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Deloitte: In Luxury, LVMH Still Rules the Space

The luxury goods sector is expanding its footprint and LVMH is taking the lead with its strong sales growth.

According to Deloitte’s “Global Power of Luxury Goods 2017” report, sales from the top 100 largest luxury goods companies, including LVMH, totaled $212 billion in FY 2015, a 4.5% decline year over year. Luxury apparel companies, including LVMH, Richemont, Kering, Ralph Lauren and PVH Corp., nabbed the top 10 spots, while Valentino experienced the most sales growth, and other luxe apparel tycoons, including Tom Ford, earned a place on the list for the first time.

LVMH, the list’s top luxury goods company, experienced double-digit growth in sales and profit margins for FY 2015. The company, which accounts for more than 10 percent of total luxury goods sales by the top 100 businesses, increased sales by 15.2% to $22.4 billion, earned a total revenue of $39.6 billion and reported a net profit margin of 11.2%. Richemont ranked second with nearly the highest net profit margin in the top 10 list (20.1%). Kering achieved $8.7 billion in sales, 16.4% growth over the previous year, while top 10 U.S. companies, including PVH Corp. and Ralph Lauren, reported a 2 to 3 percent decline in FY 2015 sales growth.

Luxury apparel companies, including Valentino, also outpaced others in terms of sales growth. The company saw a compound annual growth rate (CAGR) of 37.8% from FY 2013-15, topping the list with $1.16 billion in FY 2015 sales. Michael Kors and Kate Spade, which previously held the top two spots, experienced a dramatic drop in growth rates from the 30 percent to 60 percent year-on-year increases they enjoyed in years passed, to increases more in the 8 percent to 10 percent range for FY 2015. Both businesses amass more than 70 percent of their sales from the U.S. market and despite this downfall, still nabbed spots on Deloitte’s fastest 20 list, which means they’ve exhibited consistently high growth.

Newcomers to the top luxury companies list included Acne Studios and Ted Baker. Both companies reported considerable growth in FY 2015 luxury goods sales, with Ted Baker earning $695 million in sales and Acne Studios earning $181 million in sales.

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Although 41 luxury apparel and footwear companies made the list, this product sector overall only generated 4.4% FY 2015 sales growth. This percentage was considerably low compared to other industries, including bags and accessories (13.4%) and multiple luxury goods (10.8%). Most apparel companies made up half of the highest performers and fastest 20 group, achieving strong double-digital sales growth. The fastest growing apparel and footwear company in FY 2015 was Brazilian apparel company Restoque, which grew by 55.2%. More than a third of luxury fashion companies also experienced decreases in sales, including PVH Corp. and Ralph Lauren.

There are two key trends driving the luxury market today. For one, the interest in luxury has shifted from the physical to being more about how luxury makes the person feel, though consumers are still exceedingly keen on quality and craftsmanship.

The other trend arising in the luxury space is the move from standardization to personalization. The changing luxury consumer is far less interest in one-size-fits all and seeking more of a personalized experience.

Apart from those key trends, and as with the way of the rest of retail, digital will be the future of luxury.

“When asked how they see the luxury sector developing in their respective countries, almost half (48 percent) said that e-commerce and m-commerce will become more widespread, while over a third (37 percent) feel that luxury products and technology will become more closely linked,” the report noted.