LVMH buoyed by China even as pace of US sales growth plateaus

China’s luxury market has begun to rebound from the downturn it experienced during the country’s draconian zero-Covid policies, but the pace of sales growth in the US — luxury’s biggest market — has plateaued, according to LVMH.

The world’s biggest luxury group, which is controlled by billionaire Bernard Arnault, reported global sales for the first quarter of the year of €21bn. The rise of 17 per cent compared with the same period a year ago was ahead of analyst expectations. Sales of fashion and leather goods, the company’s biggest division, continued to be strong, growing 18 per cent to €10.7bn. 

“We’re definitely out of the zero-Covid period now, the page has turned,” LVMH chief financial officer Jean-Jacques Guiony told the Financial Times.

The group does not provide specific numbers on China but LVMH’s Asia-wide sales grew 14 per cent in the first quarter of 2023, compared with falling 8 per cent in the last three months of 2022.

“We were very affected by events in China in December, our business was practically at a standstill,” Guiony said, noting that China accounted for about 80 per cent of the group’s activity in the region. “This gives an indication of the magnitude of the improvement.”

“We expect this to continue, and we are very optimistic about the normalisation of the Chinese market,” Guiony added, which the group expects will happen this year.

The picture was different in the US, however, where Guiony said the pace of sales growth stalled over the same period as American consumers grappled with higher interest rates and an uncertain economic outlook. Sales grew at 8 per cent in the fourth quarter, but this remained unchanged in the first three months of the year.

“It is not at all catastrophic, but it is not growing as fast as two years ago,” he added, noting that many US buyers also travelled to Europe so some of their activity was displaced there.

The luxury sector proved to be resilient throughout the pandemic with the exception of a short downturn as the world shut down in March 2020. However, China’s decision to pursue strict zero-Covid measures as the disease spread at the end of last year dented many groups’ performance in their fastest-growing market.

Many luxury brands were forced to temporarily close stores and warehouses at the end of last year because of sick employees, which affected fourth-quarter results at LVMH, Burberry and Cartier-owner Richemont.

Despite a challenging end of the year in Asia, LVMH — which owns brands including Louis Vuitton, Dior and Moët & Chandon — has gone from strength to strength, reporting its second consecutive year of record profits and sales in January. Louis Vuitton, the company’s flagship brand, became the world’s first luxury house to surpass €20bn in annual sales at the beginning of this year.

The group reported a 30 per cent rebound in sales in its travel retail and department stores division to €3.9bn, led by the performance of beauty retailer Sephora and the return of travel.

There had been “no travel retail in Asia” for the past two years to popular destinations for Chinese shoppers such as Hong Kong and Macau, but it was now coming back step by step as travel restrictions were lifted, Guiony said. “It will take time for it to come back to normal in Asia, and even longer in Europe,” he added.

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