The Luxury Slump Continues as Burberry’s Woes Persist

The downturn in the luxury sector shows few signs of letting up.

“We are operating against a backdrop of slowing luxury demand with all key regions impacted by macroeconomic uncertainty and contributing to the sector slowdown,” said Burberry (BURBY), the British maker of trench coats, on Monday.

Burberry joins its rivals in struggling to grow as consumers keep a tighter hold on their wallets. LVMH (OTC: LVMUY), the maker of Louis Vuitton handbags and other luxury goods, in April posted a first-quarter decline in sales. Gucci owner Kering (PPRUY), meanwhile, said first-half operating profit would be sharply lower as demand in China stays sluggish.

Burberry on Monday replaced its chief executive officer as it continues to struggle to win over consumers that have pulled back on spending on discretionary items amid high interest rates and as the pandemic-era shopping boom came to an end.

China Slowdown Weighs on Luxury Brands

The economic downturn in China, under pressure from a prolonged property slump and tepid consumer demand, has been another drag on global luxury spending. Chinese luxury consumption accounted for almost a fifth of the world’s total, but have come down from 2021’s record levels, consultancy Bain and Company said.

Luxury brands are also grappling with high fixed costs, including expensive rents for their flagship stores.

Burberry on Monday said that it had replaced CEO Jonathan Akeroyd, who had been in the role for two years, with Joshua Schulman, a former CEO at Tapestry-owned (TPR) Coach, replacing him. The company said it expects to report an operating loss for the first half of this year and full-year operating profit would lag current consensus. It suspended dividend payments.

Investors are watching earnings reports broadly for signs of health of the consumer across income levels.