The luxury sector has flashed back from the
Covid-19 pandemic but the crisis is still putting a crimp in travel, a key
part of the market.
Industry giants have reported results that show the world’s well-heeled are
splurging on luxury goods as sales surpass even pre-pandemic levels.
LVMH — home to Louis Vuitton, Moet, Fendi, and Kenzo brands among others
— saw first-half sales climb by 11 percent above their pre-pandemic level to
28.7 billion euros (34.1 billion dollars) as it reported a profit of 5.3 billion
euros, a whopping 64 percent increase from 2019.
Rival Kering — which owns the Gucci and Balenciaga brands — bested its
pre-pandemic level by 8.4 percent with a record 8 billion euros in sales.
Hermes reported a 29-percent jump to 4.0 billion in sales.
Both recorded profits of more than a billion euros, beating expectations.
The Swiss luxury group Richemont — Cartier, Piaget, and Montblanc — beat
its pre-pandemic level in the second quarter by 18 percent, while Italy’s
Prada bested 2019 first-half sales by eight percent.
It is the “upper middle class, the rich and ultra-rich untouched by the
crisis” who could not travel or eat out and instead bought luxury goods, said
Arnaud Cadart at asset manager Flornoy.
The Chinese, “who represent 35 to 40 percent” of luxury customers, are
still crucial, he added.
But while Chinese buyers previously made a lot of their purchases while
visiting Europe, they are now making them at home.
‘Violent rebound in the United States’
In fact, “what was surprising was not so much the recovery in China but the
violent rebound in the United States,” remarked Erwan Rambourg a sector
analyst and author of “Future Luxe: What’s Ahead for the Business of Luxury”.
Compared with previous crisis recoveries, after the September 11 terror
attacks or the 2008 economic crisis for example, “the feeling of guilt, the
idea that it is inappropriate to buy luxury goods, disappeared,” Rambourg told
AFP.
“There is a young generation in the United States that feels comfortable
with luxury purchases,” in particular among the African-American, Hispanic and
Asian populations, he explained.
Hermes chief executive Axel Dumas told a telephone news briefing: “We’ve
seen a very strong rebound in activity in the United States from our loyal
clients as well as a new clientele that came to us thanks to digital”
marketing by the company.
Hermes’s sales in the US jumped by a quarter from their pre-pandemic level.
Citigroup analyst Thomas Chauvet noted that the fact that a roaring US
stock market had made many Americans more wealthy, on paper at least, had also
provided an important psychological boost to consumption.
In Europe, the sector’s performance was better than might be expected given
the absence of tourists who normally generate half of sales, because local
clients turned out.
“Europeans had to a considerable extent deserted this market” but this year
the trend was reversed, said Flornoy’s Cadart.
Rambourg added: “To everyone’s surprise, the brands discovered that by
stimulating the local clientele” via social networks “the French, Italians,
Spanish turned out more than hoped”.
Chauvet cautioned that “the rebound in local demand doesn’t compensate for
the loss of tourists.”
The luxury market will nonetheless “remain dominated by local buyers for at
least another year,” Rambourg forecast.(AFP)
