Luxury retail sales expected to be flat in 2024
by March 1, 2024 5:04 pm 794 views
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Higher-income households that comprise the majority of luxury retail sales remain optimistic about the economy, but that is not translating to more sales in the near term, according to a recent survey by Saks.
The quarterly survey conducted in mid-January indicates upscale retailers like Saks or Little Rock-based Dillard’s can likely expect soft sales in the first half of 2024. Saks CEO Mark Metrick said luxury sentiment is improving regarding the macro economy which will likely translate to more sales in the back half of the year.
More than half (55%) of respondents said they would need to see sales or promotional events for them to increase spending in the next months. Four out of 10 of respondents said they would need to see their income increase to spur near-term spending.
When shopping for luxury fashion, 24% of respondents said they are inclined to pay full price rather than wait as long as needed for the item they like to be on sale, down 2% from the prior quarterly survey.
Luxury consumer optimism about the economy grew to 48%, an increase of 12% from the prior survey fielded in October 2023. The largest increase in overall optimism was among respondents with an income of $200,000 or more, with a 14% increase in optimism about the economy and an 8% increase in optimism about their personal finances compared to the prior survey.
When it comes to their personal finances, 70% of luxury consumers feel optimistic, up 6% from the prior quarter. Millennial respondents are the most optimistic generation about their finances. The survey found that 59% of millennial consumers (ages 27-42) plan to spend the same on luxury items in the near term, with 55% of baby boomer respondents (ages 59-75) and 58% of Gen X respondents (ages 43-59) also planning to spend more.
A separate report from Bain & Associates indicates a slowing in the luxury retail market in 2024 because of student loan payment resumption and dwindling savings since the pandemic. Bain also estimates the U.S. luxury market sales could grow between 1% and 4% this year if macroeconomic conditions remain positive.
Statista estimates that U.S. luxury goods sales will total $77.28 billion, flat to a year ago. Luxury fashion sales are expected to grow to $27.67 billion, also flat with 2023.
Dillard’s recently reported a sales revenue decline of 5% for last year while also losing some market share. While CEO William Dillard said the fourth quarter results were respectable given a weaker consumer environment, UBS analyst Maurio Serna said the retailer is likely to struggle this year to avoid declines in earnings.
“Our research indicates Dillard’s position is not strong enough to gain share within brick and mortar. We model higher online sales, but believe this growth will not offset declining store revenues,” the analyst wrote.
He said a bright spot for Dillard’s is the retailer’s tight grip on inventory.