LONDON/WASHINGTON: Luxury brands could be vulnerable in the recession, as consumers cut back and economic growth slows in most developed markets, but many "high net worth individuals", who have the greatest spending power, may also prove more immune to current trends, particularly in some developing markets.

As argued in Millward Brown's most recent BrandZ Top 100 rankings – which is discussed in more detail here – brands play a uniquely important role in the luxury sector.

However, Bain & Co., the consultancy, has forecast that category sales will fall 10% in 2009, with China and the Middle East among the few areas likely to register growth.

Louis Vuitton, the world's most valuable luxury brand according to Millward Brown, was argued by its owner, LMVH, the biggest luxury goods group by sales, to have "demonstrated its remarkable momentum with double-digit revenue growth" in Q1 this year.

In reported terms, LMVH's Fashion and Leather Goods division, of which Louis Vuitton is a part, saw an upturn in revenues of 11% to, €1.6 billion ($2.3bn; £1.4bn), in this period, amounting to an improvement of 4% in like-for-like sales at constant prices.

By contrast, LMVH's total sales fell 7% on an organic basis, including declines of 11% in perfumes and cosmetics, 22% in wines and spirits, and 41% for watches and jewellery.

Gucci, part of PPR, saw its brand sales rise 1% on a comparable basis year-on-year to €567.1m in the first quarter of 2009, with wholesales posting a “slight increase” while figures for its 264 directly-operated stores were up “sharply”.

Revenues in emerging markets grew 21%, including an improvement of 16% in China, which contributed 17% of all brand sales in Q1, compared with a 1.5% fall in Western Europe, and the somewhat larger declines witnessed elsewhere.

Richemont, the Swiss luxury group, also posted an operating profit of €982m during its last financial year, down 12% on an annual basis, although revenues did rise by 2%, to €5.4bn.

However, the company said this “reflected strong growth in the six months to September, followed by a sharp decline in trading from October” onwards.

It added that the “impact of the crisis has spread globally, with the United States, Europe and Japan particularly hard hit,” compared with double-digit growth in the rest of Asia Pacific.

The Armani Group also saw revenues rise 2.4%, to €1.6bn, at constant prices in 2008, and expanded its retail network by 50 stores, to 539 outlets worldwide.

Greater China saw an uptick in sales of 33%, with Europe expanding by 8% and North America by 5%, despite what president/ceo Giorgio Armani termed a “difficult year for the fashion and luxury market.”

Hermès, by contrast, posted a loss of 4.7% at constant prices during the first quarter to €428.1m, with own-store sales rising by 6%, compared with a 27% decrease through its broader distribution network as a whole.

Sales in Europe fell 4.9% to €161.4m, with the Americas off 5.3% to €64.7m, and Asia Pacific down 2.0% to €195.5m, although revenues in this region actually rose 18.3%, to €99.4, when excluding Japan, which saw a decline of 19.3%, to €96.1m.

Overall, it seems the luxury sector has not, as yet, felt the full force of the economic downturn, and while sales have slowed in some areas, the opportunities for expansion in growth markets such as China may allow its biggest brands to at least partially offset t

Data sourced from company reports; additional content by WARC staff