Source of this article: time Finance author: Zhou Jiabao

"the Chinese market is unpredictable, but we have every reason to be optimistic about it." Said Bernard Arnault, chief executive of LVMH, a top luxury goods group.

Recently$LVMH Moet Hennessy Louis Vuitton SE (LVMHF.US)$LVMH Group performance once again set a new record. As of December 31, 2022, the group's full-year revenue rose 23% year-on-year to 79.18 billion euros, while operating profit rose 22% year-on-year to about 21.06 billion euros, or 17%, excluding the impact of exchange rates.

At the performance meeting, Bernard Arnault shared about the changes in China's consumer market. "mainland Chinese consumers are rapidly returning to Macau stores in January as a result of changes in travel policies." It predicts that if international tourism is further opened up and the number of routes between Europe and Japan and South Korea reopens, Chinese consumers may return to the international tourism consumer market, including France, in the summer.

A few days ago, due to the adjustment of policies related to the epidemic in China, LVMH's share price also rose. According to Seeking Alpha, LVMH's share price has risen 17.22% so far this year. As of the close of trading on January 27, LVMH's share price reached 173.95 US dollars per share, with a market capitalization of more than 436.14 billion US dollars.

On January 28th, the boss of # LV went to Chinese social platform popular search for the topic of Chinese tourists returning to be optimistic about the luxury market, and gained 120 million views on a single platform.

LV Brand contribution Group 1Compact 4 income, profit margin in Chinese market is declining

At the results conference, LVMH management disclosed the performance of its individual brand for the first time, and the revenue of the Louis Vuitton brand exceeded 20 billion euros, or about 147.5 billion yuan, for the first time, more than 1x4 of the group's annual revenue.

By business, the fashion and leather division of the Louis Vuitton and Christian Dior brands remains the backbone of the LVMH Group. The division's annual revenue reached 38.65 billion euros, an increase of 25% over the same period in 2021, and an organic growth of 20%. It is the division with the fastest organic income growth in the group.

With the recovery of the global tourism retail market, the group's boutique retail division saw revenue jump 26% to 14.85 billion euros last year, organic revenue increased by 17%, core business Sephora's revenue and profits reached record highs, watches and jewelry, as well as perfume and makeup business revenue also achieved organic double-digit growth.

Regionally, the Asian market in which China is located (excluding Japan) contributes 30% of the group's revenue and remains the group's largest source of revenue. This was followed by the US market, which accounted for 27 per cent, and Europe, excluding France, which contributed 8 per cent and 7 per cent of the group's revenue, respectively.

However, in terms of growth, while consumption in Europe, the United States and Japan has recovered strongly, the Asian market, which has always been the leader, does not have enough stamina. For the whole of 2022, European market revenues surged 35 per cent compared with 2021; Japanese and US market revenues rose 31 per cent and 15 per cent, respectively; and Asian market revenues were the same as in 2021.

Jean Jacques Guiony, LVMH's chief financial officer, said at the meeting that the performance in the second and fourth quarters, especially in December, reflected the epidemic in the Chinese market, and that although the overall performance of the Asian market was stable, the Asian market share fell to 30 per cent from 35 per cent in 2021 because of the high growth of the group as a whole.

In response to analysts' questions, Jean Jacques Guiony also revealed that profit margins in China in 2022 are lower than in 2021. Profit margins rose in 2021 because of a better-than-expected recovery in Chinese demand, while profits fell in the third and fourth quarters of 2022, as revenue fell under fixed costs.

There are long queues in LV stores during the Spring Festival, but they have not yet returned to 2019 levels.

After the trough of 2022, the arrival of the Chinese Spring Festival has become the first node in the recovery of luxury consumption.

"LV has the most people in line, and almost all the popular styles are gone." "all the LV counters in Macau need to wait in line, and the counters of French sticks and horns are out of stock in Macau." During the Spring Festival, long queues of news from consumers in Louis Vuitton stores across the country emerge one after another.

Whether in first-tier cities such as Guangzhou, Shanghai or second-tier city Wuxi, consumers who do not have advance bookings with stores will queue for as little as 15 minutes to as long as an hour. According to many consumer feedback, even to 9 pm to 10:00, there are still queues in stores.

A store salesman told time Finance that there are indeed a lot of people coming in to spend money during the Spring Festival, especially in the afternoon when sales are at its peak, so now many hot models in stores are out of stock. In addition, according to online rumors, the Louis Vuitton brand will raise global product prices on February 18, an increase of between 8% and 20%, which may be one of the reasons why consumers flocked to China during the Spring Festival.

Despite long queues of stores during the Spring Festival holiday, LVMH Group management remains cautious about sales in 2023. When analysts asked them to give a long-term forecast for the Chinese market, management responded, "it's hard to see any trend this holiday." It is too early to judge the overall situation this year. "

In fact, China's overall luxury consumption performance was weak in 2022. According to Bain, sales of luxury goods in 2022 are only 69% of those in 2019. In the same year, American consumers spent 88% more on luxury goods than in 2019, while European consumers spent 70% more on luxury goods than in 2019.

The report predicts that sales growth in the personal luxury market in 2023 will ideally grow by 6 to 8 per cent at fixed exchange rates, but the reality may be only 3 to 5 per cent. Bain said it would depend on the strength of China's economic recovery and the ability of the US and Europe to withstand economic headwinds.

Although the Chinese market rebounded strongly in January, Jean Jacques Guiony stressed that "we have not yet returned to 2019 levels, there is still a long way to go."

Edit / Viola