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 * Retail & Consumer


LVMH INVESTORS JITTERY OVER ANAEMIC CHINA DEMAND FOR EUROPEAN DESIGNER GOODS

By Mimosa Spencer
October 14, 20248:45 AM GMT+2Updated 17 hours ago
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A model presents a bag creation by Louis Vuitton fashion house as part of their
Spring/Summer 2023 collection show during Men's Fashion Week in Paris, France,
June 23, 2022. REUTERS/Benoit Tessier/File Photo Purchase Licensing Rights,
opens new tab
PARIS, Oct 14 (Reuters) - Investors in French luxury group LVMH (LVMH.PA), opens
new tab are eager for signs that China's new fiscal stimulus measures can
finally pull wealthy and middle-class Chinese shoppers out of their funk,
inspiring them to splash out on $4,300 designer leather handbags ahead of
Singles Day, China's largest annual shopping spree.
Global luxury bellwether LVMH, whose portfolio spans Louis Vuitton and Dior
fashion and accessories, Tiffany & Co jewellery and Sephora cosmetics, reports
third-quarter revenue on Tuesday.
Advertisement · Scroll to continue

Global sales of personal high-end goods - spanning clothing, accessories and
beauty products - this year will be between flat and 4% higher year-on-year, at
constant rates, the consultancy Bain has previously said. The global slowdown is
most marked in China as economic uncertainty weighs on middle-class shoppers and
makes those who can still afford luxury cautious about ostentation.
LVMH shares, alongside peers Gucci-owner Kering(PRTP.PA), opens new tab,
Hermes(HRMS.PA), opens new tab and Richemont (CFR.S), opens new tab, owner of
Cartier, have been on a roller coaster this year. "The luxury consumer is all
shopped out," said analysts at Bank of America, citing especially a
deterioration in sales to the Chinese, who were the main growth driver in the
first half of the year.
Advertisement · Scroll to continue

Predicting the third-quarter will be the worst for the sector in four years,
with a 1% decline in organic sales year-on-year, they also lowered estimates for
earnings per share for next year by 17% on average.
Markus Hansen, a portfolio manager at Vontobel, which owns shares of LVMH,
Hermes and Richemont, said a "lack of confidence" among Chinese shoppers
persists following declines in the country's property market. If confidence
returns, even slightly, luxury goods spending in China could become "quite
powerful" again, Hansen said.

Analysts are confident that Chinese shoppers will regain their appetite for
high-end fashion at some point, with Jefferies noting sector forecasts are
already counting on a healthy acceleration in demand from Chinese in 2025.
Redoubling its efforts to expand its market share in China, LVMH recently
deepened its partnership with Alibaba (9988.HK), opens new tab to leverage the
e-commerce firm's cloud and artificial intelligence capacities. LVMH's travel
retail unit, DFS Group, is building a major shopping and entertainment complex
on China's tax-free Hainan island.

Luxury goods are unlikely to be the next target of China's EU trade retaliation.
But luxury goods companies are staring at possible 10% plunges in their China
sales this year, compared to earlier projections of 5% to 6% sales growth,
according Patrice Nordey, CEO of Shanghai-based innovation consultancy
Trajectry. "The growth problem is everywhere, the top end consumers, the middle
class, the Gen Z, travel retail -- there's too many problems for the brands to
solve."

TD Cowen analysts on Thursday lowered their third quarter organic sales
estimates for LVMH and its rival Kering to 2.9% and -10.4%, respectively, and
for Richemont's second quarter, which ended in September, to 2%.
Kering, which reports sales on Oct. 23, gets a large proportion of its annual
sales from China, primarily through its powerhouse Gucci brand, with the
Asia-Pacific region excluding Japan accounting for 35% of its revenue. Gucci's
recent emphasis on "timeless" styles and less on trendy new fashions might not
have been effective with shoppers who need exciting looks to open their wallets,
Cowen said.

Get the latest news and expert analysis about the state of the global economy
with the Reuters Econ World newsletter. Sign up here.

Reporting by Mimosa Spencer, Casey Hall, Elisa Anzolin; editing by David Evans

Our Standards: The Thomson Reuters Trust Principles., opens new tab

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