Investors are bracing for a steep slowdown in luxury sales when luxury companies report their first quarter results, reflecting lacklustre Chinese demand and comparisons with last year when the lifting of Covid curbs in mainland China boosted sales.

LVMH, the world’s biggest luxury group, is first to report on April 16, followed by rivals Kering, Prada and Hermès a week later. Burberry and Richemont follow in May.

A surprise warning from Kering last month that first quarter sales would be down by 10 percent rather than 3 percent expected by analysts has already cast a cloud over the reporting season.

The group blamed a slump in sales in Asia from its star label Gucci. But its poor performance prompted concern that other high end fashion labels might be also struggling in China.

“We’ve got a lasting crisis and we don’t know where things are heading,” said Olivier Abtan, consultant with AlixPartners.

“All growth engines have been off for number of quarters,” he said, describing the slump as unprecedented.

Chinese tourists in Hong Kong, Macau and Singapore also do not seem to be the “spending kind,” according to analysts at HSBC.

Kering’s problems in China are part of the reason why its valuation is lagging that of rivals. Its present 12 month forward price-to-earnings ratio of 16 compares with 24 for LVMH and 51 for Hermès, according to LSEG data.

Kering shares have lost 15 percent since its warning, with LVMH down 7 percent. Hermès, seen as less vulnerable than rivals thanks to its wealthier client base, is down 2 percent.

Uncertainty hangs over how much shoppers’ appetite for high end fashion will recover in the near term, even once comparative numbers become less challenging. Annual growth for global sales of luxury goods will slow to mid single percentage digits from nearly 9% last year and double digit growth in the previous two years, according to analysts at Barclays.

Faced with rising cost of living, shoppers have become more selective about high end merchandise, widening the gap between stronger performers, including top labels such as Louis Vuitton, Chanel and Hermès, and brands like Burberry, which is undergoing an overhaul.

“Some brands will benefit more than others — we have started to see that very clearly in the past two years,” said Caroline Reyl, head of premium brands at Pictet Asset Management.

Sales growth is expected to slow even for faster growing companies, such as Prada, whose label Miu Miu has become a hit with younger Chinese shoppers. Jefferies forecasts first quarter retail sales for Prada globally up 9.3 percent.

JPMorgan forecasts LVMH will report flat overall sales in the first quarter, with 2 percent growth in its fashion and leather goods division, home to Louis Vuitton and Dior. The division, which sells small Lady Dior handbags priced at €5,400 ($5,860)and roomy Louis Vuitton Speedy bags for €10,000, grew by 9 percent year-on-year, in the previous quarter.

Consensus expectations are for 3 percent organic sales growth from LVMH for the three months ending in March, 1 percent growth from Richemont, a 10 percent decline from Burberry and 13 percent growth from Hermès, according to figures cited by UBS.

By Mimosa Spencer; Editors: Matt Scuffham and Tomasz Janowski

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