Uncertainty over the US presidential elections - compiled with earlier Terror threats in Europe and a strong dollar - has eroded the confidence of the globe's big-spenders, holding luxury purchases flat in 2016, according to a recently released study. Spending on luxury apparel, accessories and other personal items is expected to hold steady at 249 billion euros ($273 billion) this year, per a study by Bain Consultancy for the Altagamma association of Italian high-end luxury producers. Add in spending on luxury cars, yachts, jets, cruises, hotels, fine art, design and food, and the market tops a stunning 1 trillion euros.
As political events and monetary policy exert greater influence on luxury spending patterns, brands have turned their focus to wooing buyers in their home countries rather than counting on tourist arrivals to buoy sales, said Bain partner Claudia D'Arpizio.
"This is not happening by default," D'Arpizio. "Brands are refocusing on the local customer base and working to develop products that are more affordable and more inclusive to meet their needs."
While US presidential elections always put the freeze on consumer spending, D'Arpizio said this year's squeeze was a little tighter due to a strong dollar, which also hurt tourist spending, and higher oil prices. In fact, according to Reuters, Americans are “too distracted or distraught by this year's wild presidential campaign to think about almost anything else, at least that is the word from a clutch of corporate executives in recent weeks who have laid at least some blame for their companies' rocky performances or uneven consumer demand at the feet of constantly bickering White House contenders Hillary Clinton and Donald Trump.”
Since the start of October, executives from more than 80 U.S. companies have made some mention of the U.S. election during quarterly conference calls with Wall Street analysts and investors, per Reuters. In many cases, their remarks have come in response to specific questions from call participants about whether the long campaign season has had an impact on results. Some, though, have specifically pointed to the election as a factor in their earnings, including by damping consumer or business spending. For example, appliances maker Whirlpool and coffee and doughnuts chain Dunkin' Brands have directly blamed the elections as a drag on their business. Shares of both companies fell after their reports.
In Whirlpool's case, CEO Jeff Fettig pointed to apparent "temporary softness in industry demand" in the United States in explaining why sales dipped around 0.5 percent from a year earlier, undershooting Wall Street's forecasts. "We believe this is due to consumer confidence weakening, primarily due to the focus around the U.S. elections," he told analysts on the appliance maker's conference call last month.
At Dunkin' Brands, CEO Nigel Travis cited a hesitance by franchise operators to open new stores until they get a grip on how the election outcome will affect regulations and minimum wage laws. Executives at other companies, such as furniture chain Ethan Allen, staffing firm Robert Half International, and hotel operator Hilton Worldwide, have also cited the election as a pressure point as they discussed the business climate.
The election "really has impacted customers and clients. It's taken a tremendous amount of attention from especially discretionary budgets," said Farooq Kathwari, chairman, president and CEO of Ethan Allen Interiors.