After a year of record sales and profits despite slowing global growth, the luxury sector is looking to the reopening of China to deliver further expansion in 2023.

The world’s largest luxury group LVMH posted a 23 per cent jump in sales to a record of 79 billion euros (S$113 billion) in 2022 while profits climbed 17 per cent to 14 billion euros

The company’s chief executive, Bernard Arnault, wants to continue along that path in 2023, “at the risk of becoming boring”.

LVMH’s rivals also managed blistering growth in sales and profits last year.

Sales at Hermes jumped 29 per cent to 11.6 billion euros, and profits soared 38 per cent to a record 3.4 billion euros.

Kering, despite a tough time for its flagship brand Gucci, still managed a 15 per cent increase in sales to 20 billion euros, while profits rose 14 per cent to 3.6 billion euros.

A NEWSLETTER FOR YOU

Friday, 2 pm

Lifestyle

Our picks of the latest dining, travel and leisure options to treat yourself.

Sign Up

Ferrari’s sales raced to a new record of five billion euros, delivering 13,221 vehicles last year.

The 2022 results were barely dented by the disruption in China linked to end of its coronavirus-related travel restrictions and their progressive lifting at the end of the year, with LVMH calling the month of December an “air pocket”.

Only Hermes escaped unscathed. “There was no drop in traffic in our stores,” said Hermes chief executive Axel Dumas. The company’s sales rose 30.7 per cent in the Asia-Pacific excluding Japan.

The gradual reopening of China – which abandoned the last of the draconian travel restrictions of its zero-Covid policy on Jan 8 – should help its economy expand by 5.2 per cent in 2023, said the International Monetary Fund’s latest forecast.

With the restrictions having restrained consumption, the reopening of the Chinese economy is being looked at as a growth opportunity for 2023.

Analysts at UBS said 2023 will be the “year of the Chinese consumer”, noting that the pandemic restrictions pushed down the share of Chinese consumers in global luxury spending to 17 per cent last year, compared with 33 per cent before the pandemic.

“The Chinese clientele is much more important than it was in 2019,” LVMH’s financial director Jean-Jacques Guiony told journalists.

Guiony does not expect Chinese tourists to return to Europe, where they traditionally spent heavily on luxury goods, before next year.

Instead, luxury groups are focusing on Chinese consumers at home.

LVMH’s Arnault said it was no secret that China needs growth, and that the government would likely take steps to facilitate economic expansion as the country reopens.

“If that is indeed the case – and it began in the month of January – we have every reason to be confident, even optimistic about the Chinese market,” he said at the presentation of LVMH’s 2022 results.

China is a “volcano ready to explode”, said Arnaud Cadart at asset manager Flornoy Ferri.

“There is an incredible amount of savings that has been built up, an incredible reserve in the hands of the well-off class which wants to purchase luxury goods,” he added.

Cadart estimated the luxury market in China could jump by 30 per cent this year.

Kering’s chief executive Francois-Henri Pinault visited China at the end of January, and said he was amazed by the people thronging stores “like the virus had never been in China”.

“This is a good sign,” said Pinault, who also welcomed moves by Chinese authorities to boost domestic consumption. AFP