After a 2022 year of record profits and sales despite the global economic slowdown, companies in the luxury sector are greedily eyeing the reopening of China in 2023. The world number one LVMH had opened the ball of results announcing new records with nearly of 80 billion euros in sales and a net profit of 14 billion euros. Its CEO Bernard Arnault has announced that he wants to continue this momentum in 2023, “at the risk of getting tired”.
Competitors are not left out: Hermès exceeds 11.6 billion euros in sales with a net profit of 3.4 billion euros. Kering, despite a poor end to the year for its flagship brand Gucci in China, still saw its turnover climb to 20.4 billion euros and its net profit to 3.6 billion euros.
Ferrari announced a “new record” with sales reaching 5 billion euros. The prestigious car brand delivered 13,221 vehicles worldwide last year. The sector’s 2022 results were barely tarnished by a poor end to the year in China due to health restrictions and a month of December described as an “air pocket” at LVMH.
Only Hermès was not affected: “there was no effect of a drop in traffic in our stores”, assured the manager of the Axel Dumas group, who highlights his “rooting of local customers” and announces a 30.7 percent increase in sales in Asia Pacific (excluding Japan).
The gradual reopening of China, which gradually abandoned its zero-Covid policy and then ended mandatory quarantines on arrival in the country on January 8, should allow Chinese growth to reach 5.2 percent in 2023. , estimated on January 31 the International Monetary Fund (IMF).
It is precisely towards this reopening following months of health restrictions that all eyes are on for 2023. It will be “the year of the Chinese consumer”, announces a note from analysts at UBS bank, which estimates that Chinese customers n accounted for only regarding 17% of global luxury sales in 2022 compared to 33 percent pre-pandemic, in 2019.
– “A volcano ready to explode” –
“The Chinese clientele is much larger than it was in 2019”, assured during an interview with the press agencies Jean-Jacques Guiony, chief financial officer of LVMH.
Mr. Guiony, however, does not see the return of Chinese tourists en masse to Europe before “next year”. It is therefore the local market that is initially scrutinized by luxury groups. “China needs economic growth, it’s no secret”, according to Bernard Arnault. “The Chinese leaders (…) will surely use the period that is opening to revitalize Chinese growth. If this is the case – it started in January – we have every reason to be confident even optimistic on the Chinese market”, he said during the presentation of the results of LVMH.
China “is a volcano that is ready to explode”, according to Arnaud Cadart, portfolio manager for the management company Flornoy Ferri. “There are incredible savings that have been accumulated, there is an incredible reserve available among the wealthy classes who want to buy luxury goods”, he underlines, believing that “one can imagine that the re-opening Chinese market will grow 30 percent” in 2023.
Kering CEO François-Henri Pinault, who went to China at the end of January, expressed surprise to the press on Wednesday at the return of the Chinese to the streets and stores, “as if there had never been virus in China”. “This bodes well for good things”, according to Mr. Pinault, who was also “very marked by the public expression” of the authorities’ support for domestic consumption.
“When we know that China is reopening, when we know that tourism is picking up once more and that behind the (Chinese) government will put a lot of pressure on these elements (…) it’s a rather good sign”, he said. (AFP)
