Luxury giants bank on Chinese return as Western shoppers sober up
Luxury sector is seen among largest winners of China's reopening
LVMH kicks off sector's earnings reports on Thursday
Some Americans are cutting back on discretionary purchases
By Mimosa Spencer
PARIS, Jan 23 (Reuters) -The focus of the luxury industry is shifting back to China, with hopes that its high-end spenders will once again splurge on designer goods during Lunar New Year festivities as Beijing relaxes COVID curbs after three long years.
Quarterly results from LVMH LVMH.PA and Europe's other luxury goods companies will offer glimpses of the toll of last year's COVID-related disruptions in China, even as the companies roll out pricey new collections tied to the Year of the Rabbit.
They are expected to see a deceleration in sales growth over the quarter as the post-pandemic splurge on designer fashions begins to ease in the United States and Europe.
Consensus estimates cited by UBS are for fourth quarter sales growth of 7% at LVMH, which releases full-year results on Thursday, and for a sales decline of 2% at Kering PRTP.PA, which reports results on Feb. 15. Hermes HRMS.PA, which reports fourth-quarter results on Feb. 17, is expected to show sales growth of 17%, a decline from 24% in the third quarter.
The industry's showing in China will highlight the hit from lockdowns and its subsequent exit from a zero-COVID policy, which has spurred a surge of infections in the world's second-largest economy. Luxury spending by Chinese nationals had dipped from 33% of the global personal luxury goods market in 2019 to as little as 17% last year, according to estimates from consultancy Bain.
"We do believe they will come back to the luxury sector in a heavy way, to catch up on what they couldn’t do in 2022," said Caroline Reyl, head of Premium Brands at Pictet Asset Management, referring to Chinese consumers.
End-of-year trading updates last week from Britain's Burberry and Cartier-owner Richemont gave investors a peek at the knock.
Richemont missed market estimates after sales in China plunged by a quarter. Customer traffic at its stores dwindled and staff at times were not available. Many stores reduced hours or closed temporarily. Burberry's like-for-like sales growth slowed sharply to 1% in the quarter to end-December after a 23% fall in mainland China.
But Burberry said it was optimistic consumers in China would start spending again and Richemont saw a rebound there before the holiday, adding to rising expectations for the months ahead.
China is forecast to become the luxury industry's biggest market by 2025. The luxury sector is among the largest expected winners from China’s loosening of restrictions that kept shoppers out of stores for months, with shares at LVMH, Europe's most valuable listed company worth about 400 billion euros ($433.1 billion) and Hermes recently hitting all-time highs.
At Paris fashion shows, which run through the end of this week, Chinese buyers, a staple at such events before the pandemic hit, still haven't returned in droves.
Although the Chinese are expected to initially resume travelling within Asia, Europe is a region that particularly stands to benefit from a return of Chinese tourists. Reyl told Reuters she believes Chinese shoppers may begin to return to Europe in a noticeable way at the end of the second quarter or during the second half of this year.
In the United States, some Americans are cutting back discretionary spending due to decades-high inflation. Credit card data from Citigroup showed that luxury spending in the United States in December was down 10% year-on-year and, compared to 2019, turned negative, down 2%, largely due to weaker business in department stores and online platforms.
However, travelling Americans likely continued boosting the fortunes of luxury labels in Europe, with U.S. nationals leading a recovery in tax-free shopping in Europe, according to December data from Global Blue.
Europe's luxury brands shinehttps://tmsnrt.rs/3WwuMAR
Reporting by Mimosa Spencer; Editing by Emelia Sithole-Matarise
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
