The last two years should have been horrible for the 283 billion euro ($428 billion Singaporean) luxury goods sector. Many of the usual triggers for high discretionary spending – confidence in the economy, international travel, social occasions – have been in short supply. Stores closed, reopened and closed again; fashion shows and other key marketing events have been removed or moved online; supply chains have been tightened; the prices of materials and labor have increased.
And yet global sales of luxury goods have recovered to pre-pandemic levels in 2021, analysts say, as stocks in the sector – up 40% year-on-year – have outperformed the broader stock market. for the sixth consecutive year. (Earnings also rebounded on rent renegotiations and other cost savings early in the pandemic.)
Fiscal stimulus, a strong stock market and rising household savings have boosted spending in the United States, and with fewer opportunities to eat or travel, many consumers have channeled what they would have spent in luxury services to luxury products.
But the recovery has not been even. It was the big, conglomerate-backed brands with their vast geographic reach that won while the smaller players struggled, sold out or went bankrupt. And while luxury spending has returned to 2019 levels in the US, China and Korea, sales in Europe and Japan remain depressed (due to a lack of tourists for the former and slow adoption vaccines for the second).
With the spread of the Omicron variant, further lockdowns in Europe and economic headwinds in China, the picture for 2022 is cloudier than a year ago. Here’s what to watch out for.