Luxury Goods Losing Their Appeal? Gucci’s Revenue Drops Significantly!

This year, the luxury goods market has not had an easy time.

Recently, several luxury brands such as Hermès, LVMH, and Kering Group released their half-year performance reports. The reports show that most companies have experienced a decline in performance, with many mentioning underperformance in the Chinese market.

On July 23, LVMH reported that its revenue for the first half of 2024 was €41.677 billion, a 1% year-on-year decrease, with net profit at €7.267 billion, down 14%. LVMH attributed this decline to the negative impact of exchange rate fluctuations, particularly affecting its fashion and leather goods division.

These numbers were lower than expected, as the market had anticipated LVMH's revenue to slightly increase to €42.22 billion year-on-year.

Within LVMH, the fashion and leather goods division, which includes brands like Louis Vuitton, Dior, Celine, and Fendi, was the largest revenue generator. For the first half of the year, the division's revenue was €20.77 billion, a 2% decrease, missing analysts' forecast of €21.02 billion.

By region, the Asian market, including China, accounted for 30% of LVMH's revenue, totaling approximately €12.503 billion. In the first half of 2023, this region contributed 34% of revenue. From April to June 2024, LVMH’s sales in Asia (excluding Japan) dropped by 14%, expanding from a 6% decline in the first quarter.

LVMH has always regarded China as a key strategic market. In 2023, revenue in the Asian market grew by 12% year-on-year, reaching €26.707 billion.

During a 2024 first-half earnings call, LVMH CFO Jean-Jacques Guiony remarked that brands that reduced their investments in China over the past few quarters are now paying the price. He reiterated that China remains an essential market for the company.

Gucci parent company, Kering Group, faced similar challenges. On July 24, Kering reported a 2024 half-year revenue of €9.018 billion, an 11% year-on-year decrease, with net profit plunging by 50.81% to €878 million.

Most brands saw declining revenue. Gucci's revenue fell by 20% to €4.085 billion, YSL's revenue dropped by 9% to €1.441 billion, and Bottega Veneta's revenue remained flat at €836 million. Other brands, including Balenciaga and Alexander McQueen, saw a 7% decrease in revenue. However, Kering's eyewear business saw a 23% increase in revenue, reaching €1.067 billion.

Kering noted that growth in the Chinese market has significantly slowed. Its Asia-Pacific revenue dropped by 22% year-on-year to €2.897 billion. YSL’s revenue in the region decreased by 19%, primarily due to reduced foot traffic in physical stores, especially in China.

Burberry also reported a 22% year-on-year revenue decline for Q1 of FY2025 (April-June 2024), with mainland China’s revenue down by 21%.

Similarly, Cartier’s parent company, Richemont, reported Q1 FY2025 revenue of €5.268 billion, a 1% increase at constant exchange rates, but the company saw a 27% year-on-year revenue decline in China.

However, Hermès was an exception. On July 25, Hermès reported H1 2024 revenue of €7.5 billion, a 15% year-on-year increase at constant exchange rates, with recurring operating income at €3.1 billion and net profit at €2.4 billion.

Hermès noted that Q2 2024 sales reached €3.7 billion, a 13% year-on-year increase at constant exchange rates. Despite a challenging environment, all regions showed strong momentum except for Asia, where foot traffic in Greater China had shifted.

In Hermès’ report, Greater China’s performance was disclosed within the Asia-Pacific region. H1 2024 revenue in Asia-Pacific totaled €3.521 billion, a 7% year-on-year increase.

"Chinese customers are very sophisticated and are now looking for high-quality products rather than just logo-branded items. This ongoing shift benefits us," said Hermès Executive Chairman Axel Dumas during an earnings call.

For Wang Can, who works in luxury goods resale, the Chinese market has been noticeably impacted.

"Previously, we could sell a bag right after purchasing it, but this year, it takes over two months to move it," Wang told the reporter. He added that one particular bag gave him headaches for months, eventually taking half a year to sell.

When the reporter inquired about the current price of reselling bags, Wang explained that Prada bags, regardless of trendiness, could now only fetch a few thousand yuan.

"If the condition is good, the price can be slightly higher. Last year, Prada’s resale prices were stronger," Wang explained. The weakening of Prada's resale value and the current market environment are both factors behind this decline.

"Now, with longer inventory times, our capital costs have increased, so we can only offer lower buyback prices. Additionally, expensive bags are harder to sell now, so we've had to lower our selling prices," Wang said.

Another luxury resale shop employee, Yang Zhen, noted that since the start of this year, luxury bag prices have been dropping. He found that selling at the old prices is no longer viable, and the only way to move inventory is to reduce prices. His peers have also complained about how difficult it is to sell stock.

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We are a Chinese enterprise specializing in the retail of luxury handbags. Our mission is to provide high-quality products at affordable prices, ensuring our customers can enjoy the elegance of luxury without the heavy price tag. With a focus on craftsmanship and customer satisfaction, we offer a diverse range of luxury bags that cater to all tastes and preferences.

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