Luxury brands like Hermès, despite the bad economic forecast, continue to make dizzying profits, but the Chinese market is becoming a cause for their concern, writes the Economist. Hermes is synonymous with exclusivity. Last year, the model of his most famous Birkin bag reached a price of 450.000 dollars, and it cannot be bought online, but picked up in person, half a year after the order. No ads in fashion magazines or flashy ad campaigns or Instagram posts. Another reason is the increasing demand for all kinds of luxury products, reports Hina.

Last year's profit at Kering, owner of fashion brands such as Gucci and Balenciaga, rose 14 percent, while at LVMG, owner of Tiffany and Louis Vuitton, net profit rose by almost a quarter. Profits at Hermès and Richemont, owner of Cartier, rose by more than a third. Together, the four groups made more than €33 billion in profits, with total revenues of $130 billion.

However, that was before inflation and rising interest rates fueled fears of a global recession. As those fears mount, luxury brands lose their luster, at least in the eyes of investors.

Wealthy double down on spending Unrest among luxury chiefs was on display at a recent meeting sparked by a share selloff that wiped $65 billion, or seven percent, off the four luxury groups' combined market value. According to data from the analytics company Bernstein, customers who spent up to 1.000 euros on designer products before the pandemic halved their average spending in 2022.

By contrast, the truly wealthy more than doubled their spending. Currently, just five percent of buyers account for 40 percent of total global luxury sales. Exposure to China, one of the world's largest luxury markets, is another factor to consider. Luxury retailers, counting on a quick and sharp recovery from the long-term quarantine, are disappointed by the restraint of Chinese buyers.