Due to industry indicators, LVMH's sales growth in the report was lower than expected, and global luxury stocks fell on Wednesday. The stock price of the world's largest luxury goods group, LVMH, fell by more than 5%, to 650 euros per share, reducing its market cap to 323 billion euros, a cumulative decline of 9% this year. Other luxury goods stocks also fell accordingly, with Hermès and Brunello Cucinelli's stock prices falling by 2.2%, while Gucci's parent company, Kering, fell by 3.7%. Richemont, which owns the Cartier jewelry brand, fell by 2.3%, and Prada fell by 5.5%.

Other luxury goods stocks also fell, with Hermès and Brunello Cucinelli's stock prices falling by 2.2%, while Gucci's parent company, Kering, fell by 3.7%. Richemont, which owns the Cartier jewelry brand, fell by 2.3%, and Prada fell by 5.5%.

The world's largest luxury goods company, LVMH, reported that its revenue growth in the second quarter was only 1%, reaching 20.98 billion euros, slower than the first quarter and lower than the market's generally expected 3% growth. Excluding the non-normal decline during the epidemic, this is the lowest growth rate the company has seen since 2009.

LVMH's fashion and leather goods division, its largest in terms of revenue and profit, grew at a slower rate of 1% in the second quarter, while operating profit fell 6%. The group's first-half operating profit was 10.7 billion euros, lower than analysts' expectations, particularly under pressure from its wine and spirits, watches and jewelry businesses.

Due to the scale of LVMH and its luxury goods covering various fields from watches and bags to travel in its more than 75 subsidiaries, it is considered an industry barometer. Media reports state that in the past year, as the industry slowed down, LVMH was positioned in the middle of the industry, while Kering and Burberry fell into trouble, and high-end brands such as Hermès and Brunello Cucinelli took advantage of their customer base with higher net worth.

Two sides of the same coin: high-end products are sought after, while the middle-class market is weak.

Analysts believe that the luxury goods industry is facing headwinds mainly due to the slowdown of major consumer markets. However, there is a dichotomy in the luxury goods industry. Enterprises that are mainly engaged in high-end products have good momentum, while those that mainly target middle-class consumers face many difficulties.

LVMH indeed has a top customer base and a hot brand, but in the wine and spirits industry, 'champagne demand poses a serious problem.' For middle-class customers, LVMH is trying to reduce engagement ring expenses for its core consumers while increasing sales of its jewelry brand Tiffany.

Therefore, LVMH's overall growth rate lags behind Brunello Cucinelli, which expects sales to grow by 10% this year. In addition, Hermès, which has more expensive product prices, is also doing well. LVMH itself corroborated this, stating that demand for more expensive items, such as designer clothing, better maintains customer demand than its cheapest bags.

In contrast, brands selling to ordinary consumers appear more fragile. Burberry warned last week that it may incur losses in the first half of this year, and will suspend its dividends and separate ways with CEO Jonathan Akeroyd.

Kering is trying to upgrade its flagship brand Gucci to the high-end market, but it seems to be suffering heavy losses. The company announced its financial report on Wednesday, showing that same-store sales fell by 11% in the second quarter, exceeding analysts' expectation of an 8.8% decline. Gucci sales fell by 19%, higher than analysts' expected decline of 15.9%. Operating revenue in the second half of the year is expected to decrease by about 30% year-on-year.

Finally, brand appeal is crucial. Analysis believe that Burberry and Gucci's dilemma is due to their focus on middle-class consumers, and their brand transformation has yet to take effect. Meanwhile, the Cartier and Van Cleef & Arpels jewelry brands owned by Cie Financiere Richemont SA are shining and highly respected.

However, despite these bright spots, all luxury stock gains since January have been wiped out, when LVMH CEO Bernard Arnault said that the industry was returning to normal rather than sharply declining.

Analysis believe that although any meaningful recovery is expected to be delayed until at least 2025, the high-end market should continue to benefit from the growth in global income in the long run. As the most powerful company among them, LVMH should be able to gain more sales when the situation improves.

The middle-class consumer is the majority, and sinking is the way out?

In fact, brands including Burberry and Yves Saint Laurent are taking measures to recapture important middle-class customers by reducing prices.

Analysis believe that although middle-class consumers spend little on designer goods individually, they are still an important customer group of big brands. According to data from Boston Consulting Group, more than half of luxury purchases worldwide are made by approximately 0.33 billion people who spend no more than 2,000 euros, or about $2,180, on expensive handbags, clothing, and jewelry each year.

By contrast, there are about 2.5 million very wealthy customers who spend over 0.02 million euros on designer goods each year, accounting for 10% of the luxury goods sales. Although these customers contribute greatly, most of the growth in the past decade has been driven by so-called "aspirational" shoppers, especially in Asia.

However, the shrinking consumption in the main markets has put pressure on weaker luxury brands. Some brands have raised their prices too high that many middle-class consumers cannot afford. In order to enhance the brand, the new handbags released by Burberry are on average 58% more expensive than the old ones, according to Bernstein's analysis. This strategy has pushed away its traditional customers and failed to compensate from affluent shoppers.

Meanwhile, some brands have quietly lowered their prices to attract shoppers back, breaking the taboo in the luxury goods industry as it sends a wrong signal to the brand about the value of the product. According to Bernstein's data, Burberry has recently reduced the price of its Medium Knight bag by 22%. Since 2022, all bags designed by Burberry's creative director Daniel Lee have decreased in price by an average of 5%. Joshua Schulman, Burberry's new CEO, who previously worked for the affordable luxury brand Coach, wants to make the brand accessible again to its core customers. This means there will be a wider range of entry-level products and perhaps more discounts for existing products.

Yves Saint Laurent, under Kering, has reduced the price of most sizes of its best-selling Loulou bag in American stores. According to Wayback Machine, the small size bag, previously priced at $2950 in January, is now priced at $2650. However, it is still much more expensive than the price of $2050 at the end of 2020. Bernstein analysts say that if luxury brands continue to neglect middle-class shoppers, more affordable brands will fill this gap. In any case, the luxury goods industry needs to rethink its customers and establish connections from the ground up.

行业 Analysts said that if luxury brands continue to neglect middle-class shoppers, more affordable brands will fill this gap. In any case, the luxury goods industry needs to rethink its customers and establish connections from the ground up.

Infrastructure analysts say that if luxury brands continue to neglect middle-class shoppers, more affordable brands will fill this gap. In any case, the luxury goods industry needs to rethink its customers and establish connections from the ground up.