The sector, which was riding high through the COVID-19 pandemic, is starting to see customers pulling back on spending—and Richemont is a case in point. The Swiss luxury company, which owns high-end jewelry and watch brands like Cartier and IWC, is the latest to report a slowdown in growth amid a softening demand. 

Richemont’s sales were up 6% to €10.2 billion (about $10.9 billion) in the six months to the end of September, lower than analyst estimates of €10.34 billion. Profits for the same period also fell short of analyst expectations, pointing to easing in luxury spending.   

“The period under review started strongly, beyond our expectations. However, growth eased in the second quarter as inflationary pressure, slowing economic growth and geopolitical tensions began to affect customer sentiment,” Richemont chairman Johann Rupert said in a statement. “Consequently, we have seen a broad-based normalisation of market growth expectations across the industry.”

Europe, which is home to several luxury behemoths, was hit hard as sales fell 1% in the second quarter, while in Asia-Pacific sales for the period grew 8%. 

Different segments of the company’s business had contrasting results—its jewelry sales rose 9% in construct currency terms, while watch sales dropped 4% during the April to September period. 

Rupert expects the volatility to continue to weigh heavy on consumers, but added that the prospect for higher China growth and major economies averting recessions could help the company in the months ahead. 

Consumers hitting the breaks on luxury purchases 

The pandemic marked a boom in luxury spending as people all over the world were confined to their homes and splurged on high-end discretionary goods. But the tides have turned since as prices soared and interest rates rose, spelling the end of the “roaring 20s” that benefited luxury industry conglomerates.  

Richemont isn’t alone in witnessing a luxury slump—the group’s French competitor, LVMH, has also seen economic pressures eat into purchases of their luxury goods. Last month, the company reported a slower pace of sales growth in the third quarter of 9% compared to 17% in the previous quarter. Analysts have said that the largest luxury company’s results confirm a normalization in the sector, compounded by economic weakness like high inflation and interest rates. 

For its part, the Bernard Arnault-owned company said that despite macroeconomic tensions, it will bounce back. 

“In an uncertain economic and geopolitical environment, the Group is confident in the continuation of its growth,” LVMH said in a statement announcing its earnings.  

Other industry players like Gucci owner Kering have also been victims of the slump in the luxury sector. 

But some outliers—like Birkin bag-maker Hermès—dodged what looks to be the industry’s new normal. The company beat analyst estimates on its third-quarter sales just as its competitors were seeing growth ease. 

“Despite an uncertain global environment, we remain confident,” Hermès’s CFO Éric du Halgouët said, according to Bloomberg.