Cannot return to normal before the beginning of 2021
Editor’s Note: This article comes from WeChat public account “LADYMAX” (ID: lmfashionnews) < / a>, author: Drizzie.
Some analysts point out that the luxury goods business will not return to normal before the beginning of 2021, but brands cannot wait.
Any action in the Chinese market will affect the global market structure of luxury goods.
According to the fashion business news, the European Investment Bank recently predicted that with the spread of the new crown pneumonia epidemic, global luxury sales will decline by an average of 8% in the first quarter, of which the Chinese market, which is regarded as the core driver, will plummet 40 %. Dow Jones analyst Pierre Brian pointed out in a report earlier that the performance of luxury brands that have put their eggs in the basket in China may have declined sharply in recent years.
Luxury companies including Burberry, Ralph Lauren, Coach’s parent company Tapestry Group and Michael Kors parent company Capri Group have issued notice of the impact of the epidemic, temporarily closing nearly 50% of mainland China stores, and sales losses may reach tens of millions US dollars. Dior, Hermès and other luxury brands located in Taikoohui, Guangzhou have recently updated their business hours to 12 noon to 6 pm daily, which is 3 hours shorter than the previous 11 am to 8 pm.
A survey of 28 CEOs and CFOs by Altagamma, an association of Italian luxury goods companies, and the Boston Consulting Group and investment company Bernstein, estimates that this year’s sales in the industry may lose 30 billion euros to 40 billion euros to 309 billion euros. This means that industry revenue will fall by about 15% and losses will be about 10 billion euros.
The survey also estimates that as many as 10 to 15 million products originally scheduled to ship to China may not be sold, forcing the company to transfer products to other regional markets. The luxury down brand Moncler said in a recent conference call with investors that the company has transferred products intended for Greater China to markets such as Europe. Analyst Bryan Garnier said Moncler Store sales in mainland China fell by 80%.
Some analysts believe that once the situation returns to normal, certain categories such as watches and handbags may make up for most of the business losses. However, due to changes in weather, brands such as Moncler that sell seasonal single products may permanently miss seasonal sales and need to make room for new season products.
However, after the weekend, luxury companies need to worry more than just the Chinese market.
The surge in the number of coronavirus cases outside China has heightened concerns about a long-term slowdown in the global economy. Global investors quickly fled the stock market and flooded into safe-haven assets, including government bonds and gold. Worries are disrupting the global economy.
Although the US stock market has remained resilient since the beginning of the year, the Dow Jones Index suddenly fell more than 1,000 points yesterday, the largest point and percentage decline since February 2018. The S & P 500 index fell 3.3%, its biggest drop in two years. With Monday’s decline, both the S & P 500 and Dow Jones Indexes erased all of their gains in 2020, with heavy losses for travel, medical insurance and technology stocks.
The situation in Italy, Iran and South Korea is raising global concerns. Among them, Italy is the most affected country outside Asia. The ongoing Milan Fashion Week was the first to be hit. In addition to the collective absence of Chinese buyers, media and bloggers during Fashion Week, two Giorgio Armani two 2020 autumn and winter live shows were temporarily cancelled and changed to no-show shows. The Milan Opera House La Scala cancelled the show, and the Venice Carnival, which was scheduled to end on Tuesday, was also stopped early.
Affected by this, the Italian FTSE MIB index expanded its decline to 4.8% on Monday, the largest intraday decline since June 2016, mainly due to the accelerated global spread of the new crown pneumonia virus, which may lead to the impact of the economic recession. Italian luxury brand stocks including Tod’s, Salvatore Ferragamo, and others fell sharply by 5.63%, 10.76%, and 9.37%, with market capitalizations of 8.8 billion, 1.04 billion, and 2.4 billion euros. Moncler, a highly sought after capital market, has fallen 12.9% this year.
French Finance Minister Lemer said in an interview on G20 on Sunday that the outbreak of a new coronavirus has impacted the French tourism industry. Since this year, the number of tourists has dropped by 30% to 40% than expected, which will affect the French economy. Significant impact. France is one of the countries with the most tourists in the world. According to the statistics of the French Ministry of European and Foreign Affairs, in 2018, a total of 89.4 million tourists went to France, and the tourism industry accounted for nearly 8% of France’s GDP. Lemer added that France receives about 2.7 million mainland Chinese tourists each year, but the situation will change significantly in 2020.
The drop in Chinese tourists directlyImpacted tourism consumption in the European market. What is even more worrying is that as the situation in Europe, Japan and South Korea is getting worse, domestic consumption in these markets has also begun to be affected. It will take time for the inflection point of consumption to return to normal. In the face of a series of uncertainties, it is currently difficult to assess what the upcoming Paris Fashion Week will face.
According to the monitoring of fashion business news, LVMH’s stock price fell 5.53% yesterday and this year it has fallen 11.8%. Kering Group plunged 6.04% yesterday and has fallen 14.5% this year. Hermès fell 3.56% yesterday and is down 3.39% this year. Richemont Group fell 2.88% yesterday and is down 11% this year.
But there are also some signs that passion for luxury goods consumption has not been completely suppressed. According to the Hangzhou Net News, Hangzhou Tower Shopping City, which was closed due to the new crown pneumonia epidemic, has reopened last week. Although the business day was shortened from 12 noon to 5 pm, the total store sales exceeded 11 million yuan in 5 hours, exceeding In the same period last year, the company opened 12-hour sales throughout the day from 10 am to 10 pm. Among them, the most popular shops include fast fashion brand Zara, some beauty skin care brands and restaurants.
In the latest report on the impact of the new crown pneumonia epidemic on the global economy, Bain & Co. believes that optional consumption areas including clothing, cosmetics, luxury goods, etc. may rebound rapidly due to retaliatory consumption after the citizen ’s travel resumes, It also emphasizes that in order to better cope with the impact of the epidemic, it is recommended that companies stop waiting and wait and take immediate action at the moment, formulate goals and plans during and after the epidemic, and implement them quickly.
Under the premise that the outbreak period may continue to be extended, the luxury goods business may not return to normal before the beginning of 2021. However, some luxury brands will not sit still and accelerate the deployment of online markets and digital innovation.
Under a large-scale indiscriminate crisis, the “immunity” of different individuals determines the final result. According to the exclusive data of WeChat public account LADYMAX, the Chinese market of Louis Vuitton still achieved rapid growth, and online channel sales during Valentine’s Day this year were double that of the same period last year. When many brands gave up the first quarter, Louis Vuitton’s performance data gave the luxury industry a reassurance. According to the brand, during the epidemic, the performance can be guaranteed mainly due to the rapid response of the brand and the omni-channel linkage.
More importantly, if the upcoming global test is not limited to the Chinese market, luxury brands will also need to replicate their more pioneering digital strategies in the Chinese market in the European headquarters to make up for sales losses.
The luxury industry executives interviewed by Altagamma are still optimistic about the long-term prospects of the industry, and most expect to rebound next year and meet their sales targets before the outbreak.