Burberry reported its revenue for the first half of the year on Thursday, pointing to sales of 1.35 billion pounds ($1.6 billion), a 5 percent year-over-year increase based on constant exchange rates, and 11 percent rise on a reported FX basis, driven by spending in Europe; sales in its native United Kingdom suffered due, in large part, to the removal of the value-added tax incentive for tourists. Adjusted operating profit for the British fashion brand for the first six months of the year grew by 6 percent (at constant rates) to 238 million pounds ($281 million). 

Delving into what worked for the first half, Burberry stated in a release on Thursday that “new product launches and seasonal collections performed strongly,” as leather goods sales saw “good momentum with comparable sales increasing by 15 percent in Q2 and 11 percent in H1.” Leather goods growth was led by handbags, such as the Lola bag, which Burberry says is now its best seller, and the newer Frances shape. Also on the up: Outerwear, which boasted comparable sales rising by 3 percent for the first half. While growth was impacted by lockdowns in Mainland China, Burberry confirmed that its performance outside of Mainland China was “robust,” increasing by 18 percent thanks to “a strong performance across both Men’s and Women’s [offerings].” 

Geographically speaking, Burberry’s outgoing CFO Julie Brown addressed the brand’s sales slump in the United Kingdom: ”We are not seeing the same degree of tourism in the UK as we used to because we are seeing more tourists” – from the Americas, Middle East, and Asia regions – “going into Paris and Milan.” Brown blames at least some of that on the UK government’s move to do away with a reintroduction of a VAT-free shopping program for foreign visitors to the UK, which would have enabled them to obtain a full refund of sales tax paid on goods purchased on “the high street, at airports and other departure points and exported from the UK in [shoppers’] personal baggage.”

Reflecting on Burberry’s results, Bernstein analyst Luca Solca said in a note on Thursday that it is “one of the most exposed brands to aspirational consumers,” who are much more impacted by “energy and food price inflation, as they have a more limited discretionary spend capacity.” This explains the company’s “cautious commentary on the current market environment,” Solca stated. (Maintaining its near-term guidance to FY24, Burberry cited the “challenging macro environment and its potential impact on trading, particularly Covid-19 related disruption in Mainland China and recessionary risks in Europe and the Americas.”) 

In addition to the H1 revenue report, Burberry CEO Jonathan Akeroyd presented his much-anticipated strategy for Burberry, which was, until recently, undergoing an upmarket-move at the direction of former CEO Marco Gobbetti, who left to join Ferragamo. While analysts agree that Burberry is better-situated than when Gobbetti joined in 2016, it still suffers from a positioning point of view, lagging behind “competitors like Gucci, Prada and Loewe in creating a sharp brand in recent years,” per Reuters. This is where newly appointed creative director Daniel Lee, who revived Bottega Veneta in the eyes of younger consumers, is expected to help play an “important part in re-igniting interest,” according to Mario Ortelli, managing partner at advisory firm Ortelli & Co.

The key takeaway from the high-level strategy plan: Akeroyd, who joined Burberry from Versace in April, says that he aims to “broadly double sales of leather goods, shoes and women’s ready-to-wear, and grow outerwear by around 50 percent in the medium term,” with the “ambition to grow accessories to more than 50 percent of Group sales in the long term.” 

Burberry plan outline

It is not a surprise that Burberry is looking to focus more on accessories (read: leather goods). “Accessories are the real money-maker in luxury,” Neev Capital managing director Rahul Sharma stated in response to Akeroyd’s plan. It is why “every ready-to-wear brand from Versace to Burberry wants a piece of the action.” As for how successful Burberry will be in cracking the accessories code in a meaningful way is a bit less straightforward, with Sharma noting that getting (and holding on to) a bigger piece of the accessories market is “not easy – apart from scoring a hit bag or two,” and that is not made simpler by the fact that this segment of the market is crowded by the biggest names, which have a particularly strong hold.

The luxury segment “remains poised” to post striking growth for 2022 and keep rising thereafter, projected to achieve a market value of “some 1.4 trillion euros” ($1.45 trillion) in sales revenue this year, a 21 percent rise over 2021. According to the 21st edition of its Luxury Study, which it released in collaboration with Italian luxury goods body Fondazione Altagamma, Bain & Company states that the luxury market showed “a continuation of 2021’s potent recovery in 2022, despite rising macroeconomic pressures throughout the year,” with the global consulting firm projecting that gains could carry well into 2030.

