By Andrea Figueras

Luxury companies start to report results for the fourth quarter this week. Here is what you need to know.

After the boom in demand following the peak of the pandemic, the luxury industry slipped into a downward trend, as high-end shoppers--particularly those less affluent--have become more frugal in light of the macroeconomic environment.

The pullback in spending on pricey clothing and accessories has been particularly acute in China, once a growth engine for the industry. The country is contending with domestic economic woes, which have prompted Chinese consumers to axe their luxury budgets.

"The times of hyper growth that the industry has experienced in the past few years are not coming back anytime soon," Gemma D'Auria, senior partner at McKinsey & Co and leader of the firm's global apparel, fashion and luxury sector, said in an interview.

There will likely be no change in trends in the fourth quarter from the third, Berenberg analysts Nick Anderson and Harrison Woodin-Lygo said in a note. However, there are hints and optimism emerging around growth in the U.S., they said.

WHAT TO WATCH

-- BETTER TRENDS IN THE U.S.: After the uncertainty around the presidential election, a key market for the industry, spending on luxury goods could have picked up in the fourth quarter. Revenue trends should sequentially stabilize with potential upside risk, helped by wealth creation, post-election certainty and supportive macroeconomic trends, RBC Capital Markets analysts said in a note. Donald Trump's broader policy agenda, which is viewed as positive for equities and wealth creation, will ultimately boost American luxury spending, Berenberg analysts said.

-- SUBDUED DEMAND IN CHINA: Fourth-quarter trends will be broadly in line with those reported in the previous three months, with subdued demand in China, Berenberg analysts said. However, RBC Capital Markets says that the situation in China for luxury brands is unlikely to worsen from trough levels. Fourth-quarter sales looked less bad than those in the previous quarter for most luxury companies, Barclays analysts wrote in a note. This is partly due to improved sentiment following the announcement in September of stimulus measures. However, no meaningful and sustainable demand recovery is yet visible, Barclays said, adding that weakness might continue in 2025.

-- PRICE INCREASES: The luxury market faces growing fatigue from customers after years of aggressive price increases, Third Bridge analyst Yanmei Tang said in a note. Soaring price points have alienated so-called aspirational shoppers, who are less wealthy and whose spending power has been eroded by inflation, the analyst said. In this context, the main concern related to the U.S. is the potential implementation of tariffs. "Normally brands may have been able to pass on import duties onto their consumers," Gemma D'Auria said. "This time, that is not going to be possible because consumers are sick and tired of the price increases of the past few years," D'Auria said, adding that this will put pressure on margins, as companies will have less room to maneuver.

WHEN COMPANIES ARE SCHEDULED TO REPORT:

-- Richemont: sales update on Jan. 15

-- Burberry: sales update on Jan. 24

-- LVMH Moet Hennessy Louis Vuitton: full-year results on Jan. 28

-- Salvatore Ferragamo: preliminary full-year revenue update on Jan. 30, full-year results on March 6

-- Kering: full-year results on Feb. 11

-- EssilorLuxottica: full-year results on Feb. 12

-- Moncler: full-year results on Feb. 13

-- Hermes International: full-year results on Feb. 14

-- Prada: full-year results on March 4

-- Hugo Boss: full-year results on March 13

-- Brunello Cucinelli: full-year results on March 13

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

January 15, 2025 08:11 ET (13:11 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.