One of our timely calls in 2022 was a slowdown in prestige luxury in the U.S. as affluent customers would be off to Europe or South America now that it was finally safe to travel abroad and the dollar was extraordinarily strong. That slowdown would also be more noticeable because of the expanded baseline of the U.S. prestige luxury market, which resulted from big spenders being stuck at home and harboring a strong itch to please their significant others.
In 2023, those big spenders are still traveling overseas (as we've commented on our recent personal consumption expenditures (PCE) analysis) with overseas vacation travel expenditure up +15% compared to 2022 on a real basis and +17% on a nominal basis (and up +3% and +8% on a real and nominal basis versus 2019). Additionally, white-collar layoffs and banking crises are also likely hits to the high-end’s confidence. We got confirmation of that hit this week with Richemont (owner of Cartier, Van Cleef, Jaeger-LeCoultre, and other brands) announcing weaker-than-anticipated sales in the U.S. (down -2% in Q2 2023). While -2% may not look that significant, it compares to +28% in Q1 2023. That +28% growth put Richemont's Q1 2023 Americas segment sales 2.2X above its 2019 level. For Q2 2023, the -2%, puts it only 1.6X above the 2019 level.
Our index of luxury retailers (below) adds further evidence to the difficult environment in which many high-end retailers now find themselves.