While “all luxury categories thrived,” having now recovered to 2019 levels or better, and 95 percent of luxury brands seeing “positive growth” thus far in 2022, Bain revealed that the personal luxury goods industry, in particular, “saw further growth acceleration this year, coming on the heels of the V-shaped rebound [it] enjoyed in 2021.” (Bain highlights hard luxury, leather goods, and apparel as “leading the resurgence following the pandemic.”) Boosted by a strong market performance across quarters, and “despite macro-economic indicators worsening globally,” including increased labor costs, interest rates, supply chain challenges, and energy costs, as well as specific challenges in China, the personal luxury sector is set to see the value of its sales jump to 353 billion euros in 2022, “marking an advance of 22 percent at current exchange rates (or 15 percent at constant exchange rates)” compared to the previous year.

Looking at the luxury market from a regional perspective, and mirroring what luxury groups like LVMH and Gucci-owner Kering have stated in recent revenue reports, Bain’s analysts found that South Korea and Southeast Asia were “stellar” luxury markets in 2022, and the U.S. and Europe “enjoyed strong growth.” Bain notes that the companies’ performances during the last quarter of this year will be “largely dependent on the progressive lifting of Covid-19 pandemic restrictions in China, as well as evolution of European and American luxury consumer confidence in the face of rising inflation and cost of living pressures, and potential recession in the U.S. and European economies.”

Bain & Co. chart of luxury sales

In terms of mainland China, in particular, which has been constrained by strict Covid-19 lockdowns, Q4 will be telling. Bain says that it expects China to recover next year, and depending on the strength of that key market, the consultancy says that it sees “two likely scenarios” for 2023: Personal luxury goods sales growing by 3 percent to 5 percent or growing at a heightened 6 percent to 8 percent at constant exchange rates. 

Looking further ahead to 2030, Bain states that the prospects for personal luxury goods market are “highly positive, with the market’s value projected to rise to 540 to 580 billion euros – up 60 percent or more from the 353 billion euros estimated for 2022. Such growth is likely to be driven by “new tech-enabled profit pools” and “strong generational trends,” according to Bain’s report. In the coming years, spending by Gen-Z consumers and their even younger “Gen Alpha” counterparts is set to grow “three times faster than for other generations until 2030,” and will make up a third of the market. “This is, in part, driven by a more precocious attitude towards luxury, with Gen-Z consumers starting to buy luxury items some 3 to 5 years earlier than Millennials (at 15 years-old, versus at 18-20 years-old), and Gen Alpha expected to behave in a similar way.” (Generation Alpha are defined as those born between 2010 and 2024.)

Reflecting on other “key trends,” Bain asserts that “new markets are surprising the industry,” with South-East Asia and South Korea, for example, “winning in terms of growth and potential,” as the U.S. luxury market remains “strong.” There is little likelihood of there ever being “another China” in terms of luxury goods sales growth, but Bain contends that “India and emerging Southeast Asian and African countries have a significant potential nevertheless,” assuming that they catch-up in terms of infrastructure to facilitate the expansion locally. “Among the rising stars,” according to Bain, is India, which “stands out for growth potential, which could see its luxury market expand to 3.5 times today’s size by 2030, propelled by an increasing interest and evolving attitudes and behaviors among (young) customers towards luxury goods.” 

As for other trends: (1) A mix of physical and e-commerce retail will continue to play out, with stores expected to play a solid role going forward, as online channels are seeing a normalization in their growth; (2) The luxury market’s consumer base is broadening with some 400 million consumers in 2022 expected to expand to 500 million by 2030, and in the process, the consumer base is becoming more “elevated,” with consumers “hungry for unique products and experiences, and putting brands VIC (Very Important Client) strategies into overdrive;” and (3) An elevation shift is underway, as brands look to increase prices “across the industry (driving around 60% of the 2019-2022 growth) without damaging volume growth.”

Revenue for Richemont rose by 24 percent on an actual exchange rate basis (and 16 percent on a constant basis) to 9.7 billion euros ($9.88 billion) for the first six months of the fiscal year, while operating profit rose by 26 percent to 2.7 billion euros. In an H1 report on Friday, the Swiss luxury goods group said revenue was driven by “strong” demand for jewelry from Cartier and Van Cleef & Arpels, with sales in the jewelry division up by 24 percent for the first half (ending on September 30) and watch sales up by 22 percent. “This points to mega-brands at the top of their categories continuing to extend their lead against competitors,” Bernstein analysts said in a note on Friday. 

