LVMH cheers the ‘spectacular’ return of Chinese tourists
LVMH posted record results Thursday, and expressed confidence that China’s luxury market would bounce back this year as the country continues to reopen.
The world’s biggest luxury group logged revenue of €79.2 billion ($86.2 billion) and profit of €21.1 billion ($22.9 billion) for 2022, both up 23%.
In a presentation, the company said it was buoyed by the recovery of international travel and strong demand from local customers across Europe, the United States and Japan.
And in the coming months, “we have every reason to [be] confident, indeed optimistic, on the Chinese market,” LVMH CEO Bernard Arnault said on a conference call.
“There are green shoots in China,” he told analysts. “In Macao, where Chinese can now travel to, the change is quite spectacular. Stores are full. It’s really come back [at a] very strong pace.”
The owner of brands such as Louis Vuitton and Sephora also has various stores in France that are ready to welcome Chinese shoppers as more travel restrictions are rolled back, Arnault said. He predicted, though, that Chinese tourists would not return in large numbers until at least the second half of the year.
China lifted some of the world’s toughest Covid-19 border restrictions this month after nearly three years, scrapping a quarantine requirement for international travelers.
Arnault noted that while LVMH was seeing signs of recovery, it was still “early days.”
“We can’t guarantee it’s going to continue like that,” he said. “[But] if it continues as it is, it will be an excellent year.”
Chief Financial Officer Jean-Jacques Guiony also cautioned that the current level of customer traffic in China was still about 40% below pre-pandemic levels, and that the economic outlook was tough to predict.
But in another sign of optimism, LVMH proposed to hike its 2022 dividend on Thursday, from 10 euros to 12 euros per share. The proposal will be up for approval at the company’s general meeting in April.
LVMH is the latest luxury giant to deliver an upbeat forecast over China’s reopening. Last week, Swatch Group, the owner of Omega and Harry Winston, predicted “a record year in 2023,” based on strong sales growth it had already seen this month in China.
“After the end of Covid measures, consumption quickly recovered, not only in China,” but also in the nearby cities of Hong Kong and Macao, the Swiss watchmaker said in a statement.
The removal of Chinese travel restrictions will likely also boost sales in overseas tourist destinations, the company added.
Burberry, too, has pointed to signs of “a good recovery” in China this month, following a slump caused by the country’s Covid-19 outbreaks and lockdowns in the last quarter.
Sales in mainland China fell 23% in the three months ended December, the British brand said whilst reporting earnings last week.
“While the timing and pace of recovery remains uncertain for the rest of this year, we are confident in the opportunity and the long term prospects of the Chinese market,” Julie Brown, the company’s chief operating and financial officer, told analysts.
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