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Well, let's broaden out and talk, um, not just about beauty, but luxury. LVMH led a sell-off in global luxury names today after reporting lower than expected sales, as shoppers continue to pair back big purchases. With more on the state of the luxury consumer, we're joined by Pauline Brown, LVMH former chairman of North America. Pauline, it's always good to see you. Um, it seems as though the problems, some of the issues last quarter, not just at LVMH, but also at Kering and Gucci, and within Kering have something to do not necessarily with Western consumers, but with consumers in China. Um, so how big of a headwind is this for the luxury companies?

Oh, it's a massive headwind. Uh, Chinese consumers have accounted for the lion share of the growth, not just in the last few years, really in the last two decades. Um, and that's in part because it's been such a fast growing market, in part because, uh, it now produces, uh, more billionaires than anywhere other than the US. Uh, and in part because they have a great, Chinese in general have a great appetite for luxury goods. So when, uh, when the Chinese sneeze, I guess the rest of the world has a bad cold, and that's what we're seeing now.

And Pauline, I had read that, you know, one big trend with Chinese shoppers is they often go abroad, um, when when they're looking to buy luxury goods, they'll go to Japan, for example, to take advantage of the weekend. Is that a trend? Is that a theme we see playing out?

It is, but they're not shopping in quite the same way they were just a few years ago. Uh, 10 years ago, about 90% of Chinese consumption of luxury goods happened in, um, actually in the west, primarily in pockets of Europe and then to a lesser extent in the US. Uh, more recently, that's shifted to the region. So, Chinese are traveling quite a bit this year to Japan, where the, um, the exchange rate is favorable to them, and also to Seoul, which has also been, uh, a big, um, feeder of trends for the region. That said, um, there's a lot more options for them to buy at home, in Shanghai, in Beijing, even in second and third tier cities, than there were just a few years ago. And so, when they do travel unless it's a very good value, they're less tempted to buy than they were in years past.

Pauline, I do want to broaden it out beyond China because I'm curious what we're seeing among luxury consumers in other regions of the globe. Are we seeing them, you know, on the lower end, we've talked a lot about consumers being sort of more choiceful, not making necessarily all of the same decisions they were making a year ago. What are we seeing on the high end?

So, um, let's divide the high end into what I'll call the ultra wealthy consumer, that top 2%, that are doing okay vis-a-vis the stock market and the housing market. Um, their lifestyle doesn't really change even when those particular industries do. Uh, and then you have the aspirational consumer, the upper middle class. Um, that's a more sensitive audience for luxury brands. It has, here in North America, constituted most of the growth of the last many years. Um, and it also, uh, I would say has been the quickest to slow down. I think what we're seeing right now though is not just a slowdown in both of those two segments, but also, um, a bit of a reaction to the price inflation. Even ultra rich people don't want to spend that much more than they were a few years ago for the same products. And what we're seeing with a lot of these luxury brands is they've really taken price up as far as I think is reasonable, maybe too far.

So Pauline, it does sound like a challenging backdrop here in a couple different ways. When you look across the sector, across the space, are there certain names that you think are better positioned than others to navigate it?

Well, as is always the case, um, those that have depth and strength are going to weather this market better. Um, so we're seeing those that have pivoted, have already, even in very robust times, been struggling to keep up, like a Burberry or a Coach. I think they're going to be hard hit. Uh, LVMH has historically done better, not simply because it has a stable of great brands that do well or hold their value, but also because it's a very well hedged portfolio. So you have a number of brands within that group, like a Sephora, that are not as dependent on the luxury consumer as, for example, a Christian Dior or a Dom Perignon. Um, that hedge though has probably been taken as far as it can, which is why even here in the US, which was a relatively stable market next to Asia, we still had nearly flat growth two-year ago, first half.

Pauline, thank you so much as always for joining the show. Appreciate it.