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French luxury group LVMH has reported a slowdown in the US luxury market amid economic uncertainty, balanced out by recovery in China as it rebounds after the easing of Covid-19 restrictions.
The luxury conglomerate, which owns 75 brands ranging from Louis Vuitton to jeweller Tiffany, said that revenues rose 3 per cent in the US in the first half of the year compared with a 24 per cent increase over the same period in 2022, and even slightly contracted in the second quarter.
The group said that US clients had tended to purchase a lot of luxury items abroad because of the strong dollar, but economic pressure on potential customers at home has increased as inflation mounts and Covid savings and pandemic-era financial support dry up.
By contrast, Asia sales took off again as China opened up, rising 24 per cent in the first half — albeit compared with a low base the previous year — as Chinese consumers emerged from lockdown restrictions and travelled the region to shop.
“Last year, the group was pulled up by the United States because China was slowing down. And this year, the United States is slowing down, yes, but we are drawn by Asia. This geographical balance is absolutely fundamental,” said chief financial officer Jean-Jacques Guiony.
The luxury industry globally, led by market leader LVMH, has experienced several years of record growth after taking an initial hit when markets shut down early in the pandemic.
That pace is expected to normalise this year as the US market slows, with a report from Bain and Italian trade group Altagamma projecting that the market for personal luxury goods will grow by 5 to 12 per cent in 2023 after a record 2022 in which they grew 20 per cent, according to the former.
LVMH, which is Europe’s largest company by market capitalisation, reported first-half sales of €42.2bn, up 17 per cent on a like-for-like basis. This was in line with analyst forecasts compiled by Reuters and on a par with the rate of growth in the second half of last year.
Operating profit was up 13 per cent to €11.5mn.
The group’s performance was led by strong sales in fashion and leather goods, with double-digit growth at leading brands including Dior and Louis Vuitton, and in the division that includes beauty retailer Sephora and travel retail. However, LVMH’s wine and spirits division took a hit, with sales falling 3 per cent on an organic basis after slower sales of cognac and in the US.
Guiony noted that sales to Chinese buyers globally — which include purchases while travelling abroad — were up by 40 to 45 per cent compared with the same period in 2021, although travel by such customers remains mostly in Asia.
“It’s in Asia, it’s still in Korea, in Japan that [Chinese consumers] are travelling, not in Europe and the United States. Today, they still have trouble getting visas,” he said.
Of the US slowdown, he said there was now pressure on sales in US second-tier cities where luxury groups had seen high growth in recent years.
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