With trade wars and economic downturns making frequent headlines, it’s nice to see some good news coming out of China. Particularly, given how much of the luxury sector the country powers, if you happen to be a luxury investor. Now, the world’s largest luxury company, LVMH, has announced that its Louis Vuitton brand is experiencing “unheard of growth rates” in the country.
LVMH’s share price has soared by 42% so far this year
Source: Yahoo Finance
Michael Burke, Vuitton’s CEO, gave the good news to analysts in Paris, reiterating something that LVMH’s chief financial officer, Jean-Jacques Guiony, has told investors previously: that consumers in China are buying more luxury goods domestically rather than abroad.
The reason for this shift towards domestic purchases is a change of policy from Beijing, which looks to curtail the common practise of overseas purchases in order to avoid major import tariffs. In a note to investors, Citi analyst Flavio Cereda wrote: “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.”
RBC Capital Markets analyst Rogerio Fujimori also covered the news in a note, saying that “investors should be reassured by Louis Vuitton’s ‘healthy’ trends in Asia and the United States.” The news has sent LVMH up, as well as some of its peers, such as high-end handbag specialist Hermes.
In other news concerning the world’s largest luxury company, analysts in Paris also pushed executives over recent rumours that LVMH might be purchasing iconic luxury brand Chanel. Guiony seemed to pour cold water on that rumour, telling analysts that Chanel’s size would make it a challenge for any buyer. He also claimed that the company was worth more-like 100 billion euros than the 50 billion euro-value “often cited in media reports.”
Disclosure
Dominion holds LVMH in its Global Trends Luxury Fund.
Author: Theo Leworthy
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