Luxury style companies lose their sparkle as super-rich really feel the pinch

Just under £100billion has been wiped off the world’s biggest luxury firms in the past year.

The fashion world has been dominated by car-crash trading updates this summer that have sent ripples through the sector.

Disastrous stock performances have plagued companies including LVMH, Hermes, Prada, Gucci owner Kering and British brands Burberry and Mulberry.

And it has been a tough time too for Essilor Luxottica, Italian-French owner Rayban, Tapestry, which is the New York-listed owner of Coach, and Cartier parent Richemont.

Some £98.6billion had been wiped off these companies’ values over the past 12 months, according to analysis for the Daily Mail by investment platform AJ Bell.

Losses: LVMH, the world’s largest luxury conglomerate, whose brands include Givenchy, Celine, Stella McCartney and Louis Vuitton, has haemorrhaged £81bn in a year

The Paris Olympics should have set the stage for a glorious summer as tourists flocked to Europe for shopping sprees. But high-end groups have warned of lower profits and had to slash their prices.

Mood music has been gloomy since post-pandemic ‘revenge spending’ ran out of steam a couple of years ago. 

China, the world’s second-largest economy, has been hit by a debt crisis in its property sector, and consumers in Britain have been affected by inflation.

LVMH, the world’s largest luxury conglomerate, makes up most of the slide due to its gigantic size. It has haemorrhaged £81billion in a year – just under a quarter of what it was worth last year.

The French group, whose brands include Givenchy, Celine, Stella McCartney and Louis Vuitton, even lost its position as Europe’s largest firm to Novo Nordisk, the maker of weight loss drug Ozempic, last September.

But especially worrying is the battering taken by Britain’s heritage labels.

Burberry, which makes its trench coats in Castleford, west Yorkshire, is worth £5.4billion less than it was last year. Shares are down 65 per cent.

A turnaround mission is under way, after chief executive Jonathan Akeroyd was ousted this summer. Handbag maker Mulberry has replaced Thierry Andretta at the helm with former Ganni boss Andrea Baldo.

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It is down 58 per cent, having shaved £84million off its worth.

And the bargain valuations of both British fashion houses have triggered fears they could be the next companies to be poached off the London bourse by private equity sharks.

Both brands have been adamant that the Government must scrap a hated tourist tax to reinvigorate high-end goods spending in London.

Their cries for help fell on deaf ears with the Tories as it was former Prime Minister Rishi Sunak who scrapped the refund incentive for tourists. 

While Burberry and Mulberry are in dire straits, not all luxury groups are struggling to the same degree.

Hermes has managed to more or less retain its £180billion valuation this year.

Its most recent results, for the April to June quarter, saw it buck the gloom felt elsewhere. Subtle designs, including its trademark £12,000 Birkin bags, helped it continue to sell goods in China.

‘The Chinese clientele is a very sophisticated clientele that is looking for high-quality products, not necessarily with logos. This is helping us,’ chairman Axel Dumas said.

The super-rich still regard Hermes as ‘must-have’.

Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, said: ‘Supply is purposefully held far short of demand, creating a sense of elusiveness. It adds to the desirability for the super-wealthy, who view owning such a hard-to-get bag as a status symbol.’

Jelena Sokolova, senior equity analyst at Morningstar, said: ‘Generally, the trend is towards “quiet luxury” versus more logo-driven products following the success of TV shows like Succession, Instagram influencers like Gstaad Guy and possibly less desire to flaunt wealth in a more subdued economic environment.’

But Gucci and Burberry have struggled due to revolving doors at the top and a higher exposure to aspirational shoppers who are not super-wealthy.