by Mimosa Spencer
PARIS (Reuters) – Tourist shopping fever in Europe is expected to boost quarterly sales of French luxury groups LVMH, Kering (owner of Gucci), and Hermès, and offset failures in the Chinese market linked to the extension of health restrictions against the COVID-19.
French and Italian fashion houses have benefited from strong demand for designer brands after the pandemic, with buyers still keen to spend the savings made during lockdowns, despite the jolts in stock markets and rising prices.
“American consumers are traveling to Europe like it’s the end of the world,” said Mario Ortelli, of luxury M&A advisory firm Ortelli & Co, predicting the trend will boost industry sales. on the continent.
Investors will be watching for signs of waning appetite for designer brands as well as plans for further price hikes by luxury goods companies, which aim to protect margins.
“We continue to see an oversized demand for premium products in the market as consumers of all nationalities emerge from the pandemic (like it’s the last time). This has yet to normalize,” said Luca Solca , an analyst at Bernstein, who expects to see this “normalization” begin in the second half of 2022.
Closures in China, however, could further cloud the results. Sales for the sector in the country fell nearly 40% in the quarter, according to estimates from Barclays, which forecasts organic growth in global sales of around 11%, half of that of the previous quarter.
Concerns about the outlook in China were reignited on July 15, when results from Burberry and Richemont brands showed sales fell more than 30% due to COVID-19 restrictions, as the country released weak second-quarter GDP data.
The strength of the US market will also be closely monitored to detect any signs of weakness. The US overtook Europe as the biggest luxury market last year and is attracting a stream of investment in new stores that carry European brands.
UBS’s sales estimates for the second quarter indicate growth of 17% for LVMH, 12% for Kering and 16% for Hermès.
LVMH will publish its first-half results on July 26, Kering on July 27 and Hermès on July 29.
(French version Dagmarah Mackos, edited by Kate Entringer)
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