Asian Shoppers Prop up Luxury Goods Makers
Travel constraints and corporate cost-cutting boost the fortunes of luxury brands
Travel constraints in Asian markets due to the coronavirus coupled with corporate cost cutting and the expansion of online operations are boosting the fortunes of global luxury goods makers. That sets the stage for companies in the Emles Global Luxury 50 Total ReturnIndex to rebound after lagging the S&P 500 since the start of the year.
They’re as visible as “For Rent” signs along Rodeo Drive in Los Angeles, Fifth Avenue in Manhattan and the Magnificent Mile in Chicago.
With consumers forced to spend at home rather than splurge on travel, companies such as LVMH, Burberry and Richemont, which owns luxury brands including Cartier and Montblanc, reported strong demand from Asian consumers in general, and Chinese shoppers in particular. LVMH, which produces products under the Louis Vuitton and Christian Dior brands, reported a 21% increase in revenue from Asian customers. For Richemont, revenue from China jumped 80% for the three months ended in December 2020, making the country its largest market. Burberry’s e-commerce business in China more than doubled in the third quarter, while a double-digit increase in sales fueled an 11% gain in Asia
But issues remain for luxury goods makers. They’re as visible as “For Rent” signs along Rodeo Drive in Los Angeles, Fifth Avenue in Manhattan and the Magnificent Mile in Chicago. Tourists are scarce, landlords are suing tenants over missed rent and tenants are suing landlords to get out of expensive leases. As a result, until leisure travel returns to pre-pandemic levels, luxury goods companies that have plowed resources into e-commerce look set to be the real winners.