European luxury brands have been waiting anxiously for consumers in China to return to stores following the end of the country’s Covid restrictions. Stringent lockdowns were in place up to the end of last year – putting a dampener on revenue in what is now the most important personal luxury market in the world. As numbers for the first quarter of this year are unveiled, it’s clear that the outlook is brightening. But will a return to growth in China offset a likely slowdown in sales in embattled western economies?
LVMH (FR:MC), the conglomerate that owns labels Louis Vuitton, Dior and Givenchy among others, may serve as something of a bellwether. Last week, it reported a 17 per cent year-on-year revenue uplift in the March quarter – a figure that surpassed both analysts’ and management’s expectations. Although the company does not provide country-specific numbers, it’s clear that one nation was the engine of this growth.
“As far as we are concerned, the situation in mainland China is an excellent surprise compared to what we thought it could be only four or five months ago,” said the company’s chief financial officer, Jean-Jacques Guiony. Flat US sales growth figures did not faze markets in the slightest – LVMH’s shares hit a record high on 12 April thanks to optimism around the impact of China’s reopening. Hermès (FR:RMS), best known as the maker of the ultra-luxe Birkin handbag, reported a 23 per cent increase in Q1 revenue for similar reasons, although also reported strong sales in the US and Europe.