With Coronavirus Lockdown Lifted, Chinese Splurge on Big Luxury Brands
By Matthew Dalton
PARIS -- Spending in China on some of the biggest high-end
brands has surged since the country's lockdown ended, luxury goods
companies said, offering hope to an industry that has been slammed
by the coronavirus pandemic.
LVMH Moët Hennessy Louis Vuitton SE, the industry's biggest
company, Thursday said Chinese shoppers have flocked back to its
boutiques in mainland China when most of them reopened in March.
LVMH owns Louis Vuitton, the world's biggest luxury label, Dior,
Fendi and dozens of other brands.
Sales in China for most of LVMH's brands turned positive
compared with a year ago in the second half of March, said
Jean-Jacques Guiony, LVMH's chief financial officer.
"In April, for the large brands, we've seen very high growth
rates in mainland China," Mr. Guiony said, "sometimes in excess of
50%. So it really shows the appetite of Chinese people after two
months of lockdown to come back to stores and come back to their
previous patterns of consumption."
Still, overall spending by Chinese shoppers was down for the
quarter, Mr. Guiony said. That is because Chinese shoppers do most
of their luxury spending on trips abroad to European capitals, big
U.S. cities and elsewhere. With international travel locked down,
it is unclear when Chinese will have the chance, or the desire, to
splurge again overseas.
Overall sales at LVMH were EUR10.6 billion ($11.5 billion) in
the first quarter, down 17% after accounting for currency
fluctuations and other factors. That was in line with analysts'
expectations. LVMH's boutiques in China were closed for February
and the first half of March, when the coronavirus swept through
Wuhan province and threatened the entire country. Boutiques across
Europe and the U.S. were shut in March, when Western governments
locked down their economies to contain the pandemic.
L'Oréal SA, the world's biggest cosmetics company by sales, also
said the Chinese market for luxury goods was rebounding. Sales at
its luxury cosmetics division, whose brands include Armani and Yves
Saint Laurent, were down 8% in the quarter. But in China, they
showed "clear and encouraging signs of a recovery in consumption,"
the company said Thursday.
When China locked down in January, luxury brands' reliance on
Chinese consumers was seen as a liability. Now those shoppers have
become the industry's bulwark against catastrophe, analysts say.
High-end brands have reopened most of their Chinese boutiques, as
the West remains locked down.
Chinese shoppers are the industry's most important clientele,
representing more than a third of all revenue, according to Bain
& Co. Some of them have already begun documenting on social
media lavish purchases with the reopening of the country's luxury
LVMH is considered a bellwether for the global luxury industry,
with 75 brands operating in dozens of countries. In recent years,
however, LVMH's biggest brands have outperformed the industry;
smaller, independent labels lack the resources to compete with the
Analysts expect that the crisis could magnify the advantage
enjoyed by bigger companies such as LVMH and the industry's most
well-known brands -- such as Louis Vuitton, Hermès, Chanel and
"The bigger brands will exit this crisis with a massive
advantage from pent-up demand," said Erwan Rambourg, luxury analyst
at HSBC. "People might be thinking, 'I'll buy less but
Write to Matthew Dalton at Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
April 16, 2020 15:40 ET (19:40 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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