Luxury groups turn to US as Chinese growth engine stalls

{"text":[[{"start":7.76,"text":"When Hermès opened its first store in Nashville in October last year, it took a former hosiery factory and filled it with nods to the Music City and its local culture. Terrazzo stairs mimicked piano keys, the jewellery counter was backed by metal mesh resembling the comb of a harmonica, and the opening window display featured a horse made of crayons by local artist Herb Williams."}],[{"start":29.68,"text":"Not every Nashvillian was convinced. “Why would they open a Hermès store before they put a Neiman Marcus [US luxury department store] in Nashville?” one commenter wrote on an Instagram post. Eleven months later, Hermès opened in Williamsburg, Brooklyn on a corner where meatpackers once worked, behind a new brick facade that had been designed to look old. “It feels more like a spoof than a tribute,” said Christian Emanuel, a New York real estate agent, in a social media post."}],[{"start":56.8,"text":"There’s nothing fake about the rapid recent expansion of French, Italian and other European luxury groups into parts of the US where they had previously not had a presence. In the past five years, luxury companies such as LVMH, Hermès, Kering and Richemont have invested in areas far beyond the traditional luxury redoubts of Fifth Avenue and Rodeo Drive, Beverly Hills, opening stores in Austin, Scottsdale, Princeton and Nashville."}],[{"start":83.2,"text":"The investment appears to be paying off, at least for some luxury houses. Revenue at Hermès in the Americas grew 15.3 per cent in the first half of 2026 at constant exchange rates, the strongest of any region, the company said in its July half-year results. LVMH said in October that its US sales continued to grow in the third quarter."}],[{"start":103.28,"text":"This is happening amid a prolonged slump in demand for luxury goods. The number of luxury shoppers worldwide fell from about 400mn in 2022 to 330mn in 2025, back to 2013 levels, according to Bain."}],[{"start":118,"text":"China, once the industry’s primary growth engine, is the biggest drag on sales. LVMH said sales in Asia excluding Japan fell 5 per cent in the third quarter, reversing a 4 per cent rise in the previous quarter, surprising analysts who expected a smaller contraction. Louis Vuitton, which generates most of LVMH’s operating profit, has had a particularly hard summer."}],[{"start":140.68,"text":"The expansion across the US has helped luxury groups offset declining sales in China, as they look to capture new wealth from the stock market boom on Wall Street, driven by the growth of AI."}],[{"start":151.96,"text":"“The relative outperformance of the US compared with broader luxury is expected to be maintained for the next three to five years as long as the wealth effect from the stock market continues,” says Adam Cochrane, retail and luxury analyst at Deutsche Bank. He expects the US will probably become the single biggest luxury market for LVMH and Richemont, replacing China, which makes up 30 per cent of global luxury spend."}],[{"start":176.04,"text":"“The US has been an underpenetrated luxury market for many years on a per capita basis compared with Europe and China, but with the stock market strength and the technology and crypto boom there has been a material increase in the demand for luxury products,” he says."}],[{"start":191.44,"text":"In the US, the expansion still has further to run, says Luca Solca, luxury goods analyst at Bernstein, adding that brands need two kinds of stores in this market. “Major flagships in the core cities to put the brand on the map and give it credibility and more stores locally to tap into the wealthy pockets.”"}],[{"start":209.2,"text":"Groups are also spending more on events to attract wealthy American clients, including LVMH’s sponsorship of Formula 1. This allowed it to host Louis Vuitton and Tag Heuer clients at the US Grand Prix in Austin."}],[{"start":221.6,"text":"Not every luxury brand has found success in the US, despite major investments there. Kering’s comparable sales fell 22 per cent in 2023 and 11 per cent in 2024, and last December it agreed to sell its stake in a $1bn Fifth Avenue location barely a year after it invested."}],[{"start":238.76,"text":"Some of the industry’s recent decline has more to do with prices than geography. Since the pandemic, luxury groups have increased the price tags on leather goods, handbags in particular, at rates that far surpassed general inflation. Amy Odell, who writes the BackRow fashion newsletter, calculated the US price of Chanel’s classic flap handbag rose 104 per cent between 2019 and 2024, compared with inflation of 22 per cent over the same period."}],[{"start":268.24,"text":"“Jewellery has become cheaper in relative terms after the pandemic,” Solca says. “The middle class continue to buy jewellery while it struggles [to afford] handbags.” The best-performing luxury shares this year have been watch and jewellery brands and companies."}],[{"start":283.64,"text":"US President Donald Trump’s tariff war has also forced brands to invest in manufacturing in the US. Louis Vuitton has made leather goods in Alvarado, Texas, since 2019, and said a second workshop will open by 2027."}],[{"start":299.68,"text":"For investors, the overall lesson is that US exposure has not been enough to offset the general luxury industry slump and that the growth may be tied to what many shareholders worry is a technology-driven stock market bubble."}],[{"start":313.2,"text":"In Nashville, the investment’s economics may rest on the local reaction to new stores. A former employee of Hermès’s Beverly Hills store told BackRow that sales assistants preferred to sell its scarcest and most valuable bags to locals who are more likely to return to the store. One Instagram user in Tennessee had already figured this out, posting an excited comment shortly after the Nashville store opened. “Time to meet a new SA!”, they wrote."}],[{"start":null,"text":""}],[{"start":343.44,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794464949_7088.mp3"}