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Gucci, Louis Vuitton and Burberry stumble in Asia and fail to catch up in Europe and the United States

Most Asian countries, especially China, have ceased to be the boon that European multinationals in the luxury sector enjoy. Names like Louis Vuitton, Gucci and Burberry are no longer riding the wave of a market where consumers would embrace high-end brands if their purchasing power allowed it. This decline not only has an impact on the bottom lines of these business giants, but is also seen at the local level, as it will result in layoffs.

This cut is already being made by Louis Vuitton Moët Hennessy (LVMH) with a 10% cut in jobs at Sephora in China, a brand that employs 4,000 people. The cosmetics chain has nearly 300 locations across the country and is not meeting the growth expectations that the French company had hoped to achieve. “In response to a challenging market environment and to ensure our future growth in China, Sephora is streamlining its organizational structure to ensure that we have adequate capabilities for long-term sustainable growth,” the company explained to Bloomberg.

Behind this decision lies, above all, a Chinese economy that has slowed down. In the second quarter of the year, the gross domestic product of the Asian giant increased by 0.7%, according to data published by the National Bureau of Statistics of China, while in the first quarter GDP growth reached 1.6%.

LVMH speaks of a “difficult” environment, without specifying countries, which is already reflected in its results. The multinational controlled by billionaire Bernard Arnault, the richest man in the world according to Forbes, has brands such as Dior, Kenzo and Loewe under its umbrella. Between January and June, its profit fell by 14% – although it reached 7.267 million euros – and indicates a drop in its revenues in Asia as a whole (excluding Japan) of more than 12%. In the first three months of the year, this turnover has already suffered, but to a lesser extent, by 6%.

LVMH speaks of a “geopolitical and economic environment that remains uncertain”, without however specifying it by the markets. As an example of what Asia weighs on the company, it brought in more than 12.3 billion euros in the first half, while in Europe as a whole it was about to reach 10 billion. In Asia, it exceeds 2,000 stores, while on the old continent, it has nearly 1,230 stores.

Stock market crash

Something very similar is happening to the owner of Gucci. The Kering group, which also owns other brands such as Balenciaga or Saint Laurent, has not raised its head on the stock market since last March. In almost six months, its market capitalization has fallen by almost 40%. It has therefore already told investors that Gucci is not performing as expected and continues not to do so.

For the first half as a whole, Kering’s sales fell 11%, but Gucci’s – which contributes two-thirds of revenue – fell 20%, as detailed in its results presentation. And, once again, the headwinds are coming from the East, as the Asia-Pacific region has seen a “continued market decline” that is affecting all countries in the region except Japan.

The company controlled by François-Henri Pinault has more stores in Asia (over 700) than in the European and North American markets, where it reaches just over 300 each. In the latter two regions, it has also decreased, but to a lesser extent, by 7% and 9% respectively. “The number of tourists from Asia has decreased and has not been compensated by sales made to local customers,” it justifies in its half-yearly report, regarding Western markets. On the other hand, it recognizes that there are more tourists in Japan and that they increase revenues, because they take advantage of exchange rates.

It is the cooling of China that, on a Spanish scale, explains why Puig, owner of brands such as Carolina Herrera, Jean Paul Gaultier and Charlotte Tilbury, and listed on the stock exchange on May 3, closed its first month of trading on the Ibex 35 with a drop of 7.09%, amid doubts that the luxury market is raising worldwide.

Burberry’s Profit Warning

The one that is experiencing an earthquake is Burberry, to the point that it has announced that it could suffer losses and has decided to relieve its main leader, its CEO, who had only held this position for two years. Since this summer, this function has been in the hands of Joshua Schulman, who comes from the same luxury sector, since he has led companies such as Versace or Michael Kors.

The brand famous for its trench coats and plaid prints closed the first quarter of its 2025 financial year with a 22% drop in sales. And it’s worse in Asia, because it turns out that the collapse in South Korea was 36%, in the countries of the southeast of the continent, 38%; and in China, 21%. As in the other cases, this only saves Japan, which rebounds by 6%. And, again, this does not guarantee that these declines are offset by the evolution in the United States and Europe.

“If the current trend continues, we expect to record operating losses in our second quarter,” he acknowledged a few weeks ago when presenting his results. “Given current progress,” the company has decided to suspend the dividend and assumes that it is “taking measures to balance the supply.” He is also looking for “efficiency gains” and “savings,” although he does not give further details on whether this will lead to losses.

Like the owner of Gucci, Burberry is also suffering on the stock market. Its value is almost 2.5 billion pounds (about 3 billion euros), almost half of what it was at the beginning of the year.

Other companies are seeing how their sales in the United States and Europe hold up and offset what’s happening in Asia. That’s what’s happening with Richemont, the company behind the Cartier jewelry brand. Its revenue in Europe rose 5% in the first three months of its fiscal year, through June; and its revenue in the U.S. market as a whole rose 10%. That offset an 18% decline in Asia and kept its revenue flat year-on-year. In concrete terms, it billed more than €5.2 billion in three months.

Richemont is focusing its decline on China, Macau and Hong Kong. “The decline reflects the low level of consumer confidence,” he justifies. Something that contrasts with Europe, where the jewelry giant does not see dark clouds threatening the economy. “Local demand is resilient,” he concludes about its watch and jewelry business in Europe.

Source

Jeffrey Roundtree
Jeffrey Roundtree
I am a professional article writer and a proud father of three daughters and five sons. My passion for the internet fuels my deep interest in publishing engaging articles that resonate with readers everywhere.
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