What: Luxury groups shift strategic priorities from China to the US market as global sector faces its lowest sales rates in years.

Why it is important: This shift demonstrates how luxury brands are actively responding to market polarization, with the US emerging as a potential growth driver while Chinese consumer behavior undergoes significant transformation.

Global luxury goods companies are strategically pivoting towards the US market amidst ongoing challenges in China. The industry's recalibration is evidenced by positive signs in US luxury credit card spending, which rose 1% year-on-year in December, marking the first increase in over two years. This shift comes as the EUR 363 billion global luxury goods market grapples with historically low sales rates, complicated by China's property crisis and sluggish economy.

Major luxury conglomerates, including LVMH and Kering, are particularly focused on leveraging US wealth, buoyed by strong stock market performance and cryptocurrency gains. The potential implementation of tariffs by US President-elect Donald Trump could further strengthen the dollar, enhancing Americans' purchasing power for European luxury goods. Meanwhile, the Chinese market's challenges have significantly impacted the sector, with LVMH losing over 30 billion euros in market capitalisation over six months. The industry faces a complex balancing act, managing reduced Chinese consumer appetite while developing strategies to capture growing US market opportunities.

IADS Notes: The luxury industry's strategic pivot towards the US market, as discussed in the article, aligns with significant shifts observed throughout 2024. In October 2024, LVMH's notable 5% decline in fashion and leather goods sales highlighted the challenges in the Chinese market, while June 2024 revealed a growing "luxury fatigue" among Chinese consumers, who increasingly prefer discreet luxury experiences.

This transformation comes as the global luxury sector faces its most challenging period since the Great Recession, with December 2024 data showing a 2% market decline and the loss of 50 million consumers. The industry's response, including the focus on US growth potential and the adaptation to changing consumer behaviors, reflects a fundamental restructuring of the luxury market landscape, with American consumers projected to drive over a third of global luxury growth in 2025.

As China weakness endures, luxury groups pin hopes on US growth