French luxury and cosmetics giants have reached unprecedented heights of wealth during the pandemic. Consumers, tired of the inconveniences brought by the outbreak, generously opened their wallets to purchase pricey handbags, expensive lavish evening dresses, and familiar beauty products.
However, with inflation following closely, consumers are now tightening their purses sensibly instead of indulging in shopping sprees. According to Bloomberg, the fortunes of three of France’s wealthiest billionaires – Bernard Arnault, Francoise Bettencourt Meyers, and Francois Pinault – are dwindling.
The Bloomberg Billionaires Index shows that these three global billionaires collectively lost $58 billion this year. As their wealth shrinks, the industry giants they control – LVMH, L’Oreal SA, and Kering – have reported reduced demand for high-end goods, especially in China.
Since the beginning of the year, Arnault’s wealth has decreased by approximately $26 billion, making him the biggest loser among the top 500 richest people ranked by Bloomberg. He has also dropped from first place to fifth. The stock price of his luxury conglomerate, LVMH Moët Hennessy Louis Vuitton SE, has fallen by 30% from its mid-2023 peak.
As the Chinese economy continues to stagnate and luxury demand rapidly cools, the latest financial report released last Tuesday (October 15) by this global luxury titan shows that sales in the Asian market, mainly in China, continued to decline, with a year-on-year drop of 16% in the third quarter.
According to the Bloomberg Billionaires Index, the 88-year-old founder of Kering, Francois Pinault, has suffered the largest blow to his wealth, which has decreased by 63% from its peak in August 2021 to $22 billion. This is the biggest shrinkage on the Bloomberg Billionaires Index list, largely due to troubles faced by his flagship fashion brand, Gucci.
During the financial call this week, Kering Group’s CFO, Armelle Poulou, announced the closure of stores, stating, “We are implementing a thorough transformation at Gucci, and the environment is not ideal. This has affected the pace at which we are executing and undoubtedly increased the pain we are experiencing in the short term.”
This week marked the Kering Group’s third sales warning in 2024. Most of Kering’s annual sales come from China, relying heavily on its strong brand Gucci, with the Asia-Pacific region excluding Japan accounting for 35% of its revenue.
Bloomberg reported disappointing performance from cosmetics giant L’Oreal, with the company’s CEO Nicolas Hieronimus stating in a call with analysts, “The turmoil in North Asia exceeded expectations, especially in China’s ecosystem, where the market has become more negative, particularly in luxury.”
He mentioned that although the summer has slowed down, the company’s business in Europe, North America, and emerging markets is still “quite good”, but performance in China is “far below pre-pandemic levels.”