I read a WSJ article this morning about how well the luxury industry is doing – how it has more than recovered from the devastating economic recession plaguing the rest of the world. And this isn’t news – I see an article like this every couple days – luxury companies reporting higher-than-expected quarterly results, sales are up, new advertising campaigns are paying off, etc. etc.
The luxury industry is either completely deluding us or they are brilliant. Yes, before the recession, the luxury market had many consumers who were playing well above their income level, aided by easy credit and a culture of unchecked spending. So I can imagine that the recession brought a sharp focus to the real customer for the luxury market – truly high net worth individuals, whose income is largely insensitive to a recession. So perhaps the luxury industry has done what I wish other companies had done earlier – reset market expectations immediately and at a much lower level, so that growth is possible from the new baseline.
The other factor cited in the luxury market rebound is the Chinese market. Yes, I get it, but it still makes me a bit nervous to pin recovery on a single market, even one as large as China. For one thing, many of these manufacturers are also challenged by increasing labor and material costs coming out of China. In fact, one really funds the other – increased sales for Chinese manufacturers means increased wealth, which means there is a market for luxury goods.
So, although I’ve heard loads about increased sales – sales that improve dramatically every quarter – I’m not hearing that much about profitability. Will anyone report on this?Gleam Returns to Luxury Goods Sales