Sun, 11/22/2020 – 20:30
The plunge “wipes out more than six years of growth,” according to AP. The silver lining, if there is one, is that the crash is actually lower than the 35% plunge that was predicted at the beginning of the pandemic. That has mostly been due to a recovery in China, which generates about 33% of all luxury goods sales.
The sector is expected to generate $256 billion in sales for 2020, which is lower than 2014 levels and is down nearly $80 billion from 2019. It’s the first decrease in the sector, which has been buoyed just like all senselessly expensive assets have by Central Bank policies globally, since 2009.
A further bounce back is uncertain, especially as global governments brace for a second set of shutdowns heading into the winter.
Bain partner Claudia D’Arpizio, who helped write the report on the sector, said: “I see a lot of uncertainty for next year, with less uncertainty for the longer term.”
Additionally, forecasts for 2021 have been unclear. While they fall in a growth range of 10% to 19%, it’s a small respite after profits have dropped an estimated 60% this year. They are only expected to recover half of that in 2021.
In China, Bain sees a “full global recovery” heading from 2022 into 2023. They expect Chinese consumers will make up almost half of all sales by 2025.
Apparel sales plunged 30% and footwear sales fell 12% due to the pandemic and its ensuing lockdowns. Jewelry sales fell 15%, even after being “cushioned” by a recovery in Asia.
D’Arpizio warned some brands could wind up “running out of cash” and being forced to restructure. She concluded: “The pandemic has eliminated the excuses for brands that didn’t understand the trends, to give a sense of urgency to the right investments. The more the situation is sustained, the more we risk the crisis will be permanent.”
We wonder: are politicians advocating for more draconian lockdowns capable of understanding this?
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Author: Tyler Durden