Luxury Brands Bet on China’s Big Spenders’ Post-Covid Return

 

Western luxury brands are banking on a revenues boost as China’s high-end shoppers return after three years of economically painful Covid curbs in their country.

Quarterly results from LVMH – responsible for brands such as Louis Vuitton, Dior, Sephora, Tiffany and Hennessy – are expected to offer glimpses of the toll of last year’s Covid-related disruptions in China.

It’s predicted the figures will reveal a slowdown in sales growth over the quarter as post-pandemic spending on designer fashions begins to now also ease in the United States and Europe.

But there’s optimism in the luxury industry that China’s wealthier consumers will be once again free to splurge on designer goods during the Lunar New Year festivities, with China forecast to become the industry’s biggest market by 2025. 

 

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The luxury sector is among the largest expected winners from China’s loosening of restrictions that kept shoppers out of stores for months, with shares at LVMH, Europe’s most valuable listed company worth about $433.1 billion, and Hermes recently hitting all-time highs.

Luxury spending by Chinese nationals had dipped from 33% of the global personal luxury goods market in 2019 to as little as 17% last year, according to estimates from consultancy Bain.

“We do believe they will come back to the luxury sector in a heavy way, to catch up on what they couldn’t do in 2022,” said Caroline Reyl, head of Premium Brands at Pictet Asset Management, referring to Chinese consumers.

At Paris fashion shows, which run through the end of this week, Chinese buyers, a staple at such events before the pandemic hit, still haven’t returned in droves.

And although the Chinese are expected to initially resume travelling within Asia, Europe is a region that particularly stands to benefit from a return of Chinese tourists. 

 

• Reuters with additional editing by Sean O’Meara

 

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