The Luxury Goods Sector Continues to Thrive: Dynamic Growth and Rising Investor Interest

Despite global economic challenges, the luxury goods sector (Fashion & Luxury, F&L) demonstrates remarkable resilience and consistent growth. According to Deloitte’s latest report, “Fashion & Luxury Private Equity and Investors Survey 2024,” a striking 83% of investors plan to invest in this sector, seeing promising opportunities for growth. This trend is also reflected in the number of mergers and acquisitions (M&A) transactions, which totaled 358 in 2023—an increase of over 20% compared to the previous year.

The Value and Growth Prospects of the F&L Sector

According to the Deloitte report, the global luxury market is valued at $1.121 trillion. The largest share—37%—comes from personal luxury goods such as clothing, accessories, jewelry, watches, cosmetics, and perfumes. In 2023, the average EBITDA margin in the luxury sector reached 20.1% (up by 2.2 percentage points compared to 2019). The clothing and accessories segment showed the highest profitability at 35.9%, while the private jet sector saw a margin of only 10%. The report’s data is based on tax filings of 114 companies in the sector for 2022 and a summary of revenues and EBITDA for 2023. The findings reveal that despite economic uncertainty, luxury goods sales grew by nearly double digits between 2019 and 2023. The average annual growth rate for personal luxury goods was 11.1%, while other categories saw growth of 9.8%. The notably strong EBITDA margin in personal luxury goods (29.2%) highlights the increasing demand for exclusive, high-quality products. “These results show that the luxury goods sector is resilient to market fluctuations, and consumers continue to invest in premium products,” comments Michał Bigoszewski, Partner in Deloitte’s M&A Corporate Finance team.

A Dynamic M&A Market

The growth of the F&L sector is supported by increased M&A activity. In 2023, there were 358 transactions, an increase of 66 compared to 2022. The sectors with the most significant growth in transactions include:

• Hotels: +46 transactions
• Clothing and Accessories: +28 transactions
• Automobiles: +15 transactions
• Yachts: +13 transactions

Declines were noted in the following sectors:

• Furniture: -23 transactions
• Cosmetics and Perfumes: -8 transactions
• Jewelry and Watches: -3 transactions
• Luxury Cruises: -2 transactions

The average transaction value in the hotel sector increased by 535%, reaching $330 million, while in the restaurant sector, it grew by 170% to an average of $286 million. “Investors are currently focusing on smaller luxury goods companies, where further development is anticipated, particularly in the areas of fashion, accessories, and cosmetics. Already, 60% of surveyed firms plan to invest in smaller enterprises, and one-third are interested in mid-sized companies,” adds Arkadiusz Strasz, Partner in Deloitte’s Financial Advisory team.

ESG as a Key Investment Factor

Increasing environmental awareness means investors are paying more attention to companies’ commitment to sustainability. Deloitte’s report indicates that the clothing and accessories segment (41%), cosmetics and perfumes (17%), and furniture (11%) are leaders in investing in ESG innovations. The most popular initiatives include:

• Circular Economy: 23% of responses
• Social Responsibility: 21% of responses
• Energy Efficiency: 19% of responses

Consumers expect transparency and actions to minimize environmental impact. Companies effectively implementing ESG principles gain a competitive advantage and attract investor interest.

Future Prospects

The report’s authors predict that the luxury goods sector will remain attractive to investors. Key growth drivers will include sustainability, digitization, and the creation of unique consumer experiences. By 2030, Generations Y, Z, and Alpha will be responsible for 85% of global purchasing decisions, prompting companies to invest in new technologies such as Artificial Intelligence (AI), Big Data, and the Internet of Things (IoT). In 2024, 81% of firms plan to invest in breakthrough technologies, marking a 15-point increase from the previous year. These investments will focus on AI development, Big Data analytics, and IoT applications. Companies aim to leverage these technologies to optimize business processes, personalize offerings, and enhance customer experiences. The adoption of modern solutions is expected to deliver returns of up to 30%, further underscoring the sector’s attractiveness to investors. Source: ManagerPlus