Blog: Leonie BarrieSlowdown hits luxury goods

Leonie Barrie | 28 April 2008

Gucci’s higher than expected fall in first quarter sales is being seen as a first sign that the slowdown in consumer spending has finally hit the luxury sector. The fashion and accessories brand, which is owned by French retailer PPR, last week said like-for-like sales had dropped 3.3% in the quarter.
 
Part of the problem seems to be that Gucci is more exposed to mature markets in the US and Europe which have not only been hit hardest by global economic woes but also by a brake in tourist spending. It has also admitted to some disruptions in its US supply chains.
 
Confirming these trends is the latest Luxury Consumption Index from Unity Marketing, which has dropped to a historic low of 54.4 points after a survey revealed 41% of luxury consumers expect to spend less on luxury in the coming year.

The doldrums in the US luxury market is expected to continue for at least the next six months, with consumers particularly resistant to marketing efforts by luxury firms. Unity Marketing suggests irresistible ‘buy now’ offers could help jump-start businesses – such as special sales or limited time discounts on selected products. 

There is also a bright spot in the home luxury goods arena. Presumably since luxury consumers can't sell their homes, they are investing in enhancing their existing living spaces until the housing market rebounds. 

PPR Q1 revenues up 20% as Gucci sales slow


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