Luxury feels like home as Covid-19 cuts back on travel
Image: Ludovic Marin / AFP
The luxury sector has returned from the Covid-19 pandemic but the crisis is still hampering travel, a key element of the market.
Industry giants have reported findings that show the world’s well-off are splurging on luxury goods as sales even exceed pre-pandemic levels.
LVMH, which is home to the Louis Vuitton, Moet, Fendi and Kenzo brands among others, saw its sales in the first half of the year soar 11% above its pre-pandemic level to 28.7 billion euros (34, 1 billion) with a profit of 5.3 billion euros, a huge increase of 64% compared to 2019.
Rival Kering, owner of the Gucci and Balenciaga brands, beat its pre-pandemic level by 8.4% with a record turnover of 8 billion euros. Hermes reported a 29% jump to 4.0 billion in sales.
Both recorded profits of more than a billion euros, exceeding expectations.
The Swiss luxury group Richemont – Cartier, Piaget and Montblanc – beat its pre-pandemic level by 18% in the second quarter, while the Italian Prada beat its sales by 8% in the first half of 2019.
These are “the upper middle class, the rich and the ultra-rich spared from the crisis” who could not travel or eat in restaurants and instead bought luxury goods, said Arnaud Cadart of the manager of Flornoy assets.
The Chinese, “who represent 35 to 40%” of the luxury clientele, are still crucial, he added.
But while Chinese buyers used to do much of their shopping when visiting Europe, now they do it at home.
Strong rebound in the United States
Indeed, “what was surprising was not so much the recovery in China as the violent rebound in the United States”, commented Erwan Rambourg, sector analyst and author of “Future Luxe: What’s Ahead for the Business of Luxury “.
Compared to previous exits from the crisis, after the September 11 attacks or the 2008 economic crisis for example, “the feeling of guilt, the idea that it is inappropriate to buy luxury goods, has disappeared”, Rambourg told AFP.
âThere is a young generation in the United States who feel comfortable with luxury shopping,â especially among African-American, Hispanic and Asian populations, he explained.
HermÃ¨s CEO Axel Dumas said during a telephone press briefing: “We have seen a very strong rebound in activity in the United States from our loyal customers as well as new customers. which came to us through the company’s digital marketing.
HermÃ¨s sales in the United States have jumped by a quarter from their pre-pandemic level.
Citigroup analyst Thomas Chauvet noted that the fact that a roaring US stock market made many Americans richer, at least on paper, also provided a big psychological boost to consumption.
In Europe, the sector’s performance was better than might be expected given the absence of tourists who normally generate half of sales, due to the presence of local customers.
“The Europeans had largely deserted this market” but this year the trend has reversed, said Cadart de Flornoy.
Rambourg added: “To everyone’s surprise, the brands have discovered that by stimulating local customers” via social networks “the French, Italians and Spaniards have turned out to be more than hoped for”.
Chauvet warned that “the rebound in local demand does not compensate for the loss of tourists”.
The luxury market will nonetheless “remain dominated by local buyers for at least a year”, predicts Rambourg.
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