Luxury brands urged to protect margins as profits slide

Profit margins at the world’s largest luxury goods companies have almost halved in just three years, prompting calls for more disciplined cost management that preserves brand equity while restoring profitability.

Research from supply chain consultancy Inverto, part of Boston Consulting Group, shows that the average operating margin across the 20 biggest luxury groups has fallen from 24 per cent in 2022 to 13 per cent today.

Half of those companies have seen margins decline over the period, while five are now operating at a loss.

Analysts say the slowdown in global demand, particularly in key markets such as China and the US, has combined with rising input and operational costs to squeeze profitability in a sector long associated with premium pricing power.

Traditionally, luxury houses have adopted high-cost approaches across their entire business, including areas not directly tied to product craftsmanship or customer experience, such as IT, logistics and back-office functions.