Much of the luxury industry has been starved for good news that could bring it a glimmer of hope about what 2024 will hold. Reports over the last few months of 2023 pointed to a slowdown in consumer spending and, more specifically, in sales of luxury goods. A big reason? China’s lackluster economic recovery following the peak of the COVID-19 pandemic, caused in part by of a property market crisis that roiled the country—which is a key source of customers for luxury labels.
But results from high-end watch and jewelry brand Richemont point to a sign of respite that the entire luxury industry has been waiting for—that is, the return of Chinese luxury demand.
Cartier-owner Richemont saw strong sales in China in the three months to the end of December, it reported Thursday—the group noted a 25% sales growth in mainland China, Hong Kong and Macau, making it among the strongest markets.
“Retail sales increased by 11%, with growth in all regions—with the exception of Europe—and notable strength in mainland China, Hong Kong and Macau combined as well as in the US,” Richemont, which also owns brands like Piaget and IWC Schaffhausen, said in its earnings report.
During the same time last year, Richemont’s Asia Pacific sales were down 9%—the company pegged this decline to “China’s underperformance.”
The boost in shopping activity in China helped Richemont bounce back with a bang, delivering an overall revenue growth of 8% to €5.6 billion ($6.1 billion) for the three-month period in constant exchange rates.
“There are macroeconomic problems… but mainland China was double digit positive,” Richemont CFO Burkhart Grund said in a call with analysts on Thursday.
“Overall, I’d say the Chinese business is rebuilding,” he said, cautioning that there’s still a long way to go and it can be difficult to plan too much ahead of time. “In times of, let’s say, economic uncertainty… it helps to be a highly recognized and highly respected jewelry brand through the power of iconic product lines.”
The curious case of 2024
While it looks like there might be light at the end of the tunnel, the luxury industry might not be safe just yet. China’s economy showed signs of improvement in the first few quarters of 2023, and other metrics like retail sales also pointed to an upward trajectory in consumer spending—which the luxury players have hoped for. However, in 2024, major banks forecast a slower pace of growth than the previous year, along with weak consumer confidence which could pose new challenges when it comes to luxury shopping. That’s a trend true of other geographies like Europe, too.
Some of the industry’s bigwigs are still grappling with macroeconomic volatilities and the impact they are having on consumer demand. Signs of a slowdown became apparent when French luxury conglomerate LVMH reported a slower pace of sales growth in the quarter to September. A slew of high-end retail brands, including Gucci-owner Kering, have since reported a similar slowdown in spending. Richemont, too, acknowledged the effects of inflation and geopolitical tension on consumer sentiment as it missed analyst expectations in its previous quarter, reported in November.
Last week, British luxury brand Burberry issued a profit warning after a “deceleration” in the critical holiday period sales. Although comparable store sales in Mainland China was among the strongest for the trench coat-maker, regions like Europe were still not facing a drop in demand.
LVMH will report its full-year results for 2023 next week.
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