Inflation-pressured consumers tend to cut back on their luxury purchases.
At least, that’s what PYMNTS Intelligence data has found.
The company reported an 8% year-on-year increase in sales for the three months ending Dec. 31, on Thursday (Jan. 18), reaching $6.1 billion, which exceeded analyst expectations. Shares saw a 10% surge in early trading.
The growth was driven by strong demand in China, Hong Kong, Macau — which grew by 25% — and Japan, which grew by 18%.
Despite challenges in the U.S. market, Richemont experienced a sales uptick, going against the overall slowdown observed by industry peers in the region and helping to balance a decline in Europe.
Richemont’s greater exposure to the higher-priced hard luxury sector protected it from a significant downturn in aspirational and middle-class consumer spending, which hurt luxury sales at other companies.
On the flip side, Burberry issued its second profit warning in the past three months. The British brand attributed its weak financial performance to a decrease in luxury sales during the holiday season.
Burberry anticipates an adjusted operating profit in the range of 410 million pounds to 460 million pounds ($524 million to $588 million) for the fiscal year ending March 30. This forecast is lower than the earlier guidance provided in November, which had indicated a range of 552 million pounds to 668 million pounds ($702 million to $849 million).
“We are continuing to deliver the transition to our new modern British luxury creative expression for Burberry which started appearing in our stores in early autumn,” Jonathan Akeroyd, CEO, said in a Friday (Jan. 12) press release.
The company is said to be dedicated to reaching a revenue target of 4 billion pounds ($5.1 billion)
Another retailer feeling the luxury slowdown blues is Neiman Marcus, which reported a modest decline in holiday sales compared to the prior year. Despite facing challenges in the luxury market and dealing with cautious shoppers, the company expressed satisfaction with the results, considering the impact of promotions in the retail sector on profit margins.
“While we are comfortable with our inventory position currently, we are competing in a retail environment that continues to be highly promotional and continues to impact our gross margins,” Geoffroy van Raemdonck, Neiman Marcus’ CEO, said during the ICR Conference in Orlando, Florida, earlier this month.
While some consumers have pulled back on luxury spending, brands that have doubled down on attracting millennials and Generation Z shoppers have seen the fruits of their labor. Take Hugo Boss for example.
“We ended 2023 on a high note, making it a record year for Hugo Boss,” CEO Daniel Grieder said in a Tuesday (Jan. 16) earnings press release. “The double-digit top and bottom-line improvements in the final quarter are all the more remarkable considering the current challenging global market environment.”
Hugo Boss exceeded expectations in 2023, achieving an 18% growth in full-year sales, amounting to $4.57 billion.
Credit is largely attributed to Grieder, who, after joining Hugo Boss in June 2021 from Tommy Hilfiger, led a transformation at the company. He split it into two brands: Boss, targeting millennials, and Hugo, catering to Gen Z.
His growth strategy, named “Claim Five,” revolves around reinforcing brands, highlighting product quality, taking a leadership role in the digital sphere, achieving balance in omnichannel approaches, and structuring for growth.
For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.