In 2020 third quarter, currently underway, luxury revenues from sales have been decreasing by 10%: not a great accomplishment, better than the performance achieved in the previous six-month period though. Such figures have been provided by UBS financial analysts in a report, subsequently quoted by Business of Fashion. Yet, a few difficulties are still going to hinder the high-end business. Besides the general impact of the pandemic, we must consider the forthcoming effects of the trade war currently engaging China and the United States. Businesses, then, had better be careful not only about Covid-19 consequences, but also about trade war repercussions.
A good result to some extent
In the quarter, which is about to conclude at the end of the month, luxury revenues from sales have been decreasing by 10%, on annual basis, like we said earlier. Compared to the first six-month period of 2020, results are picking up considerably, despite a heavy downturn in international tourism. For example, LVMH earnings have been dropping by 28% (-38% in the second quarter of the year). Kering went down by 30.1% in the six-month period (-43.5% from April to June). Things have been getting worse for other brands, namely Ferragamo, -47%, and Prada, -40%. “Market trends are still rather volatile. On top of that, the downturn in tourism keeps affecting sales – pointed out financial analyst Zuzanna Pusz –. Yet, according to the latest data, supplied by several brands and retailers, we may assume that recovery keeps going up, especially in Asia.
Careful about trade war
The trade war between the USA and China will have some repercussions in the luxury industry. According to Business of Fashion, Gucci, Balmain and Balenciaga will be supposedly some of the brands, among others, most affected by the closure of Tik Tok in the United States. Yet, apparently, even more detrimental and alarming effects are going to concern several brands ruled out from Chinese social WeChat. Coach and Michael Kors might be hit by that. In the scenario depicted by Jason Yu, China’s chief manager of Kantar Worldpanel, US brands will have to cope with an even heavier situation. The Chinese government might decide to retaliate against American companies by focusing measures on technology giants, such as Alibaba, Tencent and JD.com.
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