Luxury companies are having mixed feelings after China’s reopening. Hermes and Louis Vuitton Moe Hennessy (LVMH) reported better-than-expected first-quarter sales, while Cairing and Burberry are expected to perform less than expected.
Bloomberg said on the 15th (local time), “There are concerns that the wealthy in China, who spent money on handbags and jewelry during the COVID-19 pandemic, will lose interest in luxury goods after the reopening,” adding, “The performance of Hermes and LVMH sales has dispelled these concerns, but other luxury companies have to watch.” As Chinese consumers’ tastes become more difficult, demand is high for top brands, which is expected to polarize the luxury industry. The more popular brands, the better the performance will be.
In the first quarter of this year, LVMH generated 21 billion euros in sales, up 17.7% year-on-year. It far exceeds the market estimate of 20.1 billion euros. Louis Vuitton, LVMH’s flagship brand, has continued its strong sales with unconventional attempts, such as recruiting musician-turned-businessman Ferrell Williams as a men’s clothing designer in February after surpassing 20 billion euros in sales for the first time last year. Hermes also recorded 3.38 billion euros in sales, up 23% year-on-year. Sales in all regions have increased. LVMH’s stock price jumped more than 31% on the Paris Stock Exchange this year, soaring its market capitalization to 446.9 billion euros. Hermes’ market capitalization also surpassed 200 billion euros.
On the other hand, Kering, which owns Gucci and Balenciaga, as well as Ferragamo, Burberry and Swatch Group, are slowing down in the Chinese market. Kering’s sales fell 7% year-on-year in the fourth quarter of last year. This is because Gucci, which accounts for half of its sales, is performing poorly after replacing its designer. Balenciaga is struggling after creating a scandal that the advertisement reminds her of a child pornography. Jonathan Siboni, CEO of Luxury Insights, pointed out, “If China’s overseas travel begins in earnest, the wealthy can spend money on luxurious experiences instead of buying handbags.”
