Luxury goods sales to add sparkle
Bain report shows growth is stronger than expected
Global sales of personal luxury goods will grow by a stronger-than-expected 2 to 4 per cent at constant exchange rates in 2017, as higher spending in Europe and China outpace weakness in the United States and South East Asia, a report showed yesterday.
In 2017, total revenue in the sector that includes watches, jewellery, clothes, shoes and leather goods will rise to between €254 billion (Dh1.04 trillion) and €259bn from €249bn in 2016, the study by the consultancy group Bain & Co and the Italian luxury industry association Altagamma showed.
The luxury goods sector has suffered in the past couple of years from fewer tourists coming to Europe after a wave of militant attacks on the continent, less business in Hong Kong and slowing demand in China.
In October, Bain had forecast 2017 growth of 1 to 2 per cent for the luxury sector, but the industry managed to grow 4 per cent year-on-year in the first quarter of 2017. “After a difficult 2016, the first quarter of 2017 brought some relief to the luxury industry. The continuous repatriation of Chinese consumption as well as a positive outlook in Europe both for locals and tourists will help drive overall market growth during the remainder of the year,” said Claudia D’Arpizio, a Bain partner and the lead author of the study.
Bain does not name specific companies but in the first quarter of 2017 the luxury majors LVMH, Kering and Hermes all posted strong results.
“It’s a healthier growth than before,” said Federica Levato, also a Bain partner and another of the report authors. “So we have revised our market forecast for this year. Some players who are doing well are really outperforming.”
Europe, which is starting to see tourists returning, is expected to be the fastest-growing market for luxury goods this year, with sales up by 7 to 9 per cent.
Mainland China was recovering with 6 to 8 per cent growth, said the report. Bain predicted that sales in the rest of Asia could shrink by 2 to 4 per cent in 2017. Hong Kong, Macau and Singapore are on the mend but Taiwan and South East Asia face a fall in tourist numbers from China and South Korea, while Japan was seen as staying flat.
The US, the largest luxury goods market, is also set to underperform, with a strong dollar and uncertainty about the policies of the US president, Donald Trump, expected to create a challenging environment.
In coming years, the luxury market is set to keep expanding at an average annual rate of 3 to 4 per cent to reach €280bn to €290bn in sales by 2020, driven by a growing Chinese middle class and a recovery in more mature markets.
Higher spending in Europe and China outpaces weakness in the US and South East Asia