Richemont, the Swiss company known for its ownership of luxury brands such as Cartier, IWC, and Vacheron Constantin, is facing the consequences of inflation on the demand for luxury goods in Europe. Even affluent European consumers are now cutting back on their purchases due to consistently higher prices, according to Johan Rupert, the chairman and controlling shareholder of Richemont. Speaking at the company’s annual meeting in Geneva, Rupert acknowledged that European households are allocating a larger portion of their income to essential items compared to the previous decade. This change in spending habits is a reflection of the pressures caused by inflation. In July, Richemont had already warned about a slowdown in demand in the United States and China, two key markets for luxury goods.
However, there is some positive news for European markets. Chinese shoppers, who were mostly absent due to travel restrictions during the pandemic, have begun to travel again. This has contributed to a boost in luxury sales throughout Europe. Amid the pandemic, luxury sales saw an increase as consumers capitalized on low interest rates and saved up to indulge in expensive watches, handbags, and jewelry.
Nonetheless, Rupert expects that disruptions in the industry will persist as central banks raise borrowing costs to combat escalating inflation. He stressed that it will take more than a year or two to return to a state of normalcy after a decade of excess. The effects of inflation and changing consumer behavior are likely to endure for a considerable time.
Overall, Richemont is preparing for the impact of inflation on luxury demand in Europe. The company understands the need for adaptive strategies to effectively navigate these challenging market conditions. As the owner of prestigious brands, Richemont aims to discover innovative approaches to maintain its position as a leading luxury conglomerate.
Useful links:
1. Reuters: Richemont faces inflation hit on luxury demand in Europe
2. Bloomberg: COVID and Inflation Fears Are Weighing on Richemont’s Top Brands
