Luxury flies, 2023 record-breaking for Lvmh and Richemont. But the supply chain?




Luxury seems to know no crisis. Two of the sector's largest holding companies, Lvmh and Richemont, emerged from the year just ended with their heads held high, with positive revenues and performance that was unaffected by the uncertain macroeconomic and geopolitical environment, although there was indeed some braking during 2023. However, looking behind the scenes, the world seems to be traveling at a different speed: according to the most recent analysis, the luxury supply chain, particularly the leather sector, after the exploits of 2022 and at the beginning of the year, continues with the handbrake on, amid declining orders and an increase in requests for layoffs.


The most recent figures are those of the Lvmh group: the French giant posted a new record year in 2023, with revenue growth of 9 percent over 2022 (organic growth of 13 percent), at 86.2 billion euros, and net income of 15.2 billion, up 8 percent. The results were positively impacted by the performance of the Fashion & Leather Goods corporate group, which achieved record levels of revenues and profits, with organic revenue growth of 14%. Much impact was made by the performance of Louis Vuitton, Christian Dior, Celine, Loro Piana, Loewe, Rimowa, and Marc Jacobs.


Positive numbers also for the Richemont Group, which ended 2023 with sales up 8 percent at constant exchange rates and 4 percent at actual exchange rates to 5.6 billion euros. Growth in almost all regions, driven mainly by Japan, Asia Pacific, and the Americas. Here, performance is led by retail, up 11 percent and 6 percent at constant and effective exchange rates, respectively, with increases in all business areas. The group's jewelry houses - Buccellati, Cartier and Van Cleef & Arpels - shone, with +12 percent at constant exchange rates and +6 percent actual.


Upstream, however, the trend is different, as shown by data from the province of Florence, the hub of luxury leather goods production. According to Cna Firenze Metropolitana, orders are down and layoffs in 2023 almost doubled, from 32 companies, 351 workers and an amount of 124,418 euros from January to November to, respectively, 60, 642 and 236,577. And no improvements are expected. But the problems are also related to the difficulty of companies to adapt to the standards of the griffes, procedures that require time and dedicated staff with costs that are difficult for smaller companies to bear. So what is happening?

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