The Week in Brief

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LVMH sales inch forward 1 percent on weaker China market, as bargain-savvy Chinese shoppers shift their spending

LVMH Group recorded revenue of EUR 41.7 billion in the first half, up 1 percent, with the luxury conglomerate's Asia excluding Japan business plummeting by double digits.

For the first half, LVMH said its Asia (excluding Japan) organic revenues fell by 10 percent, and were down 14 percent in the second half, as more bargain-savvy Chinese shoppers shifted their expenditure from the mainland to nearby Japan, where the yen is experiencing a three-decade low versus the euro.

As a result, organic revenues in the archipelago nation surged 57 percent in the second quarter, and were up 44 percent in the first half.

Asia, LVMH's largest market by revenue, still made up 30 percent of the Parisian firm's total revenues, with Japan representing just 9 percent.

Elsewhere, first-half sales were up 2 percent in the United States and 3 percent in Europe.?

By category, the wines and spirits business saw a revenue decline of 9 percent in the first half, with champagne sales dropping, and Hennessy cognac held back by weak local demand in the Chinese market.

The fashion and leather goods business recorded?organic revenue growth of 1 percent, with operating margin up at the firm's flagship fashion brands, Louis Vuitton and Christian Dior, alongside a growing demand for Celine accessories.

As a result of the slowdown in sales in markets like Asia and key categories, net profit for the first half fell 14 percent to EUR 7.3 billion.

“The results for the first half of the year reflect LVMH’s remarkable resilience, backed by the strength of its maisons and the responsiveness?of its teams in a climate of economic and geopolitical uncertainty," said Bernard Arnault, chairman and CEO of LVMH.

"Driven as ever by our dual focus on desirability and responsibility, we have continued to work towards achieving the targets set out in our environmental and social action programs... While remaining vigilant in the current context, the group approaches the second half of the year with confidence, and?will count on the agility and talent of its teams to further strengthen its global leadership position in luxury goods in 2024.”

Kering revenue takes a dive on waning Gucci sales, especially in the Asia-Pacific region; profit warning issued

Kering said revenues fell 11 percent to EUR 9 billion in the first half, on the back of double-digit declines at the luxury giant’s struggling Gucci brand.

Asia Pacific, which made up 32 percent of Kering’s revenues during the first half, saw revenues plummet 22 percent, on the back of a 25 percent decline in sales in the region during the second quarter.

In neighbouring Japan, which accounted for 8 percent of first half sales, revenues surged 22 percent, on the back of a 27 percent uptick is second quarter sales.

By brand, Gucci sales contracted 20 percent to EUR 4.1 billion during the first half, hurt particularly by a continuing marked decrease in Asia-Pacific in the second quarter, where Gucci sales fell 19 percent on comparable basis. Yves Saint Laurent's revenue in the first half was down 9 percent, while Bottega Veneta remained flat at EUR 836 million, thanks to a “resilient” Asia Pacific. Other Houses' (Alexander McQueen, Balenciaga, and Brioni) revenue was down 7 percent.

Finally, total revenue from the Kering Eyewear and Corporate segment was EUR 1.1 billion, mainly from the activities of Kering Eyewear and Kering Beauté.

As a result of the decline in overall sales, recurring operating income at Kering fell 42 percent to EUR 1.58 billion in the first half.

“In a challenging market environment, which adds pressure on our top line and profitability, we are working assiduously to create the conditions for a return to growth,” said Fran?ois-Henri Pinault, chairman and chief executive officer.

Looking ahead, Kering warned recurring operating income could fall by about 30 percent in second half of the year, compared with the previous year.

Fashion, luxury and sportswear set to shine at the 2024 Paris Olympics

In a melding of sportsmanship and style, the 2024 Paris Olympics are poised to offer a grand stage for global industries, particularly fashion and luxury, highlighted by the Olympics’ sponsorship from one of the world’s largest luxury conglomerates: LVMH.?

According to insights from research firm Euromonitor International, this quadrennial event is primed to catalyse a surge in sales and awareness across various sectors.

Marguerite Le Rolland, head of apparel and footwear at Euromonitor International, underscored the event's potential to drive sales in women's sportswear.?

“Many sportswear players are actively targeting women, traditionally less well served than men. Attendance, viewership and fan engagement are on the rise and sponsoring women athletes and teams is seen as the easy way in for brands as we are seeing with women’s football,” said Le Rolland.

With LVMH as the Olympics’ official sponsor, a benchmark has been set for brands like Armani, Lululemon, Ralph Lauren, and Skims to align with national teams, crafting bespoke outfits that marry performance and style.

“While sportwear giants such as Nike and Adidas will still be responsible for most of the kit worn for the actual competitions and sporting events, we are going to see a whole new status quo shaping up for pre- and post-event outfits,” says Fleur Roberts, head of luxury goods at Euromonitor International.?

Among others, Armani are working with Team Italia, Lululemon will be supporting the Canadian team, Ralph Lauren will continue its partnership with the US teams.?

In Asia, leading Chinese sportswear brand Anta was appointed for the Chinese delegation’s official uniforms, and Samsonite was named the official luggage sponsor for Team Singapore.

Euromonitor’s Fleur Roberts says the Olympic Games are “a great marketing opportunity” for key global players in luxury and fashion, but also for other brands not traditionally involved in the Games. “Such partnerships are even better news for smaller niche fashion brands who have now been given the chance to participate in the Olympics and support their local teams,” Roberts says.

Retail trends: Leasing sentiment in China, South Korea and Vietnam

A new report by global real estate firm CBRE highlights optimism in the retail landscapes of China, South Korea and Vietnam in the second quarter of 2024, drawing from insights on these markets’ transaction activity, current state and emerging trends.

In the face of a subdued mood in mainland China, retailers and industry experts are cautiously optimistic about an eventual recovery, sparking a flurry of activity among major brands seeking to optimise their store networks in this tenant-favoured market.?

The strategy of emphasising one flagship store per city has gained traction as retailers aim to navigate the evolving landscape. Major brands, recognising the potential for future growth, are strategically evaluating their store networks to ensure maximum efficiency and profitability.

Korea is experiencing a solid rebound in international visitor arrivals, fuelling consumption and driving demand for retail space.

This resurgence has led to a surge in interest for pop-up stores, particularly in emerging commercial districts such as Seongsu, Hannam, and Dosan Park, where availability of retail space is limited.

Retailers are seizing the opportunity to tap into these vibrant neighbourhoods, capitalising on the growing foot traffic and the desire for unique, experiential shopping environments.

Meanwhile Vietnam, a country that continues to attract significant interest from foreign brands, is witnessing a wave of investment and expansion, particularly from the F&B, fashion, beauty and lifestyle sectors.

Shopping malls are undergoing extensive renovations to accommodate the influx of new market entrants and to enhance the overall shopping experience for consumers.

By embracing innovative designs that include larger atriums and creative use of space, retailers aim to create memorable spaces that captivate shoppers and encourage longer dwell times from Vietnamese consumers.?

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