Stability, a highly prized value in 2022

Luxury goods are doing well. And its positive stock market values demonstrate its solidity, its resilience and the confidence of investors in the sector, such as Hermès, whose stock has achieved a performance of 75% in 2021. But this stability is not a given. As the second largest luxury goods market behind the US, China will be scrutinised for its ability to cope with the significant uncertainty in the real estate market that has hit the country, partly caused by the setbacks of the Evergrande Group. Still in deep trouble in early January 2022, its ability to pay off its $300 billion-plus debt is now clearly in question. Access to property is predominant in China (80% of the wealth of urban households is linked to residential property) and a potential fall in property prices would risk disrupting social stability and, by domino effect, consumption and, by extension, luxury goods.

Another factor of uncertainty is the tourist flow linked to the pandemic. According to the UNWTO (World Tourism Organisation), international tourist arrivals in 2021 remain between 70% and 75% below 2019 levels, a drop comparable to that of 2020. Of course, local consumption can partly stem the problem. According to the latest Bain & Company study, in the US for example, local demand is expected to account for 65% to 70% of luxury consumption by 2025. With the Americas now being the world's largest luxury market, totalling €89 billion, or 31% of global consumption, and China the second largest with €60 billion, or 21% of the global market, it is easy to see why capitalising on local demand in these two regions of the world is so important and why, following these phenomena, prices for luxury goods are rising.

The third uncertainty is that the recent surge in oil prices, the disruption of supply chains and the ensuing threat of inflation could potentially disrupt the recovery of the luxury goods market (+29% at constant exchange rates in 2021 compared to 2020 and +1% compared to 2019) reaching 283 billion euros.

As we can see, the stability of luxury goods is not a given. Brands that have not been able to make the changes necessary to counter the uncertainties described will be under stress in 2022.