LVMH, the Paris-based conglomerate which owns brands such as Louis Vuitton, Christian Dior, and Moët & Chandon, made an impressive start to the year and evidence points to China as being a catalyst to the group’s success. Shares were initially estimated to rise 8.5%, yet LVMH surprised all when they ultimately hit 13% to reach a record high of €277. The group is now valued at €138.2bn.
The spending power and influence of Chinese luxury consumers are no secrets. China’s wealthy individuals, in analytics compiled by Bloomberg, have shown to have invested a lot in Louis Vuitton bags and Givenchy makeup. Their demand in luxury is robust despite a strong Euro currency that can sometimes deter foreign consumers. Nevertheless, a 10% negative impact on LVMH sales was reported; the currency remains a disadvantage to businesses seeking to attract Chinese spenders.
This additionally comes at a time when China’s economic growth is predicted to slow to 6.5% as 2018 moves forward. Straining trade relations between USA and China are expected to affect the European luxury industry as Chinese consumers look inwards for upmarket experiences. LVMH seeks to ease these worries with the use of ecommerce. Bernard Arnault, CEO of LVMH, explained that ‘digital allows us to reach the client more quickly and directly’. New websites across brands, such as Berluti and Céline, as well as increased engagement on China’s social platform WeChat, have allowed consumers to purchase LVMH products without dealing with the daunting Euro.
The shares of LVMH’s rival Kering, owner of Italian fashion brand Gucci, also briefly touched record highs at 7%, while Britain’s Burberry and the independent luxury group Hèrmes also climbed 1.7% and 1.9% respectively.