The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
PARIS – Louis Vuitton, LVMH's biggest sales driver, has beefed up stocks of its handbags and other luxury wares to feed its growing online business in mainland China, as Chinese consumers spend more at home, its management told analysts.
Chinese shoppers are increasingly splurging on high-end fashion and accessories locally rather than overseas, encouraged by a leveling out of prices as import tariffs drop, although that has penalised some brands struggling to capture the shift.
Vuitton is benefiting thanks in part to a Chinese e-commerce push, according to analysts who attended a two-day closed-door briefing with the brand and LVMH.
More broadly, demand for Vuitton products within mainland China was still at "unheard of" levels, its CEO Michael Burke was quoted as saying. LVMH had no immediate comment.
ADVERTISEMENT
"Although only a third of spend on Louis Vuitton is currently local, this is growing twice as fast and a 50:50 split is now on the cards," Citi analyst Flavio Cereda wrote in a note.
Over the past nine months, Vuitton shifted inventories from neighbouring countries to its e-commerce site in China, which now accounted for 8 percent of the brand's sales there, Cereda added.
Vuitton launched its online business in China in mid-2017 – just after Kering-owned rival Gucci – with Prada and Hermes following suit.
Jeweler Tiffany, which has suffered from sharply lower spending among Chinese tourists in the United States, said this week it also planned to invest in e-commerce operations in China.
Relations between the world's two largest economies have soured amid a trade war, adding to a tougher backdrop for luxury firms in their biggest markets.
But Vuitton gave a rosy view of its US business and told analysts it had opened its third US handbag manufacturing site, in Texas.
"Investors should be reassured by Louis Vuitton's 'healthy' trends in Asia and the United States," RBC Capital Markets analyst Rogerio Fujimori wrote.
LVMH shares were flat at the close of trading on Thursday, after rising more than 2 percent earlier in the day and hitting record highs of €357.10 (around $403.27).
ADVERTISEMENT
Vuitton, with annual sales around the €10.5 billion mark (around $11.9 billion), aims to make €1 billion in revenues from its watches and jewellery in the coming years, RBC's Fujimori added.
It has already passed that threshold in its women's and men's clothing ranges, Fujimori's said.
Asked by analysts whether LVMH might buy Chanel – after the French label sparked speculation it was on the block when it published earnings for the first time last June – the group's CFO Jean-Jacques Guiony said its size would be a challenge for any buyer.
Guiony said Chanel was worth closer to €100 billion (around $1.1 billion) than the €50 billion (around $56.4 billion) often cited in media reports, Jefferies' Cereda wrote.
By Sarah White and Pascale Denis; editor: Edmund Blair.
From analysis of the global fashion and beauty industries to career and personal advice, BoF’s founder and CEO, Imran Amed, will be answering your questions on Sunday, February 18, 2024 during London Fashion Week.
The State of Fashion 2024 breaks down the 10 themes that will define the industry in the year ahead.
Imran Amed reviews the most important fashion stories of the year and shares his predictions on what this means for the industry in 2024.
After three days of inspiring talks, guests closed out BoF’s gathering for big thinkers with a black tie gala followed by an intimate performance from Rita Ora — guest starring Billy Porter.