Latest news with #RM1.7tril
The Star
23-07-2025
- Business
- The Star
Turmoil or not, luxury fashion can't afford to ignore the Middle East region
Elie Saab held its 45th anniversary show in Riyadh last November, featuring a performance from Celine Dion. Photo: Instagram/Elie Saab With Middle East airspace reopening and the US-brokered ceasefire between Israel and Iran appearing to hold, the luxury fashion sector is still counting on the region's wealthy shoppers to help offset weakness in its main US and Chinese markets – for now. The Middle East, helped by strong tourist flows and local wealth, has bucked a recent global slowdown in luxury sales that is expected to deepen this year, with some brands growing sales there at double-digit rates. Luxury sales in Gulf countries were up 6% to US$12.8bil (approximately RM54.1bil) of the nearly US$400bil (RM1.7tril) market last year, outpacing a global drop of 2%, with strong appetite for high-end fashion, jewellery and beauty products, retail consultant Chalhoub Group said. However, that trade is heavily dependent on the region's burgeoning tourist trade, with consulting firm Bain estimating that some 50-60% of the Middle East's luxury sales come from tourists. Read more: Though absent, Giorgio Armani's vision still comes to life at Milan Fashion Week This month's outbreak of an air war between Israel and Iran emphasised the ongoing risks in a region in which unrest was already simmering, with airlines cancelling flights and rerouting planes following Israel's strikes against Iran on June 13 – measures that are now being unwound. "At this point, we have not adjusted our long-term growth forecast, as we continue to see considerable potential in the region," said Federica Lovato, senior partner at Bain. "However, short-term volatility has increased in the last few weeks and may continue, depending on how the situation develops." The region is an important hub for travel spending, favoured by Russian oligarchs but also wealthy Asians, and has increased in importance since Russia's invasion of Ukraine triggered sanctions and the rerouting of flights between Europe and Asia from more northerly routes to the Middle East. It also serves as a gateway for high-end brands to reach wealthy shoppers from India, where high tariffs have kept companies like LVMH from expanding store networks. Max Heinemann, co-CEO of travel retail group Gebr Heinemann, which recently expanded into Saudi Arabia and operates airport fashion retail stores carrying luxury brands in Jeddah, said the region's travel market has shown long-term resilience despite unrest. He remains optimistic: "Dips may be witnessed, but growth will remain." At Prada, first-quarter sales in the region rose 26% year-on-year, while Hermes' sales there were up 14%. High-end fashion and jewellery brands have been opening new stores and hosting splashy events. Milan-based menswear label Zegna this month took its spring collection to the opera house in Dubai, the region's leading luxury hub, for a catwalk show in an elaborate set evoking an Italian villa. Read more: Uncovering Valentino's fashion legacy: Celebrities, luxury and the power of red Elie Saab held its 45th anniversary show in Riyadh last November, featuring a performance from Celine Dion. Dior, Saint Laurent and Valentino last year opened stores in Bahrain, while this year Louis Vuitton brought guests to the Dubai desert for a dawn meal and Chanel hosted a dinner in Abu Dhabi linked to a high jewellery launch. But maintaining visitor numbers to Middle Eastern destinations will be vital to bringing shoppers through the doors. Luxury travel agency Global Travel Moments says that for now, its long-term travel volumes to the Middle East have been unaffected by the latest unrest. However, given recent events, there is currently "certainly more caution" before finalising trips to the broader Middle East, it said. – Reuters
The Star
23-07-2025
- Business
- The Star
Has luxury fashion lost its appeal? Signs of shopper fatigue persist
Handbags for sale in the window of a Dior boutique in Paris. Photo: Bloomberg LVMH and Kering are expected to report another drop in quarterly sales, deepening investor worries about a prolonged downturn in the US$400bil (approximately RM1.7tril) luxury market as brands face the threat of hefty US import tariffs. The results, kicking off with LVMH on Thursday (July 24), will likely show that any revival in demand for pricey fashion in the key US and Chinese markets remains elusive. Uncertainty unleashed by US president Donald Trump's trade war has caused volatility in stock markets, weighing on consumer confidence. Trump's threat of 30% tariffs on imported EU goods risks hurting luxury houses that make products in France and Italy. They will be wary of lifting prices for US consumers after signs that previous rounds of price hikes slowed demand. "The level of price increases has been too much" at a number of brands, alienating the "aspirational" middle-income shoppers, said Caroline Reyl, head of premium brands at Pictet Asset Management. Read more: Fashion's new power move? Turning away from influencers and the overhyped Decline in sales LVMH's fashion and leather goods division, home to Louis Vuitton and Dior, is expected to show sales down 6% year-on-year, its fourth consecutive quarterly decline, according to a Visible Alpha consensus forecast. Gucci, Kering's main earner which is undergoing an overhaul, has struggled for twice as long and is seen reporting sales down nearly a quarter from a year earlier. After two years of slowing sales, unease about the health of the industry is growing, with customers baulking at higher price tags. Shares of LVMH are down nearly 27% since the start of this year, while shares of Kering are down 15%. Shares of Hermes and Richemont, which cater to mostly wealthy clients, were little changed, with the former down 0.9% and the latter up 1.6% over the same period. LVMH, Europe's most valuable listed company as recently as January, has slipped to fifth place. "It seems that investors are starting to worry about the long-term structural attractiveness of the industry," UBS analysts said last week. Sales of handbags – previously a growth engine – have been weak as shoppers opt for timeless, investment-grade jewellery. Brands including Dior, Gucci and Chanel have recruited new designers, but it takes time for fresh styles to enter stores. Read more: Less-expensive luxury fashion brands are slowly gaining ground, but why? Lower-priced products Brands like Louis Vuitton and Prada are offering more products below $1,000, like a new hybrid ballerina-sneaker shoe, for example, and emphasising beauty products, said Bain consultants. But that carries risks. "The aspirational skew of the brand is unhelpful currently," said HSBC analysts, highlighting problems at Louis Vuitton. "Some inconsistencies, we feel, are likely starting to have consumers wonder." Consensus forecasts peg organic sales of LVMH down 3%, while Kering is seen down 13%; Hermes and Prada are expected to show a 10% rise, as Prada's Miu Miu label takes market share from rivals. Kering will report its results on July 29, while Hermes and Prada are due to report on July 30. – Reuters
