The mini bling boom since the turn of the year is well and truly over.
On Monday, LVMH reported first-quarter sales that missed expectations. No division generated growth. Each one underwhelmed. The crucial fashion and leather goods unit reported a 5% decline in sales, excluding currency movements, far below the 0.6% slide expected.
The picture could not have been more different in January — the last time the owner of Louis Vuitton and Christian Dior updated the market. There was a surge of optimism in the wake of Donald Trump’s election win, which sent stock markets and cryptocurrencies surging.
But with the president embarking on a trade war and markets slumping amid fears of recession, the American recovery is now in tatters. Analysts at Bernstein expect global luxury goods sales to decline by 2% this year, compared with their previous estimate of 5% growth. Given the trade tensions, it’s not yet clear whether Chinese shoppers will be able to compensate for any pullback in the US.
For long-term investors, though, there are ways to make sense of the turmoil.
LVMH said the main reason for the decline in the first quarter was the comparison with a year ago, when Chinese consumers flocked to Japan to purchase luxury goods. They are still spending at home and making trips to Japan to stock up, but the comparison with last year’s spectacular growth dragged down the performance.
In the US, demand for fashion and leather goods as well as watches and jewelry has held up so far. There was, however, a slowdown at beauty retailer Sephora, which also experienced strong growth in the year earlier. It’s possible that color cosmetics and cognac may have been hurt by tariffs, given that Sephora and wine and spirits appeal to less wealthy customers more likely to feel the pinch.
Perhaps it’s early days and there will be a more pronounced effect on demand for Louis Vuitton’s Takashi Murakami handbags or Tiffany Hardwear pendants, as rich Americans digest their stock losses and take fright at the uncertainty. But it’s worth remembering that the US luxury market has been transformed over the past five years. European brands have expanded beyond traditional enclaves such as New York and Los Angeles. Locations including Austin, Atlanta and Charlotte have emerged as luxury destinations. Once seen as elitist, luxury is now truly entrenched in popular culture.
That doesn’t mean all luxury houses are created equal. LVMH should be one of the most resilient, given that Louis Vuitton is the world’s biggest luxury brand, with a margin last year of about 50% — ahead of Hermes’s 40%.
But while those Murakami bags and scarves helped this division’s sales get ahead of the average for fashion and leather goods, Dior underperformed, with sales declining as much as 10%, according to estimates from analysts at Citigroup. LVMH is also grappling with creative change at some of its other brands, including strong performers Celine and Loewe, and is in the midst of a generational transition, as Chief Executive Officer Bernard Arnault hands over to his children, creating management upheaval too.
LVMH shares fell as much as 8% on Tuesday, their biggest fall since the start of the pandemic, and to their lowest level since November 2020. They trade on a forward price-to-earnings ratio of about 18 times, well below their 10-year average of 23, according to analysts at Stifel.
Of course, even amid the current instability, LVMH has a strong balance sheet. It’s always possible that Arnault uses the dislocation to strike where LVMH still has white space: skincare, watches and jewelry, and hospitality.
Hermes International SCA should be even better placed. Not only does it cater to the super-wealthy rather than the simply comfortable, it has more demand for its iconic bags — led by the Kelly and Birkin — than it can meet. When times are tough, it can simply work through its waiting list.
Hermes also hasn’t pushed up its prices as much as some rivals, giving it more scope to pass on the costs of tariffs to US consumers. Hermes generates only about 43% of its sales from leather goods, but at least this offers a good level of resilience. That explains why Hermes shares have fallen less than rivals. On Tuesday, it surpassed LVMH as the world’s most valuable luxury group. Even Hermes’ forward price-to-earnings ratio, while still a punchy 48 times, is below its five-year average.
Cie Financiere Richemont SA, meanwhile, generates more than half of its sales from jewelry, including Cartier and Van Cleef & Arpels. True, Richemont is grappling with more expensive gold, but like Hermes, it has been relatively restrained in raising pricing. Yet the shares have fallen by more than a quarter since the beginning of March.
In contrast, the tasks faced by luxury brands in turnaround mode, such as Kering SA’s Gucci and Britain’s Burberry Group Plc, now look even more daunting. This isn’t yet fully reflected in their valuations.
If the US enters a recession and Chinese shoppers battered by the trade war cut back too, no luxury group will be completely insulated. For all, the picture remains volatile. But it’s not just diamonds that are forever. So are Hermes handbags, Van Cleef & Arpels bracelets and Moncler coats.
British cycling apparel brand Rapha announced on Monday the appointment of Jodie Harrison to the role of chief brand officer, a newly created role reporting to CEO, Fran Millar.
Jodie Harrison – Courtesy
Harrison has been consulting across brand strategy for Rapha since January, and will now work with the Rapha leadership team to oversee the end-to-end recalibration of its brand position, according to a press release.
The executive joins from Belstaff, where both Millar and Harrison worked together to transform the British fashion brand’s position and performance.
