Falling Gucci sales and the rise of ‘quiet luxury’

Rich consumers eschewing more ostentatious big logo brands in favour of subtle extravagance

Has the fizz finally gone out of the luxury goods market and, if so, what does it tell us about inflation and the spending habits of the great and the good?

Last week, luxury giant Kering issued a profit warning, forecasting its first-quarter sales to fall by 10 per cent year on year. Particularly troubled is the stable’s Gucci — which accounted for two-thirds of group operating income last year — where sales are expected to fall nearly 20 per cent on lower volumes in Asia.

Shares in the French-based conglomerate are down about a third over the past 12 months and last week’s warning prompted another sell-off, with its share price declining by more than 16 per cent over the past week alone. It also dragged other luxury names like Luis Vuitton owner LVMH and Cartier owner Richemont, albeit to a more modest extent.

What is behind Bitcoin's remarkable recovery?

Listen | 25:48

Not so long ago, shares in luxury stables were considered a hedge against inflation. The logic was essentially that sales of high price-point items were less affected by the rising cost of living simply because, well, the cost of living isn’t such a big concern for the kind of people who buy Hermès bags or Balenciaga couture. This sales trend has reversed somewhat over recent quarters and in some corners, China’s economic woes have been chiefly to blame.


However, analysts have pointed also to another, more novel explanation. Rich consumers appear to be eschewing the more ostentatious displays of wealth and towards what is being described as “quiet luxury”. A viral sensation in the fashion world in 2023, it refers to more muted, simple products, exemplified by the understated but still extravagant tastes of the main cast of characters in HBO’s Succession.

Consequently, portfolio managers have shifted attention away from the likes of Kering and Burberry and towards luxury stables that have adapted more rapidly to the new trend. While Gucci has been attempting to get with the programme, its new “quieter” collection still accounts only for a small proportion of the items in store, the Financial Times reported last week. These dynamics could slice an eye-watering 20 per cent to 25 per cent off its forecasts this year, according to Citi.