The luxury goods sector could shrug off the hit from the coronavirus crisis as early as this year as Chinese and US shoppers help sales recover to pre-pandemic levels, consultancy Bain has said.
Bain now sees a 30% probability that sales of high-end handbags, clothes and jewellery will return to or exceed their 2019 level of 280 billion euros ($340 billion) this year, depending on how quickly vaccines are rolled out and tourism picks up.
There's a possibility of a full rebound in 2022, which would still imply a faster convalescence than Bain predicted in November, when it said the sector may have to wait till 2023 to put the crisis squarely behind it.
Luxury goods sales fell by 23% to 217 billion euros last year, their largest-ever drop and the first decline since 2009, as the pandemic forced shop closures and brought international tourism to a virtual halt.
But the crisis does not seem to have had a lasting impact on consumers' appetite and spending power for high-end wares, reports Bain.
Soaring sales in China, the biggest market for luxury goods, and a stronger-than-expected US rebound, thanks to a big stimulus programme, have helped revenues bounce back sharply in the first quarter of 2021.
"The US market has been the unexpected bright spot," Bain said. By contrast, Europe is lagging behind, hampered by a slower vaccination campaign and restrictions on tourism.
The speed of the recovery has been uneven. The industry's biggest groups such as LVMH, Hermes and Kering are already above their 2019 levels, while smaller labels like Ferragamo and Tod's still have to catch up.
The crisis has forced brands traditionally more reluctant to sell online to fully embrace e-commerce, which is set to become the leading channel for luxury purchases in the next few years.
According to November estimates from Bain consultants, the market for personal luxury goods was set to have shrunk by about one-quarter last year, reducing to 2014 levels.
Burberry Group Plc, for instance, had reported a drop in its sales as the British fashion brand suffered from a new wave of lockdowns at the end of last year, said a Bloomberg report.
Geographically speaking, Burberry’s performance was mixed: The appetite of shoppers in Asia was strong with 11% growth but Europe and the Middle East saw a 37% deceleration, mainly hurt by the lack of tourists.