2022 could not have started better for French luxury. The sector’s major heavyweights are posting spectacular results for the first half of the year. From Hermès to Kering to L’Oréal… All see their net profits soar thanks to an increase in sales compared to 2021, a year already marked by the return of consumers. Despite a difficult current environment eroded by inflation, supply disruptions and repeated restrictions in China, where sales are falling, luxury continues to show relentless composure and approaches the rest of the year in full swing.
Starting with the world number one LVMH, for which the year 2022 is announced, but under the best of circumstances. The French group announced last Tuesday that it had achieved a net profit of 6.5 billion euros in the first half, 23% more than in the same period of 2021, whose performance had already been qualified ” record”. Bernard Arnault’s group’s turnover between January and June was 36.7 billion euros, up 28%, driven by its flagship fashion and leather goods division (Louis Vuitton, Dior, Celine, etc.), which alone had 18 billion euros in sales power (+31%).
A success that LVMH owes in part to the strong increase in its sales in Europe and the United States. In fact, the recent lifting of health restrictions in Europe has allowed foreign tourists, particularly Americans, to return to the territory. Especially since the weakness of the euro, which is stagnating almost at par with the dollar, is particularly advantageous for this clientele.
In the United States, it is the native population that explains this increase in sales. ” It’s American customers who are spending more since the movement’s inceptionesocial and societal nts that enable new customer segments access to luxury consumption »analyzes Joëlle de Montgolfier, vice-president of the study and research department for the luxury sector in the Bain & Company cabinet. ” From now on, the advertising campaigns of the big luxury brands will target these new segments, in particular the African American population, which is gradually gaining access to this luxury market; They help create a clientele that didn’t exist before », She keeps going. In addition, the increase in online sales also allows regions or areas of the American territory that do not have points of sale to have access to them.
Despite declining sales, China remains attractive
The momentum in the European and American markets allowed luxury goods, particularly LVMH, to offset weaker sales growth in Asia, particularly in China, which remained under health constraints in the second quarter. True to its “zero Covid” strategy »At the first warning of a resurgence in the epidemic, the country has multiplied restrictions, particularly in places important to the luxury sector, such as Beijing and Shanghai. Kering makes the same observation. The luxury conglomerate announced last Wednesday that it had posted net income of 1.988 billion euros, up 34% over the past year. Its turnover thus amounted to 9.93 billion euros between January and June, an increase of 23% in one year, thanks to its Gucci brand, which alone achieved 5.173 billion euros in sales (+ 15%). It benefited from activity gains in Western Europe, Japan and the United States, which offset this ” the clear effects of the lockdown in China » linked to Covid-19, according to a press release from the group.
Despite this drop in sales, the Chinese market remains essential for luxury brands that continue to invest there, Kering’s finance director Jean-Marc Duplaix explained in an interview with journalists. For Gucci, it is ” a key market with long-term intact potential », he explained. Joëlle de Montgolfier agrees: ” Despite short-term uncertainties, the Chinese market remains a luxury market engine in the long-term, as it is a growing population with rising living standards and a strong appetite for luxury products. When the Chinese market reopens with the lifting of health restrictions, consumers will be able to shop in China again but also travel and spend outside of their country. The long-term signs are therefore rather good, of course without any new geopolitical events. ».
There is also some optimism about Chinese consumers on the part of Hermès. The manager of the French group also welcomed the luxury group’s good resilience in Asia despite the health context in China. ” There was a fall in April but a very strong rebound in June ». ” We are not far from compensating for the decline (…) At the end of the first half of the year, we are positive about China »he assured, pleased that Hermès knows ” an exceptional semester ». According to a press release published on Friday, the group recorded a net profit of 1.64 billion euros in the first half, an increase of 39.7% over the previous year, thanks to an increase in sales in all regions. The saddlery leather goods maker’s sales totaled 5.475 billion euros, up 29% from the first half of 2021. The French luxury giant is even planning a sequel ” the acceleration of recruitment (…) in the second half of the year to strengthen all of the company’s businesses », said Axel Dumas and announced that five new leather goods should see the light of day within five years.
As for L’Oréal, whose net profit reached 3.2 billion euros, an increase of 36.4% thanks to a 20.9% increase in sales over a year, the group can count on online sales compared to 60% of their sales in China account for 50% before. That’s what Nicolas Hieronimus, managing director of the group, said to himself ” convinced that China will have a good second half: They mastered ite Getting better the covid, no inflation, low unemployment, prosperity politics ».
Luxury, insensitive to the consequences of inflation
Luxus actually seems to be ignoring the problems that are currently plaguing the entire world, starting with the war in Ukraine. ” The damage ended up being quite moderate and limited to Russia and Ukraine », comments Joëlle de Montgolfier. And if industry players have pushed up raw material costs due to inflation and supply problems, the luxury specificity gives them the opportunity to pass that increase on to their selling prices in much the same way. ” As a general rule, people who are able to buy luxury are not the most sensitive to rising prices. »explains the specialist who specifies it ” Historically, luxury has been very crisis-resistant ». However, she wonders: ” If inflation leads to a recession, particularly in the United States, will the luxury industry be spared a drop in consumption? » Especially since in the United States the emerging clientele, especially young workers, is less established and could limit this spending item.
However, Bain & Company expects the sector to continue its strong momentum for the remainder of the year. ” It’s still early to make any predictions as there is still massive uncertainty, but we expect the market to grow throughout the year. The least optimistic scenario projects growth of 5% to 10% over 2021 versus 10% to 15% if sales growth in Europe and the United States continues and that in China picks up again. In any case, it should be a good year »concludes Joëlle de Montgolfier.
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