Luxury Business Responding to Crisis

(This article is only accessible to members of The Luxury Marketing Council)

A report from KPMG

Many luxury goods companies are in the grip of a double crisis. A declining economy has hit sales, while a financial credit crisis has made debt difficult and costly to raise and service. The result is that many luxury companies find themselves in a liquidity crisis
that requires urgent remedial action
to survive.

During the first two quarters of 2009 stock markets have staged a partial recovery, and the rate of decline in property prices and in unemployment has moderated. Yet the corporate credit crisis has not gone away. Most companies in financial distress will still need to revisit their market positioning, their cost cutting strategies and
their investment plans, and above all improve their cash management, if they are to survive.

In mid-2009 companies continue to enter financial crisis. The signs of approaching distress include missed budget targets, falling margins, worsening working capital and increased reliance on trade credit, while supplier conditions tighten. Companies faced with these conditions should follow four ‘golden rules’ of survival.