LVMH, the luxury conglomerate, maintains a positive outlook on its fashion and leather goods division in China, despite the surge in Covid cases in the country. China is LVMH’s second-most important market, following the United States, and the ongoing situation has affected the company’s local sales. Nevertheless, the company’s directors have faith in the potential of the market.
During the first quarter, LVMH’s flagship division reported revenues of €9.12 billion, marking a 35% increase compared to the same period last year. This growth was primarily driven by the exceptional performance of renowned brands such as Louis Vuitton and Dior. Geographically, sales in Asia excluding Japan experienced an 8% rise, while Europe and the United States witnessed growth rates of approximately 50% and 30% respectively. However, the growth in LVMH’s fashion and leather goods division in China was slightly above 10%, as highlighted by CFO Jean-Jacques Guiony. He acknowledged that the rapidly changing situation in China, including confinement measures in certain cities, has impacted business. Nevertheless, Guiony remains optimistic about the medium to long-term consequences and foresees a swift market rebound.
Although LVMH previously faced confinement measures in China two years ago, the current situation is comparatively less severe. The Chinese authorities have demonstrated their ability to swiftly contain the pandemic, and demand for luxury goods has not been hindered by the confinement measures. Recognizing China as a critical market, LVMH plans to continue its expansion in the country. While luxury shopping malls are not prevalent in all tier 3 and 4 cities, LVMH regards online distribution as a crucial channel to reach consumers in these areas. The company is progressively expanding its presence in Chinese cities and recently entered into an agreement with Alibaba’s Tmall platform. The “common prosperity” policy advocated by the Chinese government does not appear to have affected the luxury sector significantly, as most of LVMH’s sales are generated by affluent clients rather than the ultra-wealthy.
Overall, LVMH remains confident about the future of its fashion and leather goods division in China, despite the challenges posed by the current situation.
Useful Links:
– [Link 1: LVMH Official Website](https://www.lvmh.com/)
– [Link 2: Alibaba’s Tmall Platform](https://www.tmall.com/)
