LRLCY Loreal Co (PK)

By Matthew Dalton 

PARIS -- Spending in China on some of the biggest high-end brands has surged since the country's lockdown ended, luxury goods companies said, offering hope to an industry that has been slammed by the coronavirus pandemic.

LVMH Moët Hennessy Louis Vuitton SE, the industry's biggest company, Thursday said Chinese shoppers have flocked back to its boutiques in mainland China when most of them reopened in March. LVMH owns Louis Vuitton, the world's biggest luxury label, Dior, Fendi and dozens of other brands.

Sales in China for most of LVMH's brands turned positive compared with a year ago in the second half of March, said Jean-Jacques Guiony, LVMH's chief financial officer.

"In April, for the large brands, we've seen very high growth rates in mainland China," Mr. Guiony said, "sometimes in excess of 50%. So it really shows the appetite of Chinese people after two months of lockdown to come back to stores and come back to their previous patterns of consumption."

Still, overall spending by Chinese shoppers was down for the quarter, Mr. Guiony said. That is because Chinese shoppers do most of their luxury spending on trips abroad to European capitals, big U.S. cities and elsewhere. With international travel locked down, it is unclear when Chinese will have the chance, or the desire, to splurge again overseas.

Overall sales at LVMH were EUR10.6 billion ($11.5 billion) in the first quarter, down 17% after accounting for currency fluctuations and other factors. That was in line with analysts' expectations. LVMH's boutiques in China were closed for February and the first half of March, when the coronavirus swept through Wuhan province and threatened the entire country. Boutiques across Europe and the U.S. were shut in March, when Western governments locked down their economies to contain the pandemic.

L'Oréal SA, the world's biggest cosmetics company by sales, also said the Chinese market for luxury goods was rebounding. Sales at its luxury cosmetics division, whose brands include Armani and Yves Saint Laurent, were down 8% in the quarter. But in China, they showed "clear and encouraging signs of a recovery in consumption," the company said Thursday.

When China locked down in January, luxury brands' reliance on Chinese consumers was seen as a liability. Now those shoppers have become the industry's bulwark against catastrophe, analysts say. High-end brands have reopened most of their Chinese boutiques, as the West remains locked down.

Chinese shoppers are the industry's most important clientele, representing more than a third of all revenue, according to Bain & Co. Some of them have already begun documenting on social media lavish purchases with the reopening of the country's luxury boutiques.

LVMH is considered a bellwether for the global luxury industry, with 75 brands operating in dozens of countries. In recent years, however, LVMH's biggest brands have outperformed the industry; smaller, independent labels lack the resources to compete with the French conglomerate.

Analysts expect that the crisis could magnify the advantage enjoyed by bigger companies such as LVMH and the industry's most well-known brands -- such as Louis Vuitton, Hermès, Chanel and Gucci.

"The bigger brands will exit this crisis with a massive advantage from pent-up demand," said Erwan Rambourg, luxury analyst at HSBC. "People might be thinking, 'I'll buy less but better.'"

Write to Matthew Dalton at Matthew.Dalton@wsj.com

(END) Dow Jones Newswires

April 16, 2020 15:40 ET (19:40 GMT)

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