There was some welcome news for the leather industry this week as several of the world’s biggest names in luxury goods expressed the view that the worst of the recession that has dogged the sector since September 11 2001 was finally over.  The end of the Iraq war, the rapid containment of SARS, and the continuing recovery in international tourism were cited as the main factors at work.

First came Gucci’s second-quarter results, released Tuesday.  While first half sales (ended July 31 2003) were seen as “disappointing”, with an 8% sales decline being noted in the group’s biggest earner of leather goods, by the middle of October the picture had changed completely, with strong double-digit growth being recorded in core Gucci Division sales in Europe, Japan, Hong Kong and the United State.

“In July we commenced delivery of our superb fall/winter collection,” commented chief executive Domenico De Sole, “and we immediately began to experience the most significant sales growth we have seen since the luxury goods recession began on September 11, 2001.  The outlook is now very positive.  We have already received outstanding levels of reorders for fall/winter merchandise from our key wholesale accounts and very strong reaction to our cruise, main and fashion collections for spring/summer 2004.  Importantly, led by the exceptionally strong handbag and leather goods collections, other product categories such as shoes and ready to wear are participating in this growth.”

A similarly upbeat outlook was presented by rival LVMH (Louis Vuitton Moët Hennessey) which posted its third quarter results the same day.   Again, sales were up across the board with the main growth being seen in leather goods, handbags especially.  The same view was also taken that the upturn was the beginning of a new and much more positive direction.  

“The group expects this momentum to extend through the fourth quarter,” the company said , “Tourism levels have continued to improve in October and there appear to be signs of a sustained economic recovery in the US and Japan.”  As it was, sales grew 6% in the third quarter with fashion and leather goods rising 7% on a currency-neutral basis, beating expectations of the analysts and putting the group back on track to its full year outlook.

Not that the good news was limited to the European-based brands.  In the US, the upmarket Neiman Marcus retail chain, which operates 36 stores nationwide, reported a 14.7% rise in same store sales compared with September 2002, while Bloomingdales estimated its designer clothing sales had risen 15 percent in the previoius six months.  UK brand Burberry also posted positive results during the week, with the 17% rise in its sales beating even the company’s own expectations.

It would appear that after two of the most difficult years in its history, the $63 billion a year luxury goods industry – and the international leather sector with it - at long last has an outlook it can look forward to.

Share this story: