Many households are facing a cost of living crisis and soaring energy bills, but the wealthy have no such problems, reported De Standaard.
In fact, the sale of luxury goods continues to boom and there's no shortage of champagne, expensive clothing or handbags. Demand remains high for precious jewelry – luxury multinational LVMH (parent company of Louis Vuitton, Dior, Moët & Chandon, and others) announced great results for the first half of 2022, with turnover rising by 28% and profits by 34%.
The whole luxury sector is experiencing a golden age, according to an economic review of the sector from Bank of America. Demand for luxury items has increased across all major markets, including the US, Europe and Asia.
The growth was achieved despite an economic downturn and Covid-19 measures still disrupting the Chinese market. Nevertheless, the Bank of America expects the luxury sector to grow by 14% in 2022, the second highest growth rate in a decade (excluding the recovery year of 2021).
Return of tourism
The resurgence in international tourism helps explain why the sector is doing so well. Bank of America analysed credit card data which shows that spending on luxury goods remains high as ever, regardless of inflation and the energy crisis.
The rise in food and energy prices has sapped the purchasing power of many households but the wealthy are almost unaffected. Inflation can even be an advantage for luxury brands as it encourages people to convert their savings into cash.
Many international conglomerates have been able to maintain their profits despite inflation and haven't cut dividends. In the first quarter alone, $302 billion was paid in dividends globally – up 11% on the previous quarter. Dividends are often a significant source of income for the wealthy.
In addition to LVMH, luxury companies such as Prada, Hermès, Moncler, Richemont (Cartier, Delvaux) and Kering (Gucci, Yves Saint-Laurent) have reported strong half-year results.
In the aviation sector, CEO of Air-France-KLM, Ben Smith, pointed out that wealthy customers are prepared to pay considerable amounts, and that tickets for transatlantic flights in first class are sold months in advance. These tickets can cost up to €17,000 for a return trip from Paris to Los Angeles.
For sports car manufacturer Ferrari, business was better than ever in the first quarter of 2022, with the brand selling 29% more cars than a year before. In Belgium, 90 new Ferraris left the company's showroom compared to 71 in 2021.