Wednesday, October 23, 2019
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Chinese Consumers Continue to Buy LVMH owned luxury brands

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Chinese Consumers Continue to Buy LVMH owned luxury brands

How young Chinese consumers are reshaping global luxury

A new generation of Chinese consumers are powering the global luxury market, and the double-edged sword they present to the world’s leading luxury brands. Set to be the engine of global spending on high-end shoes, bags, fashion, jewelry, and watches, China’s affluent upper-middle class presents an enticing prospect for the world’s designer brands.

Louis Vuitton’s robust growth in the third quarter has soothed concerns over China’s economic slowdown, reassuring investors that the luxury purchasing power of Chinese consumers is still strong.

The world’s leading luxury powerhouse, which owns big-name brands like Louis Vuitton, Celine, Christian Dior, and Givenchy, continued its sales momentum with third quarter “organic” revenue growing 10 percent year-on-year, in line with analysts expectation, the company reported on October 9. In the first nine months of 2018, the company recorded a total of $38 million (€33.1 million) in revenue, an increase of 11 percent from the same period last year.

This is so even in the context of the sharpest slowdown in China’s economy since the financial crisis, and with it a slide in demand for discretionary items such as new cars and mobile phones. At the high end, negative impacts are evident in Hong Kong, where jewelry sales and imports of Swiss watches have slowed, but even in these categories demand remains relatively strong on the mainland.

 

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To break down the growth, LVMH’s “Fashion & Leather Goods,” “Perfumes & Cosmetics” and “Watches & Jewelry” business section each grew by 14 percent year-on-year in the first nine months of 2018. “Selective Retailing,” which mainly refers to its Sephora and DFS entities, achieved organic revenue growth of 8 percent during the same period.

The “Wines & Spirits” business group increased 7 percent year-on-year in the first nine months of the year. In particular, Hennessy cognac’s sales volume rose by 4 percent year-on-year in the period, with demand in the United States and China markets growing rapidly. UBS analysts said China’s past Mid-Autumn Festival (from September 22-24) should have helped lift the demand for spirits, MarketWatch reported.

 

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Chinese Consumers Continue to Buy LVMH owned luxury brands
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