Trading The Luxury Market: Slowdown in 2024?

November 24, 2023 10:33

Christmas is just around the corner, the time for presents is coming. Depending on the budget, consumers will plan their purchases for their loved ones. Those with larger budgets will turn to luxury brands that offer more expensive than average items. The luxury brand market usually gets a boost during the Christmas holidays, with companies strengthening their finance tabs.

But how has the luxury brand market performed in 2023? What luxury brand traders should know or expect? In our article, we will share some valuable insights regarding the luxury brand market performance that you as a trader might find useful when building your strategy.

Trading The Luxury Brand Market: Performance in 2023 

Some analysts suggest that the luxury brand market has followed the path of other markets during 2023, impacted by high interest rates and inflation that eat up consumer budgets and put a strain on spending. Many people across the world struggled to cover their needs as the economic downturn has struck even more wealthy consumers. 2023 is not over yet but there is some data that could shed some light on how the luxury goods market has performed so far.

Bain & Company, a global management consulting firm, published a report showing that the world luxury market could grow by 8.0% this year, a good growth rate taking into consideration the financial environment and its challenges in 2023. It should be noted that although the expansion of the sector in such conditions was positive, it still is a far cry from the 26% growth rate recorded in 2021 and 2022.

According to the survey, “the global luxury market is projected to reach €1.5 trillion in 2023. The key segment, personal luxury goods, has experienced continued growth in 2023 and is projected to reach €362 billion by the end of year, 4% higher than 2022 at current exchange rates.”

However, market analysts are less optimistic for next year. As they suggest, current scenarios indicate a softening of personal luxury goods performance in 2024, coming down to low-to-mid single-digit growth over 2023. The report forecasts that by 2030, “Chinese customers will account for 35-40% of the personal luxury goods market, while Europeans and Americans together will represent 40%.”

LVMH Under-delivers In Q3 2023

On October 11th, LVMH Moët Hennessy Louis Vuitton, commonly known as LVMH, the luxury goods brand giant, announced its financial results for the third quarter of the year which were disappointing. A slowdown in revenue growth (+9% instead of 11% y/o/y) triggered a stock sell-off that led its share price to fall to the lowest level in the last year. As a result, LVMH lost first place in Europe in terms of market valuation to the Danish pharmaceutical Novo Nordisk.

LVMH’s chief financial officer noted in the accompanying report that “After three roaring years, and outstanding years, growth is converging toward numbers that are more in line with historical average.” Company’s officials suggested that “in an uncertain economic and geopolitical environment, the Group is confident in the continuation of its growth.”

Economists at UBS don’t seem to share LVMH executives’ optimism since they announced their decision to downgrade the company’s shares from “buy” to “neutral” on November 21st. The bank’s analysts said that there might be a period where LVMH may not be able to sustain its exceptional growth trajectory, leading to a more defensive position for its stock.

Richemont H2 2023 Profits Fall Short Of Forecast

Compagnie Financière Richemont S.A commonly known as Richemont, another luxury group coming from Switzerland and owner of Cartier, Montblanc, Vacheron Constantin, Van Cleef & Arpels among others, announced its profit results for the first half of 2023 on November 10th.

Richemont’s net profits in the first six months of the year were €1.51bn, short of the €2.17bn forecast, while sales also rose less than anticipated by analysts. Richemont’s shares slid by almost 6% after the report’s release. Richemont’s head, Johann Rupert, noted that “there has been a moderation in demand, which was to be expected, because that’s exactly what the central banks of the world intend. They wanted less demand, and it’s across all asset classes.”

Commenting on Asian markets, Ruper added, “we had predicted that China’s [recovery] will take quite a bit longer than most of the market analysts and even competitors expected. That’s proving to be correct, though we’re starting to see signs when they travel to Hong Kong, Macau, even Japan, that the market is still there, it is just the feelgood factor is not.”

Hermes Withstands Downturn In Q3 2023

Hermès International S.A. is a French luxury design with almost 200 years of history in the market and owner of Crystal Saint-Louis, John Lobb, Le Crin, and J3L brands. Hermes was one of the few large luxury goods groups that managed to deliver a 16% rise when it comes to sales in the third quarter of the year, staying ahead of analysts’ expectations.

Hermes executives told media reporters that “the solid performance in the third quarter reflects the desirability of our collections all over the world, with a sustained momentum in Asia and in the Americas. More than ever, in an uncertain global environment, we are reinforcing our investments and our teams to support growth.”

The company plans to continue investing in Asia, opening new stores to satisfy its customers’ needs as according to the financial results report “the region continued its strong momentum.”

Trading Luxury Market And Risk Management

The luxury brand market is one of the strongest in the world as despite occasional economic downturns, it proves its resilience. Traders that start their journey now may find it tempting to trade CFDs on luxury brand shares. However, as with all other instruments, trading requires knowledge of fundamentals and the right timing when executing a strategy.

Beginner traders should focus on improving their knowledge and learn how to use risk management tools to mitigate risks. Brokers offer educational materials prepared by experienced traders for free including articles, how-to guides and videos, webinars etc., that could help to learn how to build a comprehensive trading strategy. Beginner traders should not stray away from learning how to use risk management tools such as the stop-loss order that could reduce the loss of funds in case markets move against their plans. Strengthening your trading knowledge is the way that you could consider following before embarking on an exciting experience.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.