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Will the luxury goods market keep up strong growth in 2022?

By Jenni Reid

07:28, 9 December 2021

A Louis Vuitton store in a Dubai mall
Strong spending in the Middle East have helped drive recovery in the luxury goods market in 2021 – Photo: Alamy

The luxury goods market has seen a stunning rebound in 2021. 

Consultancy firm Bain & Co released its annual study of the worldwide luxury markets last month, which estimated an overall growth of 13-15% over the year 2020 – when the sector was hit by the sudden closure of stores, the halting of international travel and economic uncertainty during the first months of the pandemic. 

The study also provided insights into where high-end spending went, showing a shift to goods – which were above their 2019 level – over experiences, which have so far been below it but have shown some improvement through the year. 

While the luxury cruise market was unsurprisingly 80% smaller than its 2019 level and even down 40% in the disastrous 2020, hospitality, fine dining and private jet travel made a recovery year-on-year. 

High-quality home wear, fine wines and luxury cars were all above their 2019 level as well as above 2020. The most significant growth was seen in personal luxury goods, the €283bn ($318bn) market, which was up 29% on-year. 

Luxury drivers

“The revived luxury market has been powered by the resumption of local consumption, the dual engine of China and the US and consistent strength of the online channel,” said Claudia D’Arpizio and Federica Levato, authors of the Bain report. 

In China, the market size has doubled since 2019, they note, while in the US a “new map of luxury” has emerged along with the increased importance of secondary cities and suburban areas. 

Dubai and Saudi have led strong growth in the Middle East, though Europe, Japan and the rest of Asia have seen a weaker return to luxury spending, which D’Arpizio and Levato say will rely on the full resumption of international travel. 

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Andrew Shirley, who edits the consultancy Knight Frank’s annual wealth report and compiles its Luxury Investment Index, told that it had been a “really, really strong year” for the so-called investments of passion he tracks, from art and cars to watches and whiskey. 

“The pandemic has focused people’s minds on luxury spending, particularly as investments, as they spent more time at home researching. The breadth of people collecting has widened, with younger people getting more involved.

“Major auction houses have been given a push to bring themselves into the 20th century with more digital offerings, with the definition of luxury art expanding to include non-fungible tokens (NFTs), which have been selling for millions through Sotheby’s and Christie’s.”

Both these trends are reflected in the Bain report, which says Millennials and Generation Z “continue to drive growth and together are set to make up 70% of the market by 2025,” and estimates a 27% growth in online luxury sales from 2020 to 2021 following a 50% jump the year before. 

This demographic may also be driving the rise in the €33bn secondhand luxury market, which has grown by 65% between 2017 and 2021 versus 12% for firsthand goods.

Share boost 

While high revenue growth isn’t always the most important metric for luxury brands, which rely on consistent, strong operating margins above their competitors, many have reported soaring sales this year, and their share prices have shot up as a result. 

The global leader, France’s LVMH (MC) – named for its brands Louis Vuitton, Moët and Hennessy – is up 40% this year. The company’s revenue increased 46% in the first nine months of 2021. 

British bagmaker Mulberry (MUL) is up more than 50%; France’s ​​Hermès (RMS) is up nearly 80%, and it has been described as “the year” of its famous Birkin bag as sales have boomed. Luxury group Kering is up 24%, Switzerland’s Richemont is up 77%, and over in the US, high-end furniture store Restoration Hardware (RH) is up 30%. 

The S&P Global Luxury Index, comprising 80 of the largest publicly-traded companies making or selling luxury goods and services, has provided around a 20% return in the year to date. 

Will growth continue? 

Despite some potential headwinds, there is a general optimism among analysts for continued growth in the luxury market. 


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After LVMH’s strong nine-month update, Bernstein analyst Luca Solca wrote in a note that as the “bellwether of the luxury goods industry” it would “prompt upward earnings revisions for this year and next, and set the sector on an even keel.”

J P Morgan’s chief US economist Michael Feroli forecasts elevated consumption in 2022 due to $2.5tn in “excess savings” versus before the pandemic, with consumer spending up 3.1%; though Solca told increased US and also European spending would eventually “normalise”, it was just not clear how fast that would be.

Russ Mould, investment director at AJ Bell, commented: “The real upside to luxury goods sales can come from the aspirational buyer, those whose wealth has received a cyclical boost, say from stock markets or bonuses as the economy turns up, as well as well-heeled tourists.  

“An ongoing economic upturn, and the return of international travel, could therefore both be a further boost to sales of luxury goods, especially in Europe and Asia.” 

Economic forecasts

Of course, that relies on an ongoing economic recovery actually manifesting, which has to contend with soaring energy prices and inflation, supply chain issues and not the least – the Omicron variant of coronavirus, which is still causing concern and making countries like the UK reinstate advice to work from home.

Those supply issues, which are causing headaches for businesses around the world, could also cause inventory issues for some. 

But Knight Frank’s Andrew Shirley says he is not forecasting a drop in spending on the luxury items he tracks, even amid inflation and likely interest rate hikes next year. 

“No one is predicting very sharp rate rises, so this wouldn’t hit the spending power of high-net-worth individuals, and current growth seems sustainable.”

China crackdown

Some also believe a pledge by the Chinese government to curb “excessive incomes” and extravagant shows of wealth will have some impact on spending in the coming years. 

Bernstein’s Luca Solca said that beyond policy, Chinese macro-economic developments may have an impact.

“Further softening with no government or central bank intervention will eventually dampen Chinese luxury spend growth,” he told 

Loyalty test 

Kathleen Brooks, the founder of financial consultancy Minerva Analysis, called the conditions for luxury goods in 2022 “fairly sanguine” but identified a different risk from China.  

 “The 1.4 billion consumers in China are expected to spend nearly half a billion dollars in 2022 on clothes and shoes alone,” Brooks said. 

“We think that western brands could lose out to local brands that are developing a large home following. Some foreign firms are considering moving their production out of China, which may not sit well with the new nationalistic fervour in the country. 

“Some reports have suggested that nationalist youths in China could boycott some Western brands, particularly in the US, as punishment for the Biden administration saying that US teams will boycott Beijing’s Winter Olympics, and this may be felt in the luxury sector.”

Still, Bain & Co note tailwinds here too, forecasting a rise in Chinese consumer spending worldwide, persistent strong demand, and acceleration of middle-class growth. 

Despite some challenges, the shine hasn’t come off the luxury market yet.

Read more: LVMH revenue up 46% in first nine months of 2021

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