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From Gucci’s 10,000-sq-ft store on the site of a former pencil factory in SoHo to Hermes’ two-story flagship in a New Jersey mega-mall, America hearts luxury. And that’s a good thing for the industry, because with Shanghai in lockdown and European demand potentially hurt by the war in Ukraine, the US is picking up the bling baton. In 2021, luxury growth was led by the US, not China. Soaring stock and crypto markets boosted wealth, while stimulus cheques got many more shoppers to dip their toes into top-end waters. And the wealthy didn’t just splurge on Dior bags and Cartier jewellery. They led art buying, according to the Art Basel and UBS Global Art Market Report. That helped the overall market exceed its pre-pandemic levels.

Structural factors, too, are helping along. While the high end has long been concentrated in the retail bastions of New York, Los Angeles, San Francisco and Chicago, this is changing. Many Americans moved during the pandemic: New Yorkers relocated to Florida and Californians to Arizona and Texas. They did not leave behind their luxe appetites, though, but fuelled wide demand. This set off a race for prime retail space, driving up rents in fancies spots.

Such brands once had huge flagship stores only on Fifth Avenue or Rodeo Drive. Now opening at suburban malls. Another incentive to move to the burbs has been the spate of shoplifting in some city centres, including Los Angeles and Chicago.

Consequently, the French luxury group Kering SA is reassessing where it puts its stores. It has been opening and revamping Gucci outlets across the US, debuting most recently in Austin. Gucci generates about 27% of its revenue from North America. More new stores will follow, including in Atlanta and Sacramento. New Jersey’s American Dream mall recently announced that Kering will lease a 10,000-sq-ft site for Gucci. Kering is expanding Saint Laurent’s reach too.

LVMH Moet Hennessy Louis Vuitton, which generates about 26% of sales from the US, has been active, too. Among its new locations is a Louis Vuitton boutique at Hudson Yards in Manhattan, replacing its previous outlet in the now shuttered Nieman Marcus department store. LVMH is also refurbishing Tiffany stores after acquiring the jeweller last year. But as the world’s biggest luxury goods group, it probably has scope to go further.

Kering and LVMH are not alone. Lanvin Group, whose owners include Chinese investor Fosun, plans to list on the New York Stock Exchange via a blank-cheque company. It will use part of the proceeds to open 200 stores in the next three years—in both Asia and the US.

All the luxury companies expanding in the US face the risk that the American bling bubble will burst.

Upmarket home furnishings group RH, formerly Restoration Hardware, warned last week that demand had weakened following the Russian invasion of Ukraine in late February. So far, this hasn’t shown up in US luxury sales, although store visits did dip in March, according to Placer.ai, a company that evaluates store foot traffic.

Also threatening the boom are a losing quarter for US stocks and a halving of Bitcoin from November to January (it has since recovered some ground). And while the super-wealthy may be relatively sheltered from inflation—including higher price tags on Chanel handbags—more marginal buyers may be spending more on essentials, leaving less left over to splash out on the things they simply want, such as a Moncler coat or Burberry sneakers.

Nevertheless, as the economic outlook has darkened in other regions of the world, the US is back to being the luxury industry’s best hope.

Luxury goods makers have pulled out of Russia, forfeiting revenue there since the Ukraine invasion, though this probably amounts to less than 5% of global sales. However, there could be a knock-on effect in Europe. Expensive handbags and Swiss watches can be regarded as stores of value in troubled times, but as uncertainties mount, their appeal could wane. Meanwhile, tourists from the US and parts of Asia may be more reluctant to visit Europe.

But the biggest worry is China. After concerns last year that President Xi Jinping’s Common Prosperity agenda would curb overt shows of wealth, now Shanghai, the biggest source of China’s luxury sales, has been plunged into a fresh lockdown. Little wonder that valuations of luxury goods groups have slumped.

In the long run, China is expected to power the industry’s growth, as the world’s largest population of consumers buys luxury goods. But for now, shoppers in New York City’s Meatpacking District meandering from the Starbucks Reserve Roastery to the nearby Hermes and Rolex boutiques are a useful stand-in. 

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries.

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