World Luxury Goods Sales to Grow Stronger

Global sales of personal luxury goods will grow by a stronger-than-expected 2-4% at constant exchange rates in 2017, as higher spending in Europe and China outpace weakness in the US and Southeast Asia, a report showed.

In 2017, total revenue in the sector that includes watches, jewelry, clothes, shoes and leather goods will rise to €254 billion-€259 billion ($284 billion-$289.25 billion) from €249 billion in 2016, the study by consultancy group Bain & Co and Italian luxury industry association Altagamma showed, Reuters reported.

The luxury goods sector has suffered in the past couple of years from fewer tourists coming to Europe after a wave of militant attacks on the continent, less business in Hong Kong and slowing demand in China.

In October, Bain had forecast 2017 growth of 1-2% for the luxury sector but the industry managed to grow 4% year-on-year in the first quarter of 2017.

“After a difficult 2016, the first quarter of 2017 brought some relief to the luxury industry. The continuous repatriation of Chinese consumption as well as a positive outlook in Europe both for locals and tourists will help drive overall market growth during the remainder of the year,” said Claudia D’Arpizio, Bain partner and lead author of the study.

Bain does not name specific companies but in the first quarter of 2017 luxury giants LVMH, Kering and Hermes all posted strong results.

Bain partner Federica Levato, another of the authors of the report, told Reuters: “It is a healthier growth than before. So we have revised our market forecast for this year. Some players who are doing well are really outperforming.”

Europe, which is starting to see tourists returning, is expected to be the fastest-growing market for luxury goods this year, with sales seen up 7-9%.

Bright spots were Spain, seen as a relatively safe destination, and Britain, rendered more affordable to tourists after a post-Brexit slump in sterling, while China was also recovering with 6-8% growth, said the report. Bain predicted that sales in the rest of Asia could shrink 2-4% in 2017.

Hong Kong, Macau and Singapore are on the mend but Taiwan and Southeast Asia face a fall in tourist numbers from China and South Korea, while Japan was seen as staying flat.

The US, the largest luxury goods market, is also set to underperform, with a strong dollar and uncertainty about the policies of President Donald Trump expected to create a challenging environment, said the Bain report.