Research on the Impact of COVID-19 on the Profitability of the Luxury Industry

DOI

10.2991/978-94-6463-098-5_5How to use a DOI?

Keywords

COVID-19; Luxury Industry; Profitability; CAPM model; Luxury Consumption

Abstract

Since the outbreak of COVID-19, the global economy has become relatively sluggish. Quarantine and lockdown policies hamper the efficiency of the luxury industry. The literature on the impact of COVID-19 on the luxury goods industry is relatively limited. This paper aims to fill in the gaps in this field. Based on the window periods of the pre-epidemic, outbreak, and post-epidemic three years, this paper explores the impact of COVID-19 on stock price changes, equity evaluation, and profitability metrics of the luxury industry to measure the profitability of the luxury industry over that period. This paper uses the CAPM model and event study model to analyze how the stock prices changed during the window periods and whether COVID-19 is a significant factor. The fund “U.S. Global Investors Global Luxury Goods Fund” was selected to represent the industry’s stock performance. Based on these data, the P/E ratio and price-to-book ratio are used to assess market expectations and valuations for the industry. Finally, the financial ratios of the top 100 luxury companies are selected to measure the operating efficiency, sales growth, and growth potential of the industry. In the short term, the stock price of the luxury industry is hovering negative, the utilization efficiency of assets is reduced, the growth rate is slowed down, and the overall health of the industry is reduced. But the post-pandemic performance of the luxury sector is worth looking forward to: share prices are gradually recovering to their pre-pandemic performance, and retaliatory spending presents a good growth opportunity for the sector. The luxury industry needs to adjust its traditional marketing and sales models to embrace models like online sales and practical design to meet the needs of consumers in the COVID-19 era.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jingwen Li
PY  - 2022
DA  - 2022/12/27
TI  - Research on the Impact of COVID-19 on the Profitability of the Luxury Industry
BT  - Proceedings of the 2022 4th International Conference on Economic Management and Cultural Industry (ICEMCI 2022)
PB  - Atlantis Press
SP  - 31
EP  - 39
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-098-5_5
DO  - 10.2991/978-94-6463-098-5_5
ID  - Li2022
ER  -