in the company’s sales in China — the only major economy expected to grow this year, it would not be enough to offset the depressed sales in the company’s other markets.  

There is also a severe dependency on international tourism for the sale of luxury goods. And international tourism is expected to remain muted till a Covid-19 vaccine comes through, said LVMH Chief Financial Officer Jean Jacques Guiony.

“I am not particularly hopeful that we’ll see a lot of tourist inflows before that,” Guiony told analysts on a conference call.

But as the company heads into the holiday season, the strong performance in July through September quarter has encouraged the company.

Sales in mainland China were “extremely strong” and “positive sales trends are continuing in October”, reported jeweller Tiffany — which was attempted to be acquired by LVMH prior to the pandemic hit.

While not being a part of the luxury segment, the most successful to date sale during Amazon’s Prime Day sale earlier this week also raises hopes. While no sales figure was provided by Amazon, it would make as much as $10 billion according to estimates of analysts.

That delivers a positive bigger picture as large economies like the United States are driven by consumption and therefore customers continuing to spend is crucial even in the face of an uncertain trajectory for the Cvoid-19 pandemic and as economies head into eth winter season.  

Activity in the United States was improving, LVMH and Tiffany said. But that trend needs to continue because consumer spending is still below where it was in January.

(Adapted from CNN.com)



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