After years of global growth, the luxury industry is facing a new foe: “underconsumption”. On TikTok #underconsumptioncore emerges as a trending topic, as the next generation of potential shoppers swap tips on how to look good while buying and spending less. The entire sector is struggling as consumers wince at luxury prices, and are left bemused by the rapid turnaround of designers.
Last week, shares in Kering, owner of luxury labels including Gucci, Balenciaga, Yves Saint Laurent and Alexander McQueen, hit a seven-year low after reporting that operating income in the second half of the year would be down 30% after a 42% drop in the first half.
LVMH, the French luxury behemoth, later confirmed worries about stalling demand even among brands with wealthier client bases that don’t typically chase younger, less affluent shoppers, when the company missed its sales estimates.
Even LVMH’s champagne sales are in decline. The company’s chief financial officer, Jean-Jacques Guiony, said it could be that the current global climate “doesn’t lead people to cheer up and to open bottles of champagne”. In the process, the LVMH chairman Bernard Arnault lost $19.2bn or 9% of his net worth, according to the Bloomberg Billionaires Index, slipping behind Tesla’s Elon Musk and and Jeff Bezos.
Only brands catering to the wealthiest of wealthy consumers seem to be weathering the shift. Hermes reported a 13% increase in sales. Burberry, by contrast, issued a second profit warning in a year, replaced its CEO and saw shares fall to 2010 levels.