The regional breakdown: Compared to H1 2021, Richemont revealed that it saw double-digit sales increases “across all business areas, channels and regions, excluding Asia Pacific, where sales grew by 3 percent” as a result of “temporary boutique closures in mainland China and Macau due to the continued enforcement of the zero-Covid policy.” The European market delivered a 45 percent YoY revenue increase for Richemont, “fueled by strong local demand and resumed inbound tourism from the U.S. and the Middle East following the easing of most restrictions on international travel.” 

In N. America, reported sales grew by 22 percent, “continuing trends seen in the first quarter of the financial year, notwithstanding many Americans purchasing abroad.” Growth momentum in the U.S. was the highest for the watch division, per Richemont. As for Japan, which posted the “strongest regional sales growth rate” of 76 percent, sales came by way of “strong domestic demand, a nascent return of tourists and lower comparatives due to boutique closures in the prior-year period.” And finally, in the Middle East & Africa, sales rose by 12 percent thanks to “solid domestic and tourist spending, notably in Dubai.” 

Richemont revenue by region

According to Bernstein’s note, Richemont “sees strong underlying demand from consumers, first from Chinese nationals and in more recent times from customers in the USA, Europe and Asian countries outside of China, across age groups,” with younger consumer cohort proving to be particularly strong, “partially because of the marketing efforts carried out in the past few years.”

In terms of the physical retail vs. online breakdown: Richemont revealed that the retail sales channel grew in all regions, “most notably in the Americas, Europe and Japan,” reaching a 21 percent increase, while online sales rose by 9 percent YoY “as the Group’s Maisons continued to expand their digital presence.” The largest progression in the period came from the Specialist Watchmakers where online retail sales reached 3 percent of sales. “Overall, online retail sales contributed 6 percent to Group sales, broadly in line with the prior-year period,” the group reported. 

Richemont noted that “following the reclassification of YNAP sales to discontinued operations, ‘Online retail’ now comprises online retail sales directly generated by the Group’s Maisons and Watchfinder.” 

As for the group’s individual divisions: Its three Jewelry Maisons – Buccellati, Cartier and Van Cleef & Arpels – generated a combined 24 percent YoY increase in sales for a total of 6.34 billion euros, with “all product categories” performing well. “Iconic jewelry collections, such as Clash and Trinity (Cartier), Alhambra and Fauna (Van Cleef & Arpels) and Opera Tulle and Macri (Buccellati), to name a few, continued to outperform.” 

Richemont management said in a call with analysts on Friday that they see “untapped opportunities in the branded jewelry segment alongside strong pricing power.” At the same time, though, they also see “intensifying competition in hard luxury” – presumably from LVMH with its budding Tiffany & Co. revamp, for instance – “and is prepared to continue to invest, when needed, to maintain a leading position.” 

The “Specialist Watchmakers” division generated 2.04 billion euros (up 22 percent), with performance here driven by “strong direct-to- client sales: Retail and online retail sales continued to expand sharply, and combined, contributed to 54 percent of the Specialist Watchmakers sales.” 

Richemont revenue by group

Finally, the “Other” division – which includes the Fashion & Accessories Maisons, Watchfinder, the Group’s watch component manufacturing and real estate activities – generated 1.29 billion euros in revenue. “Nearly all Maisons recorded strong growth, with Delvaux and Peter Millar being particularly noteworthy,” according to Richemont. Alaïa sales also “grew sharply, benefiting from a renewed creative vision.” 

Delving into the headline-making YNAP deal, Richemont chairman Johan Rupert stated on Friday that the agreement for Farfetch and Alabbar to acquire 47.5 percent and 3.2 percent of YNAP, respectively, which leaves Richemont holding 49.3 percent, “will realize my long-standing goal of making YNAP a neutral industry- wide platform, with no controlling shareholder.” Richemont will receive Farfetch shares, “expected to represent 12-13 percent of Farfetch’s issued share capital, to further align interests,” he stated, noting that “subject to a number of conditions, including the receipt of certain antitrust approvals, the initial stage of the transaction is expected to complete before the end of calendar year 2023.” By that point, he says that Richemont’s Maisons will “adopt Farfetch’s technology to create the best ‘route to market’ and realize their ‘Luxury New Retail’ vision.”

