Asia, the engine of French luxury giants that has become an Achilles heel with the coronavirus?

By wetretrjyu
24/09/2022
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Hermès, Kering, LVMH… In 2019, the mastodons of tricolor luxury recorded record profits carried, in particular, by the success of their leather goods and their ever -increasing growth in Asia.But the situation could change with the coronavirus.

Between French luxury brands and Asia, love is there.It has already been several years since Parisian chic has experienced a significant boom in Asian countries, China and South Korea in mind. En atteste, la dernière étude annuelle consacrée aux produits personnels de luxe publiée par le cabinet d’études américain Bain & Company.

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"With a growth of 4% at constant exchange rates, the luxury market in its entirety - including personal products and luxury experiences - [A] reached 1.300 billion euros worldwide "in 2019, explains the firm.Which specifies that the segment of personal luxury goods also recorded a similar growth of 4% at constant exchange rates last year to set up at 281 billion euros.

Record turnover

Also, the fact that Hermès saw in 2019 its turnover increase by 15% at current exchange rate and 12% at constant rate is a nice performance which is part of a more global dynamic.That of a sector which, whatever the geopolitical tensions, does not know the crisis.

In detail, the turnover of the Sellier-Maroquerier reached 6.9 billion euros last year.A performance in accordance with the consensus established by the FactstSet and Bloomberg agencies.In addition, its net profit established at 1.5 billion euros in 2019, an increase of 9%.

What necessarily give the smile to his boss, Axel Dumas, who thus praised "a solid dynamic" and "of particularly remarkable performances this year, thanks to balanced growth in all trades and all geographic areas".

But Hermès is no exception to the rule.In 2019, the LVMH group (Moët Hennessy Louis Vuitton), a world leader in luxury products, crossed the 50 billion income mark (53.7 billion euros precisely, an increase of 15% compared to the 'last year).Last year Kering (Gucci, Saint-Laurent, Boucheron, etc..) generated a turnover of nearly 15.883 billion euros ( +16.2% in published data and +13.3% compared to 2018), indicates the group.

Figures which, in all cases, attest to the unfailing execution of strategies finely running out of the mastodons of the tricolor luxury.And which, beyond continuing to create value and unifying their distribution channels, also give pride of place to an Asian market which makes it good.

L'Asie, le moteur des géants du luxe français devenu un talon d'Achille avec le coronavirus?

Chinese market explosion

The love story between Chinese consumers and luxury has been lasting for several years.In a report published in August 2019, the consulting company McKinsey recalled how much China was an "engine of global growth in luxury spending".An engine such that the expenses in question should, according to the study, "almost double by 2025".

It must be said that the luxury brands distributed in China are carried by the taste of households from the upper middle class for luxury products.The millennials participate largely in this boom.Those who were born in the 80s, details McKinsey, "grew up while China has become an economic power and are now at the top of their careers and their income".Those born in the 90s are on their side "emerging power".

Result: despite the slowdown in the second world economy, the increase in expenses of the young Chinese generation today encourages the mastodons of the sector to modernize their brands and open new ones.In China, consumers demand luxury brands that they bring them much more than just a logo on a handbag.

As for the tricolor brands present in China, they also surf an image that reassure Chinese consumers.Chanel and Hermès today belong to the restricted circle of companies that continue to get out of the game...Despite the fall in Asian growth.

Fears about the coronavirus

But in this quasi-Idyllic landscape, French luxury groups that distribute their products in China are starting to doubt.Not the inclination of consumers for their products, but simply the impact of the coronavirus on their sales.However, China and Asia weigh very heavy in the accounts.The Asia-Pacific zone (including Japan) thus represents 50% of sales for Hermès, 42% for Kering and 37% for LVMH (Asia and Japan only).

At the beginning of the week, the boss of Hermès estimated that it was "still too early to draw conclusions" concerning the impact of the coronavirus epidemic on the activity of the group.

"It fell into an important country, at an important moment (during the Chinese New Year, which generates heavy expenses, editor's note).We have 43 stores in the region if we take China, Hong Kong, Macao and Taiwan: at one point we had to close 11, today 4 are still closed.We see a potential renormalization, but it is still too early to know when the rebounded effect will arrive, "said Axel Dumas, recalling that Hermès' production was carried out in France at 80%.

"In the medium term, despite the economic, geopolitical and monetary uncertainties worldwide", the group known as "confirm an objective of progression of turnover at ambitious constant rate".

On the side of LVMH, the bell sound is significantly the same.At the end of January, the French luxury giant also said they were confident about the continuation of the group's growth in 2020.And this, despite there again the uncertainties linked to the coronavirus.On the occasion of a press conference, Bernard Arnault, the boss of LVMH, indicated that in 2020, as in other years, the conjuncture would be "carrier".

Regarding the impact of the coronavirus, he believed that "he was still" too early "to assess his impact on group sales.Specifying, however, that everything was a question of duration."If it lasts two and a half months, [the consequences] will not be terrible.If it lasts two years, it's another story ".