After a year of record profits and sales in 2022 despite the global economic slowdown, luxury companies are looking forward to reopening China in 2023.
The first group in the world, LVMH, revealed the results of the companies’ performance, announcing record sales of about 80 billion euros and net profits of 14 billion euros. And Bernard Arnault, Chairman of the Board of Directors of the group, announced that he “wants to continue this momentum in 2023.”
Record profits for «Aramis»
The “Armis” group also achieved record profits after its sales exceeded 11.6 billion euros, with a net profit of 3.4 billion euros. As for Kering, despite a bad end to the year for its flagship brand, Gucci, in China, its sales rose to 20.4 billion euros and net profits to 3.6 billion euros.
Ferrari announced a new record in sales of 5 billion euros. The luxury car group delivered 13,221 cars worldwide last year.
The sector’s results in 2022 were hardly affected by a bad end this year in China due to health restrictions, while LVMH describes growth in December as a “slowdown”.
Only “Armis” was not affected. “The slowdown in our stores had no effect,” said Axel Douma, group manager, noting “the reliance on local customers.” It announced a 30.7% increase in sales in the Asia-Pacific region (excluding Japan).
Reopening of China
The International Monetary Fund had stated in estimates on January 31 that “reopening China after gradually abandoning the zero Covid policy and ending the mandatory quarantine upon entering the country on January 8, is supposed to allow China’s economic growth to reach 5,000 percent.” 2% in 2023. And this particular openness, after months of health restrictions, is the center of attention in 2023.
Analysts of the banking group “UBS” (the Federation of Swiss Banks) said: “2023 will be the year of the Chinese consumer.” They estimate that Chinese customers will account for 17% of global luxury sales in 2022, compared to 33% before the pandemic in 2019.
A volcano is about to erupt
“The number of Chinese customers is much greater than it was in 2019,” said Jean-Jacques Guigny, financial director of LVMH, in an interview with news agencies. But at the same time, he does not expect Chinese tourists to return in large numbers to Europe before “next year”, so the luxury product groups target the domestic market first.
“China needs economic growth, and this is no secret,” Bernard Arnault said, noting that “Chinese leaders will certainly take advantage of the period that will open to stimulate Chinese growth.”
“If this is the case – this started in January, then we have every reason to be confident and even optimistic about the Chinese market.”
As for Arnaud Kadar, portfolio manager for Flornois Ferry, he saw that “China is a volcano about to explode.”
He said, “There are incredible savings that have accumulated and an incredible reserve available to the well-to-do classes who want to buy luxury products.”
And he thought, “We can imagine that the reopened Chinese market will grow by 30% in 2023.”
The return of the Chinese to the streets
Francois-Henri Pinault, Chairman of the Board of Directors of Kering, who visited China at the end of January, expressed his surprise that the Chinese returned to the streets and shops, “as if there had never been a virus in China.”
“This bodes well for good things,” he said, stressing that he was “also greatly influenced by the public expression of the authorities’ support for domestic consumption.”
He continued, “When we know that China is opening its doors and when we know that tourism is booming again and that behind that, the Chinese government will put these elements in place, this is a fairly good sign.” (AFP)
