The world's biggest luxury group LVMH's sales have increased by 11% year on year
Some shoppers seem to have missed the gloomy headlines. On October 9th, the world’s biggest luxury group, unveiled stellar results. Sales at its Dior, Louis Vuitton and myriad other brands went up by 11% year on year . That is nearly double the 6% trend rate of growth in personal luxury goods, which includes everything from watches to ties and posh heels. Its high-end rivals, Kering, which owns Gucci, and Hermès, are expected to follow suit.
Luxury has always been a cyclical industry: even those with plenty of cash to spare tend to spend more of it when times are good. Overall growth rates have slowed since 2018, when sales rose by over 10%. But the impact has not been felt evenly. “What you see is the luxury pie expanding at a slower pace—and the biggest players are grabbing a bigger slice,” says Rogerio Fujimori ofTake Hong Kong.
The main question for the industry is whether Chinese consumers will keep spending lavishly. A crackdown on corruption was expected to decimate sales a few years ago, but hardly registered. Chinese buyers account for 33% of all luxury sales, double the share in 2010, according to Bain, a consultancy. About two-thirds of the industry’s growth comes from China.
The prospect of a trade war has so far not clobbered Chinese consumer confidence, which has only recently come off all-time highs. And a decline in sales would again be felt first by second-tier players. Especially among emerging middle-class buyers in places like China, consumers purchase one product a year, says Luca Solca of Bernstein, a research firm. On a tight budget, they will go for “the brand of the moment”, poaching sales from lowlier rivals.
One headwind that would hit luxury firms of all sizes is a rise in protectionism. The retaliatory tariffs America recently imposed on Europe to compensate for illegal aerospace subsidies included some spirits, whichalso sells . However, the conglomerate has crafted an elegant solution to mitigate future import levies. This week its boss, Bernard Arnault, opened Louis Vuitton’s latest workshop—in Texas.
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