World luxury sales may slow down

Prada flagship store, Atlanta

HSBC Global Research have recently released a report about the imminent slowdown in luxury sales, although it is expected that revenues won’t fall.

“We forecast the sector’s average organic sales growth rate to slow to 10 per cent in 2012 and 9 per cent in 2013 from the historically high level of 2011 (circa 20 pr cent),” stated the “Stop, Look, Listen” report, written by HSBC analysts.

Globally, it is expected that a “normalisation” of growth patterns in Asia outside Japan, with sales increases beginning to slow, although this in part will be tempered by the expansion of distribution in China. First-time buyers still represent 65 per cent of luxury-brand sales in China, according to the report.

A cause of concern for the luxury houses is both the U.S. and European markets, although the US looks slightly stronger than Europe.Analysts have predicted that the US market will be less resilient than in 2011, unless economic conditions improve. Luxury goods sales are expected to stand at 4 per cent this year.

Europe is expected to take another beating with its finances as the countries still continue to scramble themselves out of debt. “We think the fragile debt situation and weaker GDR performance are likely to take a more severe toll on local consumption,” the analysts wrote. “However, we expect some protection to come from tourism inflows (notably from Asia), which could account for between 35 per cent and 60 per cent of sales.”

Despite the debt crisis in Europe, HSBC is predicting a sales growth of 5 per cent, whilst in Japan, a growth of 2 per cent is expected.

adapted from WWD