How luxury fashion labels have lost their luster as the super-rich feel the impact

The world’s biggest luxury companies have lost almost £100bn in the past year.

The fashion world has been dominated this summer by commercial innovations that have had repercussions throughout the sector.

The disastrous stock market results have hit companies including LVMH, Hermes, Prada, Gucci owner Kering and British brands Burberry and Mulberry.

And it has also been a tough time for Essilor Luxottica, the Italian-French owner of Rayban, Tapestry, the owner of New York-listed Coach, and Cartier’s parent company, Richemont.

According to an analysis carried out for the Daily Mail by investment platform AJ Bell, some £98.6bn of the value of these companies has been lost in the past 12 months.

The Paris Olympics should have set the scene for a glorious summer when tourists flock to Europe to shop, but luxury groups have warned that profits will fall and have had to cut prices.

Ambient music has been gloomy since post-pandemic “revenge spending” lost steam a couple of years ago.

China, the world’s second-largest economy, has been hit by a debt crisis in its property sector, and consumers in Britain have been hit by inflation.

LVMH, the world’s biggest luxury conglomerate, is responsible for most of the fall due to its mammoth size. It has lost £81bn in a year, just under a quarter of its value last year.

The French group, whose brands include Givenchy, Celine, Stella McCartney and Louis Vuitton, even lost its position as Europe’s biggest company to Novo Nordisk, the maker of weight-loss drug Ozempic, last September.

But of particular concern is the attack on Britain’s heritage labels.

Burberry, which makes its trench coats in Castleford, west Yorkshire, is worth £5.4bn less than last year. Shares are down 65 per cent.

Handbag maker Mulberry has launched a turnaround mission following the ouster of chief executive Jonathan Akeroyd this summer. Thierry Andretta has been replaced by former Ganni boss Andrea Baldo in the role of director.

It is down 58 per cent, having lost £84m of its value.

And the low valuations of both British fashion houses have sparked fears that they could be the next companies to be squeezed off the London Stock Exchange by private equity sharks.

Both brands have been adamant that the government should scrap the hated tourist tax to revive spending on high-end goods in London.

Their cries for help fell on deaf ears by the Tories, as it was former Prime Minister Rishi Sunak who scrapped the refund incentive for holidaymakers.

While Burberry and Mulberry are in serious trouble, not all luxury groups are experiencing difficulties to the same extent.

Hermes has managed to more or less maintain its £180bn valuation this year.

Its latest results, for the April-June quarter, helped it counter gloom elsewhere. Subtle designs, including its trademark £12,000 Birkin bags, helped it continue to sell products in China.

“Chinese customers are very sophisticated and are looking for high-quality products, not necessarily with logos. This helps us,” says President Axel Dumas.

The super-rich still consider Hermes a must-have item.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Supply is deliberately kept well below demand, creating a sense of elusiveness. This increases the appeal for the super-rich, who see owning such a hard-to-find bag as a status symbol.”

Jelena Sokolova, senior equity analyst at Morningstar, said: ‘Overall, the trend is towards “quiet luxury” rather than more logo-oriented products following the success of TV shows like Succession, Instagram influencers like the Gstaad Guy and possibly a reduced desire to flaunt wealth in a more subdued economic environment.’

But Gucci and Burberry have struggled because of revolving doors at the top and greater exposure to aspirational buyers who aren’t super-rich.