Top European luxury companies have collectively lost approximately €250 billion in market value in 2023 amid weakening demand from Chinese consumers and volatility in global financial markets driven in part by artificial intelligence developments. The trend, highlighted by quarterly earnings from major groups LVMH, Hermès, and Kering, reflects growing concerns about a prolonged downturn in the luxury goods sector.

The six largest European luxury firms—LVMH, Hermès, Kering, Richemont, Prada, and Moncler—have experienced a significant contraction in market capitalization, with LVMH and Hermès hit hardest. LVMH’s valuation dropped by around €131.6 billion, while Hermès’s market value declined by approximately €93.3 billion this year.

For more than a decade, growth in the luxury market was largely driven by consumers in China. However, a sustained property market slump, combined with a weakening Chinese stock market and regulatory crackdowns on offshore wealth, has curtailed domestic spending. Over the past six months, monthly retail sales growth in China has averaged less than 0.5%, marking a sharp slowdown from prior periods.

LVMH reported a mid-teen percentage decline in sales to Chinese customers globally within its fashion and leather goods division for the third quarter. Chief Financial Officer Cécile Cabanis attributed this slowdown primarily to the Chinese market, expressing uncertainty about when demand might recover. Kering, which owns luxury brands such as Saint Laurent and Bottega Veneta, faced an even steeper fall, seeing sales to Chinese consumers drop by 15 to 20% in the third quarter, accelerating from an already significant decline the previous quarter.

Hermès, known for its resilience in the sector, also showed signs of strain, with its ready-to-wear and accessories division experiencing a 2% decline in global sales. CFO Eric du Halgouët pointed to recent Chinese market challenges and government measures affecting wealth outflows as complicating factors. Analysts voiced concerns regarding Hermès’s exposure to China and the shifting profile of its consumer base, which may be leaning toward more aspirational buyers. One analyst described Hermès’s latest update as raising "more questions than answers" about future revenue trends.

Despite the broad downturn, some segments showed strength. Hermès’s sales of Birkin and other high-end handbags rose by 10.8% in the reported quarter. In addition, luxury jewellery brands such as LVMH’s Tiffany and Kering’s Boucheron demonstrated solid growth with double-digit sales increases.

Meanwhile, in the United States, which had been supporting the luxury market’s expansion earlier this year, demand has started to moderate. Factors including cooling stock markets and rising gas prices have contributed to a decline in luxury spending of at least 4% in July, August, and September, according to credit card data.

Overall, the luxury goods industry faces multiple headwinds as it navigates subdued appetite among Chinese consumers and more cautious spending across other key markets, complicating prospects for a swift recovery.