Luxury giants LVMH, Kering, Hermes, Burberry banking on China as US, European shoppers sober up

Luxury goods companies such as LVMH, Kering, Hermes, and Burberry are shifting their focus back to China as the country relaxes Covid curbs after three long years.

Rolling out pricey new collections, the companies expect to see a deceleration in sales growth over the quarter in the US and Europe as the post-pandemic splurge on designer fashions begins to ease.

Consensus estimates for fourth-quarter sales are a growth of 7 percent at LVMH, a sales decline of 2 percent at Kering, and a 17 percent growth for Hermes, which is a 24 percent drop from the third quarter.

Luxury spending by the Chinese dipped from 33 percent in 2019 to 17 percent last year, according to estimates from consultancy Bain.

Cartier-owned Richemont missed market estimates after sales in China plunged by a quarter. Burberry’s sales growth slowed sharply to one percent in the quarter to the end of December after a 23 percent fall in mainland China.

Burberry is optimistic consumers in China would start spending again and Richemont saw a rebound there before the holiday, adding to rising expectations.

China is forecast to become the luxury industry’s biggest market by 2025.