Kering beat analysts’ expectations for revenue for the third quarter, reporting sales of 5.14 billion euros ($5.03 billion) for the three-month period ending on September 30, up 14 percent compared to the same period in 2021 (analysts anticipated 12 percent) and up 28 percent over pre-pandemic 2019. The Gucci, Saint Laurent, Bottega Veneta, and Balenciaga owner’s three-month gains were driven by sales growth in all regions, and a “hefty contribution” from American tourists banking on the strength of the dollar in Europe, the French luxury goods group revealed on Thursday. Sales at Kering’s marquee brand, Gucci rose by 9 percent during Q3, but that was not enough to match analysts’ expectations, which put a 11 percent figure on the brand’s sales growth. 

Delving into its biggest brand, Kering reported that GUCCI generated revenue of 2.58 billion euros ($2.52 billion), up 9 percent on a comparable basis. “Sales generated in directly operated Gucci stores grew 9 percent on a comparable basis, [with] momentum remaining very strong in Western Europe, supported by both local customers and tourists, particularly from the U.S.,” per Kering. The flip side of luxury-shopping American tourists was that growth was muted in North America. Meanwhile, the brand’s performance in Mainland China was “mixed, impacting sales in Asia-Pacific, where overall trends posted a notable improvement.”

As for wholesale revenue for Gucci during Q3, that totaled 2 percent, and demonstrates that Kering’s effort to significantly rein-in wholesale channel activity for the brand is “now complete.”

Kering revenue chart

More of a shining star from a growth perspective, Kering’s second-largest brand SAINT LAURENT boasted 30 percent comparable growth and 916 million euros ($896.4 million) in revenue. Sales in directly operated stores were up by 38 percent from Q3 2021, “driven by all product categories.” Revived tourism and desirability with local customers led to sales in Western Europe that were double those of Q3 2021, while Saint Laurent benefitted from a “sturdy performance in N. America, and strong growth in Asia Pacific and Japan.” On the product side, the brand reported high double-digit growth in all categories thanks to “existing products and very successful introductions.” 

Wholesale here grew, per Kering, which cited demand for Saint Laurent’s Fall/Winter collection as driving wholesale revenue up by 13 percent on a comparable basis.

BOTTEGA VENETA revenue totaled 437 million euros ($427.7 million) for the third quarter, up 14 percent on a comparable basis. “Growth was driven by sales in directly operated stores, up 20 percent on a comparable basis, reflecting the excellent reception of Matthieu Blazy’s first collection” and “particularly remarkable” sales in Western Europe and Japan. The brand’s wholesale revenue fell 5 percent, in line with what Kering says is the “house’s strategy of streamlining this channel.”

As for Kering’s OTHER HOUSES, the largest of which are Alexander McQueen and Balenciaga, sales in the third quarter totaled 995 million euros ($973.7 million), an increase of 13 percent. Sales at Balenciaga and Alexander McQueen were “particularly buoyant across all product categories.” 

Geographically speaking, Kering pointed to sales in Western Europe (up 74 percent) and Japan (up 31 percent) as “particularly outstanding,” while a small rise in North America market (up 1 percent) “reflects the high comparison base together with the hefty contribution from American tourists to European sales momentum.” Still yet, growth in Asia Pacific (up 7 percent) was “robust,” despite the impact of Covid restrictions in Mainland China.


Reflecting on Kering’s results, Jefferies’ analysts Flavio Cereda and Kathryn Parker states that Gucci –whose “shortcomings are more obvious” – is still in “an odd limbo as it seeks to regain brand appeal, but China is not helping and this is not changing anytime soon.” The brand, which generates almost half of the group’s revenue, “needs a trend reversal with some urgency, yet we fail to see how in the short term.”  

Meanwhile, in a separate note, Bernstein analysts pointed to Kering management’s focus on Gucci’s newly-appointed design and China management team, which have a brand “elevation plan” in place, with three focus areas: (1) Gucci’s return to the fashion calendar with six collections in 2023; (2) Expansion of Gucci into the high-end offer, which is a priority; and (3) The men’s and travel category expansion where they have not yet reached the full potential.

