Global luxury: more “local” consumption for lack of travel, but still expanding



Published on

August 2, 2021

Paris, July 30, 2021 (AFP) – The pandemic has made the consumption of luxury goods more “local” in the world, but without penalizing the profits of the giants of the sector, which exceed their levels during the crisis, thanks in particular to the United States .

Photo: Cartier

Luxury giant LVMH announced on Monday that it exceeded its pre-pandemic half-year sales by 11% to 28.7 billion euros for a net profit of 5.3 billion (+ 64% compared to 2019).

In the process, its historical competitor Kering also communicated a record level of sales of 8 billion euros for the first half of the year (+ 8.4% compared to the pre-Covid 19) while the third a large French group, Hermès exceeds 4 billion euros (+ 29%). Both are making more than a billion euros in profits, exceeding expectations.

The French are not the only ones: the Swiss Richemont (Cartier, Piaget, Montblanc …) has experienced the same success with a sharp rebound for its first quarter shifted to 4.3 billion euros in turnover (+18 % compared to 2019), while the Italian Prada exceeded its half-year sales by 8% compared to 2019.

These are the “upper middle, rich and ultra-rich, preserved by the crisis” who, as in the first quarter, continued to spend their savings on luxury goods, for lack of being able to travel or frequent restaurants, said the ‘AFP Arnaud Cadart, portfolio manager at Flornoy.

Chinese customers, “which represent 35 to 40%” of the sector’s customers, “are still an important driver,” he said. The inability to travel, as everywhere else, has however refocused this clientele on its local market at the expense of the European market.

– “Violent” rebound in the United States –

“What surprised was not so much the recovery in China, but the violence of the rebound in the United States”, explains to AFP Erwan Rambourg, analyst and author of “Future Luxe: what’s ahead for the business of luxury “.

Compared to the rebounds of previous crises, September 11 or 2008 financial crisis, “the feeling of guilt, this idea that it is inappropriate to buy luxury, has faded,” he notes. “There is a younger generation in the United States more uninhibited about buying luxury” especially among the African-American, Hispanic and Asian minorities, he explains.

“We are seeing in the United States a very strong recovery in the activity of our loyal customers and at the same time a new customer base that comes through digital”, confirmed the manager of Hermès Axel Dumas, during a conference call. Compared to 2019, the group’s sales in the United States jumped 25%.

For Thomas Chauvet, Citigroup analyst, the “psychological impact” of the US government’s support measures with financial aid and “wealth effects with the rise in stock market indices”, in recent months, is no stranger to this. rebound.

As for Europe, admittedly penalized by the absence of tourists, especially Asians, who generated half of the sector’s turnover, it suffered a lesser than expected drop in activity, thanks to a return of local customers. . “The Europeans had largely deserted this market”, but this year, this trend has been reversed, according to Arnaud Cadart.

“To everyone’s surprise, the brands are realizing that by stimulating local customers,” by seducing them in particular via social networks, “the French, Italians and Spaniards are more present than expected” according to Erwan Rambourg.

“There is a very strong growth of the local clientele, even if these markets remain dependent on tourism”, he analyzes. According to Thomas Chauvet, “the rebound in local demand does not, however, compensate for the loss of tourists”.

But the luxury sector, assures Erwan Rambourg, should “remain dominated by local purchases for at least another year”.


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