Recent riots in Paris have raised concerns about their impact on the luxury goods sector, which was already grappling with significant challenges. The upheaval saw upscale boutiques, including those owned by major groups such as LVMH, Kering, Hermes, and Richemont, suffering damage from looting and arson. This disruptive event coincides with broader issues in the luxury market, particularly the slowing demand from Chinese consumers, who previously accounted for a substantial portion of global luxury spending.
Shares of Kering, owner of Gucci, fell sharply by 17 percent after the company reported disappointing sales figures, compounded by fears that further unrest could hamper retail recovery. Similarly, Hermes and other luxury brands have moved to increase security measures in their stores amid concerns that images of the unrest could deter Chinese shoppers from visiting France and Europe more broadly. Bain & Company estimates that Chinese buyers once represented about one-third of worldwide luxury expenditure during the post-pandemic rebound but now account for only 22 percent following economic challenges at home, including a property market crisis and high youth unemployment.
Hermes recently attributed a dip in its third-quarter sales to the ongoing economic difficulties in China. This development poses a significant challenge for leading luxury houses such as LVMH, which reported a 5 percent sales decline over the three months through September. LVMH shares have fallen 41 percent since January, nearing levels last seen at the onset of the COVID-19 pandemic. The group, which owns prestigious brands like Dior, Louis Vuitton, and Tiffany, is criticized for failing to adequately capture younger consumers who seek products priced at more accessible levels rather than ultra-high-end luxury items.
Despite these headwinds, some analysts remain cautiously optimistic about the sector’s long-term prospects, pointing to the enduring consumer desire to display wealth and status. Among the luxury conglomerates, LVMH’s chairman Bernard Arnault retains a strong reputation for navigating difficult periods, though investors are advised to adopt a patient outlook given current uncertainties.
Elsewhere, Richemont, known for its Cartier and Van Cleef & Arpels brands, has seen a different dynamic. Its share price remains below analyst target prices, supported by the company’s focus on jewellery, which some consumers currently view as a more reliable store of value amid economic uncertainty. Richemont’s interest in joining a consortium to acquire diamond miner De Beers underscores its confidence in the long-term appeal of precious stones, despite its own stores being affected by the Paris unrest.
Hermes shares have experienced their worst performance since their 1993 stock market debut, declining 42 percent in 2024 amid concerns that the growing market for second-hand Birkin bags could erode the brand’s exclusivity. Analysts are divided on the outlook, with some recommending a cautious approach.
Kering’s Gucci stores were also among those targeted during the riots. Despite recent setbacks, analysts generally advise holding Kering shares, which remain 72 percent below their value from five years ago. The company’s CEO Luca de Meo faces pressure to restore the brand’s former prominence in a difficult retail environment.
In the UK, luxury brands like Mulberry and Watches of Switzerland have capitalized on strong demand in the United States, driven largely by younger, aspirational consumers willing to spend on more affordable luxury items. Mulberry reported a 28 percent rise in U.S. sales, and its stock price has more than doubled this year. Watches of Switzerland shares have also rallied, supported by sales of high-end timepieces such as the Rolex Submariner and a recent target price upgrade by Goldman Sachs.
Burberry has faced ongoing challenges due to Chinese market weakness, with shares declining 18 percent so far this year. Nonetheless, the brand continues to find appeal among American consumers, especially for moderately priced products like its Cotswold bags. Goldman Sachs has set a favorable price target for Burberry, reflecting confidence in its ability to navigate current headwinds.
As the luxury goods sector contends with political unrest, shifting consumer preferences, and economic uncertainty, investors remain watchful for signs of recovery in an industry deeply intertwined with global economic and geopolitical developments.