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Global luxury brands as a group have had a very weak performance during the first half of this year compared to recent years, as the sales of leather goods dropped. Sales are constantly declining, especially in Korea according to an article in Business Korea.
According to a Wall Street Journal article on August 6, the Kering Group based in France, which owns Gucci, the world’s biggest luxury group Louis Vuitton Moët Hennessy (LVMH) and Italian luxury house Prada, had similar or lower revenues and profits compared to last year.
Declines in sales of leather goods are the main reason for the weak performance since margins on leather products including handbags are generally higher than that on other clothing, the sales of leather products determine the overall profitability.
A change of regional preferences also affected the sales of luxury brands. For Prada, sales in the Asia-Pacific region dropped by 2% despite a 12% increase in China. Consumers in Korea, Singapore, and Hong Kong especially reduced their spend on major luxury brands. In addition, the sales growth of LVMH in Asia was only 3% except in Japan, a sharp decline from last year’s 13%.
On the other hand, the Financial Times already reported that the reason for the sluggishness of three largest luxury markets worth €8.3 billion (US$11 billion) was a change in consumer taste, focusing on the Korean luxury market last month. The FT said that young Korean consumers prefer less expensive but trendy brands to more expensive traditional luxury brands, and that some brands are already considered old-fashioned and common.