The Long View by Vogue Business: The big takeaways from luxury’s first half

A weak euro is helpful for luxury brands manufacturing in Europe and selling elsewhere, notes Adam Cochrane, Deutsche Bank Research retail and luxury equity research analyst. “You have scope for margin expansion, particularly if you are already increasing your prices to cover the cost of raw materials and freight. The manufacturing and labour costs are largely in euros. It’s actually a good position.”

In response to the war in Ukraine, luxury brands have kept stores in Russia closed during most of the first half. Many retailers, including Nike, H&M and LVMH-owned Sephora, are shutting down operations in the Russian market entirely. Luxury brands are holding back from this step for now. “We keep our business in a frozen state, in a wait-and-see attitude,” says LVMH’s Guiony.


How will the industry navigate the macro environment during the second half? Rambourg highlights plenty of uncertainties about China. “Will it be a stabilisation, a V-shaped rebound, or a muted recovery? It will be very difficult to assess because things are very volatile.”

He also emphasises a “growing disconnect between macro pressures and recruitment potential in the US — the reality of a sector where demand is still very strong.” A key issue for the second half is the likely speed of deceleration of sales in Europe and America in the event of recession.

For the second-half outlook, investors may remain anxious about the possibility of recession, but analysts are more relaxed. Mario Ortelli, managing director of luxury advisory firm Ortelli & Co, says: “In a recession, luxury customers are the last ones in, the first ones out.” Cochrane of Deutsche Bank Research forecasts overall growth decelerating from 15 to 20 per cent in the first half to around 10 per cent in the second half. He says: “Despite an economic slowdown, I don’t think there’s going to be a huge luxury slowdown.”

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