And still yet, in a Q3 call with analysts on Thursday, which largely focused on the slowdown of Gucci and the success of Saint Laurent, Kering’s management provided some interesting insight about its trademarks in Russia. CFO Jean-Marc Duplaix revealed that the group is “taking time to assess the situation” in Russia, noting that it is “not a very simple question.” The group has “strictly applied the [sanctions] rules,” and closed all of its stores in Russia (a “few” Gucci outposts and one Boucheron) in early March, with Duplaix saying that even before the closures, Kering did “not have a huge exposure to Russia, and especially not through direct operations.” 

The group will continue to monitor the situation and is prepared to take some decisions “if needed,” per Duplaix, “considering also that we need to protect our brand and trademarks in the country.” This requires a “presence in the country,” where Kering is currently still paying rent for its stores and paying employees, and so, Kering will measure the “best balance” even if they do not expect to be able to operate in the country again in the “short term or mind term.” 

Hermès touted “very good sales momentum” for the third quarter generating 3.1 billion euros ($3.03 billion) for the three-month period ending on September 30 (up 24 percent year-over-year – significantly greater than the analyst consensus of 15.3 percent), “with strong growth in all the business lines,” and 5.5 billion euros ($5.38 billion) in revenue (up 23 percent at constant rates) for the first nine months of the year. The French group highlighted “high levels of sales” across all of its groups, with the Ready-to-wear and Accessories, Watches and “Other” divisions posting “a remarkable increase in the third quarter.” 

Looking at the individual categories, Hermès’s mighty Leather Goods and Saddlery division, which saw revenue rise to 1.3 billion euros ($1.27 billion) in Q3 up by 13 percent (despite the usual limits on output), benefitted from “the strong rebound in Greater China in Q3 and very sustained demand,” according the the group Hermès. Leather Goods and Saddlery sales for the first 9 months grew by 12.5 percent to 3.7 billion euros ($3.62 billion). Ready-to-wear and Accessories sales were up by 38 percent in Q3, driven, in part, by the “great success” of fashion accessories. 

Watch sales grew by 55 percent “thanks to the development of pieces with exceptional know-how, such as the Arceau, Le temps voyageur watch and the success of the new H08 watch.” And still yet, “Other” Hermès sectors were up by 31 percent in Q3 due to “highly dynamic growth, both in Homeware and Jewelry.”  

Hermès revenue chart

Sales in the group’s stores were up 23 percent in Q3, per Hermès, while a 26 percent rise in wholesale activities “reflected the resumption of travel retail.” At the same time, Hermès management said on a call on Thursday that growth in s-commerce sales continues to outpace brick-and-mortar across all regions. 

Geographically speaking, all the areas posted very strong performances as of the end of September, according to Hermès. Highlights here include … Asia excluding Japan (+21 percent) continued its “strong momentum,” thanks to a 34 percent rise in sales for Q3. Sales in Greater China “picked up strongly, despite temporary closures,” resulting in what the group says is a “spectacular” recovery, particularly in Beijing and Shanghai, with sales driven by organic growth and not the result of price increases.

Japan (+21 percent) confirmed “the regularity and solidity of its growth, thanks to the loyalty of local clients.” Americas (+28 percent) continued on an upward trend in Q3. Europe excluding France (+25 percent) and France (+28 percent), supported by “the loyalty of local customers, benefitted from the recovery in tourist flows, especially in France, the United Kingdom and Italy.” 

Hermès revenue chart

Hermès has the “lowest impact from tourism” compared to its luxury peers, according to Neev Capital managing director Rahul Sharma. So, its regional results “directly show strength by nationality.”

Looking ahead, management says that price increases are coming, with the company slated to boost prices by 5 to 10 percent in January to make up for increased materials and labor costs, particularly in Europe. Hikes are expected to be smaller in the U.S., China, and Singapore compared to the EU and Japan. These annual increases follow from a 4 percent jump put in place early this year – that is up from the usual 2 percent annual rise in recent years). 

Another forward-facing point centers on Hermès’s supply chain, with management revealing that there may be issues in Q4, as vendors “under pressure from inflation and the sourcing of raw materials.,” which may result in delays. Nonetheless, in light of the fact that Hermès is “hiring at full steam” and handing out “bonuses/raising wages for all staff,” Sharma asserts that we “could not get more positive signals about the health of the business.”