Harrison cut her brand-building teeth in the magazine industry at GQ. After seven years, she joined Mr. Porter, as its founding editorial director. In 2017, she became Soho House’s creative and content director, followed by time in the U.S. at Anthropologie and online fashion website, Moda Operandi. After returning to lead the Soho House membership strategy, Harrison founded her own brand consultancy, Fell & Scar, and then was poached by Millar to join Belstaff.
“Rapha was built on originality and courage, which Jodie brings to everything she does. I’m delighted she will lead the focus on inspiring new and future fans in this next chapter for the brand,” said Millar, who was appointed CEO of Rapha in September.
Rapha is performance wear cycling apparel brand with a history of material and functional innovation, married to a unique style. Since its inception, the brand has forged collaborations with Palace and Patta.
“At 21 years young, Rapha has already achieved an enviable and established heritage. It’s a brand’s brand – recognised globally and genuinely loved – so shepherding it into a new era comes with great responsibility. This is not something I take lightly – there’s a lot of careful work to do,” said Harrison.
“No other brand has defined and redefined cycling like Rapha, transforming the way the world sees the sport. Rapha made cycling relevant, evocative and alluring. As such, our founder Simon Mottram has built the kind of passionate community most brands can only dream of.”
British retail sales volumes fell by the smallest amount since October this month but stores expect conditions to worsen next month, according to a survey on Monday that reflected ongoing concerns about growth and consumer confidence.
Reuters
The Confederation of British Industry‘s monthly gauge of how retail sales compared with a year earlier rose to -8 in April – its highest since October – from -41 in March, which had been the lowest reading since July 2024.
The CBI’s gauge of expected sales for May fell to -33, the lowest in more than a year.
“Annual retail sales volumes fell more slowly in April, but firms remain pessimistic about the outlook due to the impact of Autumn Budget measures, persistently weak consumer sentiment, and global economic uncertainty,” said Martin Sartorius, principal economist at the CBI.
“With no sales recovery on the horizon, firms across the distribution sector want to see the government use every lever available to boost business and household confidence during these challenging times.”
Official data last week showed British retail sales jumped in March, defying forecasts of a fall. But rising household bills and U.S. President Donald Trump‘s trade war have heightened concerns about economic growth and dented consumer sentiment.
The CBI said annual wholesale sales volumes this month fell at the joint-fastest pace since January 2021 at -33, declining from -29 in March, and wholesalers expect the downturn to extend in May.
Saks Global Enterprises is considering raising up to $350 million in debt as well as selling some its real estate assets to shore up its finances as stock-market volatility and China tariffs threaten to slow luxury spending.
Neiman Marcus
The fresh debt would come through a so-called first-in, last-out loan under its existing $1.8 billion revolving credit facility, Chief Executive Officer Marc Metrick said.
“We’re in the early days of the process now but we’re not looking at this being a long process,” Metrick told Bloomberg News in an interview.
Metrick said Saks had between $360 million to $400 million in liquidity, which he considers an “ample amount.” The loan would help Saks shore up its balance sheet, leaving it better prepared to weather a potential pullback in spending from luxury shoppers hit by market volatility and likely price hikes on items imported from China.
The company also told lenders on a call on Monday that it is exploring the sale of some of its real estate assets, according to people familiar with the matter, who asked not to be identified discussing confidential information. A Saks spokesperson declined to comment on the matter.
Saks bonds plunged further on Monday even after the company told creditors earlier in the day that its vendor troubles have eased. It also said inventory is up after it instituted a plan in February to gradually pay suppliers past due balances over the course of more than a year.
The company’s management held the call with creditors after revealing last week that it was considering taking on more debt to boost its coffers.
The bonds, secured notes due in 2029, fell to about 53 cents on the dollar, according to Trace. They have lost almost half of their value since being issued in December.
The company is also focused on integrating Neiman Marcus Group, which it acquired last year, and rolling out plans — still undisclosed — to tap partnerships with new stakeholders including Amazon, Authentic Brands and Salesforce to boost growth.
“We’re looking at a world that is turbulent with a lot of uncertainty,” Metrick said. “We have big plans.”
Metrick said Saks is ahead of schedule on cutting overlapping costs as it integrates Neiman Marcus. The company was targeting $100 million in synergies in its fiscal year that started on Feb. 2 and is now sees that figure reaching $150 million, Metrick said.
The recent market turmoil has caused some volatility in the shopping patterns of Saks’ high-income shoppers, but they haven’t pulled back on spending.
“There have been fits and stops,” Metrick said. “But it’s not been that long for us to really read into how they are actually going to react and behave.” Around 2% of Saks’ shoppers account for around 40% of sales, he added.
Many of those shoppers buy high-end luxury products that are imported from Europe, and Saks is expecting price hikes on those products to be in line with recent years. Prices on luxury goods have jumped by around 10% to 15% annually and the CEO said that Saks expects the impact of tariffs on such products imported from Europe will fall within that range.
More notable price hikes are likely, though, on contemporary apparel, which costs less than high-end luxury items and represents around 20% of sales. Many of those items are sourced in China, Metrick said.
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