Demand for luxury goods rebounding from year-end slowdown, says LVMH
LVMH Moet Hennessy Louis Vuitton said it was joining the luxury industry’s rebound from a slowdown at the end of last year, underlining the resilient demand for high-end fashion.
The French luxury giant’s performance in China “recovered very significantly” in January, said chief financial officer Jean-Jacques Guiony. The group had posted slower fourth-quarter sales growth due to the Covid flare-up in Asia’s largest economy.
“It’s hard to make a trend of three weeks,” Guiony said on Friday (Jan 27). “But we can be really optimistic (that) China has actually turned the page on the disruption of the pandemic.”
The pattern echoes the trends at rivals Richemont – the owner of Cartier – and Burberry Group. Both saw slumps in Chinese demand at the end of last year, followed by rebounds in sales this month.
LVMH’s key fashion and leather goods division saw organic sales rise 10 per cent in the final three months of 2022, said the company on Thursday. While that was the slowest pace of the year, it was still higher than analysts’ estimates.
Shares of the group were 1 per cent lower in early trading on Friday, but they have risen 17 per cent so far this year.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Billionaire Bernard Arnault, LVMH’s chief executive and the world’s richest man, said the company was confident heading into 2023 but remained “vigilant about current uncertainties”.
The group’s cash cow, Louis Vuitton, crossed 20 billion euros (S$28.6 billion) in sales last year, while the parent company posted record revenue.
But LVMH’s results were described as a “mixed bag” by Citigroup analyst Thomas Chauvet, who highlighted an operating-profit miss. That was partly due to higher spending on advertising and promotions in the second half of the year.
“The reopening of China is a potential game-changer,” he said, adding that there were legitimate concerns about a slowdown in US demand.
Still, LVMH has experienced solid growth despite soaring inflation and slowing economies, making it a darling among investors. The luxury group recently became the first European company to surpass 400 billion euros in market value, while Arnault’s wealth now exceeds that of tech luminaries Elon Musk and Jeff Bezos.
While the group does not share its China results, its sales in Asia, excluding Japan, sank 8 per cent last quarter. That contrasted with growth of 22 per cent in Europe, 29 per cent in Japan and 7 per cent in the US, said Guiony.
Arnault said he was confident that Chinese authorities would aim to boost domestic economic growth, which would, in turn, strengthen LVMH’s performance there. He noted that trends in Macau were “incredible” so far this year.
For much of last year, sales of high-end goods to Chinese customers – the industry’s top spenders prior to the pandemic – were constrained by Covid-related restrictions. While the abrupt end to the strict rules in China in December led to a rapid spread of the virus that kept consumers at home, investors are now anticipating a V-shaped recovery.
While LVMH was seeing significant growth rates in China since 2023 began, Guiony said he did not expect a return of Chinese tourists in Europe in large numbers until 2024. He pointed out that airline capacity remained limited and flights were costly, indicating that the resumption of package tours was still some ways off.
Chinese customers at home and abroad represented a third of the personal luxury goods market in 2019, but that shrank to between 17 per cent and 19 per cent last year, based on data from consultancy Bain & Company. BLOOMBERG
Share with us your feedback on BT's products and services
