What: For the Financial Times, the current situation in China is becoming increasingly threatening for luxury groups’ margins.

Why it is important: Luxury brands are decades-old partners of department stores across the world. Any change in their profit structure might impact upwards or downwards their relationship.

Due to Covid-19 pandemic and travel restrictions, Asian tourists luxury spending has shifted from Europe to Asia, and increased luxury brands’ profits. However, the FT argues that an overdependence on China, coupled with a less lucrative business now that retail prices are becoming comparable to Europe and the US, might put the industry at risk.

At the same time, the war in Ukraine means that the rebound in Europe is unlikely to be swift, leading analysts to wonder if the Chinese tourists, once borders reopen, will buy back in the same quantities that they used to do.

Finally, the greatest risk, according to the journalist, is China itself, with the long-term consequences of the lockdowns, the zero-Covid strategy, and how it might impact consumption, display of wealth, and even salaries.

Why the luxury market needs to hedge against China