The luxury market is facing persistent challenges, with signs of a slowdown evident across key regions due to macroeconomic uncertainties. Burberry, the British luxury brand known for its trench coats, acknowledged this trend on Monday, highlighting a decline in consumer spending.
Burberry’s struggles are not isolated; LVMH, the owner of Louis Vuitton, reported a decline in first-quarter sales earlier this year. Similarly, Kering, which owns Gucci, has warned of a significant drop in first-half operating profits, primarily due to sluggish demand in China.
The economic downturn in China, exacerbated by a prolonged property crisis and weak consumer sentiment, is significantly impacting global luxury spending. Chinese consumers previously accounted for nearly 20% of global luxury sales, but this figure has declined from the peak levels of 2021, according to Bain & Company.
Luxury brands are also contending with high fixed costs, particularly the expensive rents associated with flagship stores. In response to these pressures, Burberry announced the departure of CEO Jonathan Akeroyd, who held the position for two years. He will be succeeded by Joshua Schulman, former CEO of Coach, owned by Tapestry. The company anticipates an operating loss for the first half of this year and has suspended dividend payments as full-year profits are expected to fall short of consensus estimates.
