World’s top luxury goods firms increased revenues 11% last year, says Deloitte
Luxury segment grew sales to $247bn despite economic slowdown in many markets and e-commerce disruption
The world’s 100 biggest luxury goods companies, which include LVMH, Estée Lauder and Chanel, generated 10.8 per cent more in revenues for the fiscal year ending June 2018, with sales reaching a combined $247 billion (Dh906bn), despite disruptions to retail from e-commerce and an economic slowdown in major markets.
“In an age of fast changing trends, luxury companies are re-examining the value of brand heritage and history and ... focusing solely on the new age consumer,” said Herve Ballantyne, partner and industry leader of consumer and industrial products at Deloitte Middle East, which produced the study.
“To accomplish this, they are committed to making significant investments in digital technologies.”
In total, 76 of the top 100 luxury goods companies reported sales growth in the fiscal year 2017 that ended June 30, 2018 – the last period for which comparative figures on luxury goods sales are available for all the companies.
France’s LVMH, owner of Louis Vuitton and other brands, generated the most revenues over the year. The French holding company reported 17.2 per cent year-on-year growth in revenues which reached $28bn, followed by the US-based Estée Lauder with $13.7bn, up 15.7 per cent from the year earlier.
Switzerland’s Compagnie Financière Richemont, whose businesses include Cartier, Piaget, Jaeger-LeCoultre, Chloé and Montblanc, generated $12.8bn of revenues, up 3.1 per cent from the previous year. There was no change in the ranking of the top three luxury goods companies compared to fiscal year 2016.
The top 10 companies – which also included France’s Kering, Italy’s Luxottica Group, The Swatch Group, PVH and Hong Kong’s Chow Tai Fook Jewellery Group – accounted for nearly half (48.2 per cent) of luxury goods sales from all the top 100 companies, with year-on-year sales growth rising 13.6 percentage points, to 14.2 per cent.
Globally, retailers have been hit by economic uncertainty in many of the major world markets such as China, the Eurozone and the US. They have also had to grapple with the rise of digitalisation and e-commerce, which has posed a challenge to bricks-and-mortar-based companies and forced many to invest in ‘omnichannel’ strategies, those that entail selling across e-commerce, mobile and social media platforms.
However, the luxury segment has been somewhat cushioned from the changes as its target markets are typically wealthier, and because companies have invested in digital innovations and new verticals to capture a broader audience.
The most notable change in the top 10 was the entry of privately owned Chanel in sixth position, after it published its financial results for the first time in 2018, Deloitte said. Ralph Lauren dropped out of the top 10 for the first time since Deloitte starting publishing its Global Powers of Luxury Goods study in 2014, slipping four places to rank 12, as sales continued to decline.
The UAE – where many of the top 100 companies examined in Deloitte’s report are present – is witnessing “sustained growth” in the luxury market, attributed to an increase in brand omnichannel strategies and the continued rise of the tourism industry.
“It is expected that the [UAE's] luxury market will continue to experience growth as the market matures and adjusts to global trends,” Deloitte’s Mr Ballantyne said.
The minimum revenue threshold required to enter the Deloitte’s latest Top 100 list was $218 million, up by $7m from fiscal year 2016.
Three companies in the previous year’s list disappeared this time due to merger and acquisition activity. For example, Christian Dior Couture – which ranked 26th in 2016 – was acquired by LVMH in a 6 billion euro deal completed in July 2017.
Kate Spade & Company, which ranked 40 in the FY2017 list, was acquired by Coach (now Tapestry) in July 2017 for $2.4bn, and Jimmy Choo, (which previously ranked 66th), was acquired by Michael Kors (now Capri Holdings) in November 2017 in a $1.2bn deal.
Updated: June 3, 2019 04:39 PM