The Luxury Sector Might Have It's Worst Year Ever

Bernstein analysts warned that luxury brands will have the worst year in modern history. A group of analysts led by Luca Solca sent a note to clients describing the next phase the industry is entering. “What we know is that 1H20E [the first half of 2020] update is likely going to be the worst in the modern luxury goods industry history, and by some margin,” these analysts wrote. Since China is luxury brands most important customer base, they’ve been hit hard by the COVID-19 outbreak. Chinese consumers make up 35% of global demand in the luxury sector, thus, the most valuable customer. Bernstein estimates that demand from these consumers will be down 30% to 50% in the first half of the year.

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As the COVID-19 virus spreads all over the world, the demand from other luxury consumers in the United States, Europe, and the Middle East has dwindled as well. “Under normal circumstances, I’d expect a bounce-back for luxury brands but that too is now in doubt,” Doug Stephens, a retail industry consultant, wrote in an email to Business Insider. He continued, “Luxury is in a very precarious state at the moment. First, protests in Hong Kong disrupted both revenue and production capabilities. Now, Covid-19 not only put Chinese luxury consumers on the sidelines but has further disrupted supply chains and touched off a stock market collapse that will also give high-net-worth consumers across the globe reason for pause.”