What's Happening?
Luxury brands such as LVMH and Kering are under pressure to demonstrate a sustained recovery during the upcoming holiday season. Despite a recent surge in luxury stocks, driven partly by a broader equity
market rally, the sector is emerging from two years of declining sales. Third-quarter results showed improvement in China, a key growth market, and new creative directors have boosted investor sentiment. However, the fourth quarter presents risks, with new styles not hitting stores until next year and uncertainties in China's economic recovery. The holiday season is crucial, accounting for up to 30% of annual sales for some brands.
Why It's Important?
The luxury sector's performance during the holiday season could significantly impact U.S. market reliance for brands like LVMH, Zegna, Kering, and Richemont. A successful season may bolster confidence in the sector's recovery, while failure could lead to further restructuring and CEO replacements, as seen with brands heavily exposed to China. The U.S. market remains vital, with brands expanding their presence and opening new stores. However, recent U.S. credit card data indicates a decline in luxury spending, raising concerns about consumer confidence amid economic uncertainties.
What's Next?
Luxury brands are banking on new creative directions to attract shoppers, with Gucci testing styles from its new creative director ahead of a February runway show. The strategy appears promising, with Gucci showing improved performance compared to peers. Louis Vuitton has launched high-priced refillable makeup products to draw customers. The holiday season will be a critical test for these strategies, with brands hoping to capitalize on consumer interest and mitigate the impact of high prices.
