Luxury brands blame slowdown on China's gifting crackdown
Luxury brands feel the pinch as the mainland reins in gift-giving to curb corruption, writes Abid Rahman
The normally upbeat world of luxury goods, buoyed by Chinese demand, has been a little more sober and serious in recent months as slowing earnings at fashion houses and watch ateliers make as many headlines as their latest collections.
Pessimists felt slightly vindicated late last year when Burberry shocked the markets halfway into the financial year with news that it expected 2012 sales and profits to slow and come in below expectations.
Hermès also gave everyone the jitters when it announced that its first-quarter growth in 2013 was the lowest since 2009, the height of the recession. The company's 10.3 per cent sales growth for the first three months of this year, driven in part by the popularity of Birkin bags in the mainland, was unexpected and it only partially masked the 5 per cent sales decline in its watch division.
The biggest luxury conglomerates, from LVMH to Kering (which owns labels such as Gucci and Balenciaga), Richemont and the Swatch Group (which owns Omega and Breguet, among others) all reported significant slowdowns.
The Federation of the Swiss Watch Industry (FH) has posted rosy headlines for years, and its industry report for 2012 was no different - Swiss watch sales grew 11 per cent overall. A closer look at the data, however, reveals some growing problems and a significant slowdown in two of the largest markets.
Hong Kong, the world's biggest export market for Swiss watches, was up only 7 per cent in 2012 and sales in the No 3 market - the mainland - rose an anaemic 1 per cent.