Luxury goods sales growth bottoms out, profit margins resilient under pressure

Published: 8 Octember 2018

The world’s 100 largest luxury goods companies generated sales of US$217 billion in FY2016 and the average luxury goods annual sales for a Top 100 company is now US$2.2 billion, according to the fifth annual Global Powers of Luxury Goods report by Deloitte.

The report examines and lists the 100 largest luxury goods companies globally, based on the consolidated sales of luxury goods in FY2016 (which we define as financial years ending within the 12 months to 30 June 2017). It also discusses the key trends shaping the luxury market and provides a global economic outlook.

The top five largest Fashion & Luxury players - LVMH Moët Hennessy Louis Vuitton SE, The Estée Lauder Companies Inc., Compagnie Financière Richemont SA, Luxottica Group SpA and Kering SA – maintained their positions on the leader board. “The luxury market has bounced back from economic uncertainty and geopolitical crises in 2016, edging closer to annual sales of US $1 trillion at the end of 2017.” said Patrizia Arienti, EMEA Region Fashion & Luxury Leader, Deloitte Italy. “Whether total global market growth is in single or double digits will depend on many factors, including larger geopolitical factors and their impact on tourism. Growth in the luxury goods industry will continue, unlike in several other industries”.

At constant exchange rates, the growth rate for the Top 100 was 1 percent, 5.8 percentage points lower than the 6.8 percent currency-adjusted growth achieved by these companies in the previous year. There were major winners and losers within the Top 100 – 57 companies increased their luxury goods sales year-over-year, with 22 achieving double-digit growth, and nearly one-third of the Top 100 achieved a higher rate of sales growth in FY2016 than in FY2015. Growth among the Top 100 was weakened in particular by the ten companies which experienced double digit sales decline in FY2016, including two Top 10 players – the Swatch Group and Ralph Lauren. However, FY2016 seems to mark the bottom of the downturn in luxury goods sales growth for most companies.

When it comes to spending, the report says China is now one of the fastest growing countries for luxury goods, although its rapid pace of economic expansion is unlikely to sustain in the medium to long term. "Tech-savvy young millennials and Generation Z have contributed to the flourishing of luxury consumption in China," says Zhang Tianbing, Deloitte Asia Pacific Consumer Business and Retail Sector Leader. "This means it's now even more important for luxury companies to devise digital and mobile marketing strategies to better engage them. They should optimize use of Chinese language social media platforms to promote their brand values, and create interactive, tailor-made experiences to satisfy customers."

Key findings from the report include:

• Italy is once again the leading luxury goods country in terms of number of companies, while France has the highest share of sales.
  
  
• China, France, Germany, Italy, Spain, Switzerland, the UK and the US together made up 83 percent of the Top 100 luxury goods companies and 90 percent of Top 100 luxury goods sales. Spain and France reported the highest growth rates of luxury goods sales.
• Among the Top 10 companies, three are conglomerates participating in multiple sectors of the luxury goods market; two are cosmetics and fragrance companies; two are jewellery and watch companies; two are fashion companies, and global eyewear leader Luxottica is the only accessories company. Three are headquartered in the US, three in France, two in Switzerland and one in each of Italy and Hong Kong SAR.
• Between FY2014 and FY2016, composite luxury goods sales for the Fastest 20 companies increased at a compound annual rate of 15.1 percent – nearly four times the rate for the Top 100 as a whole, but 7.1 percentage points down on the previous year. The strongest product sectors in the Fastest 20 were once again clothing and footwear (ten companies) and jewellery and watches (five companies).
  
  
• Sales by companies in the luxury clothing and footwear sector were lower in FY2016 than in the previous year, although currency-adjusted sales grew by 0.2 percent. Both sales growth rates and net profit margin fell for the second year in succession. With 38 companies, this product sector has by far the largest number of companies in the Top 100.
• Cosmetics and fragrances was the top-performing sector in FY2016, and was the only sector with improving composite luxury goods sales growth, at 7.6 percent.
• All eleven of the companies in the multiple luxury goods sector have by far the largest average size among the Top 100. The average annual luxury goods sales was US$6.3 billion, and together they accounted for 32.2 percent of the Top 100 luxury goods sales.

About the Global Powers of Luxury Goods report

The Global Powers of Luxury Goods report identifies the world’s top 100 largest luxury goods companies based on publicly available data and analyzes them from multiple perspectives. It also examines industry trends and global economic conditions. Full details about the Global Powers of Luxury Goods report are available here.