Hermès, LVMH, Kering, L’Oréal…: the incredible health of the French luxury giants

The year 2022 could not have started better for French luxury. The leading heavyweights in the sector posted impressive results in the first half. From Hermès to Kering through L’Oréal… All saw their net income jump thanks to the increase in sales compared to 2021, a year marked by the return of consumers. Despite a difficult context today, marred by inflation, supply disruptions and repeated lockdowns in China where sales have fallen, luxury continues to show unfailing calmness and approaches the rest of the year in full. os confidence.

Starting with the number one in the world, LVMH, where the year 2022 was announced, in fact, under the best management. The French group announced on Tuesday that it earned a net profit of 6.5 billion euros in the first half, 23% compared to the same period in 2021, whose performance has been qualified record”. The sales of Bernard Arnault’s group amounted to 36.7 billion euros between January and June, an increase of 28%, driven by the flagship Fashion and Leather Goods division (Louis Vuitton, Dior, Celine, etc.) which produced only 18 billion euros in turnover (+31% ).

A success that LVMH owes in part to the sharp increase in its sales in Europe and the United States. In fact, the recent lifting of health restrictions in Europe has allowed foreign tourists, especially Americans, to return to the territory. Especially since the weakness of the euro, which is stagnating almost at parity with the dollar, is particularly beneficial for this client.

In the United States, the local population explains this increase in sales. It is American customers who spend more, since the emergence of the movementesocial and societal nts who can new customer segments access to luxury consumption »analyzed Joëlle de Montgolfier, vice-president of studies and research division for the luxury sector within the cabinet Bain & Company. Since then, the advertising campaigns of major luxury brands have focused on these new segments, especially the African-American population, which has gradually gained access to this luxury market; they help create a client that never existed before », he continued. In addition, the increase in online sales also allows regions or areas of the American territory, which do not have points of sale, to have access to them.

Despite the decline in sales, China remains attractive

The dynamics of the European and American markets enabled luxury goods, especially LVMH, to offset weaker sales growth in Asia, especially in China, which is still under health restrictions in second quarter. True to its “zero-Covid” strategy », the country has increased lockdowns at the first warning of a resurgent epidemic, especially in areas important for the luxury sector such as Beijing and Shanghai. Kering made the same observation. The luxury group announced on Wednesday that it made a profit of 1.988 billion euros, which is 34% in a year. Therefore its sales between January and June amounted to 9.93 billion euros, up 23% a year, thanks to its Gucci brand which alone concentrated 5.173 billion euros in sales (+ 15%). It benefited from increased activity in Western Europe, Japan and the United States, which offset the marked effect of China’s imprisonments » linked to Covid-19, according to a press release from the group.

Despite this decline in sales, the Chinese market remains important for luxury brands that continue to invest there, as Kering’s finance director, Jean-Marc Duplaix, explained in an interview with reporters. For Gucci, it is a key market, which remains untapped in the long term », he explained. Joëlle de Montgolfier agrees: Although in the short term there are uncertainties, in the long term the Chinese market remains an engine of the luxury market, as it is a growing population with a growing standard of living and a strong that appetite for luxury products. When the Chinese market is reopened, with the lifting of health restrictions, consumers will be able to shop in China again, but also travel and spend outside their country. So the long-term indicators are in good shape, without the course of new geopolitical events. ».

On the side of Hermès, there is also a certain optimism about Chinese consumers. The manager of the French group also welcomed the good resistance of the luxury group in Asia despite the health context of China. There was a fall in April, but a very strong rebound in June ». We are not far from paying for the fall (…) At the end of the first half, we are positive in China »he assured, pleased that Hermès knew amazing semester ». The group saw its net profit reach 1.64 billion euros in the first half, which is 39.7% year-on-year, thanks to the increase in sales in all regions, according to a press release published on Friday. The sales of the saddler-leather goods maker amounted to 5.475 billion euros, an increase of 29% compared to the first half of 2021. The French luxury giant still plans to continue. the acceleration of recruitment (…) in the second half of the year to strengthen all domestic businesses », said Axel Dumas, announcing that five new leather items should see the light of day within five years.

As for L’Oréal, whose net profit reached 3.2 billion euros, increased by 36.4% thanks to a 20.9% increase in sales in a year, the group can count on online sales, which now represents 60 % of its turnover in China, compared to 50% before. Nicolas Hieronimus, general manager of the group, thus said himself convinced that China will have a good second half: they have masterede Covid is better and better, no inflation, low unemployment, prosperity policy ».

The luxury, cannot be matched by the consequences of inflation

The luxury actually seems to ignore the issues currently pressing around the world, starting with the war in Ukraine. The damage was ultimately moderate and limited to Russia and Ukraine », commented Joëlle de Montgolfier. And when players in the sector see that the cost of raw materials has increased due to inflation and supply problems, the particularity of luxury offers them the possibility to pass this increase on their sales prices in an almost equivalent way . As a general rule, people who can afford luxury are not the most sensitive to rising prices. »explains the specialist who determines that Luxury has historically been very resilient in crises ». However, he wondered: If inflation leads to a recession, especially in the United States, can the luxury sector survive the decline in consumption? » Especially because in the United States, the newly emerging clients, especially young workers, are not very stable and may prevent this item from spending.

However, Bain & Company expects the sector to maintain strong momentum for the rest of the year. It is too early to make estimates, as there are many uncertainties, but we expect the market to grow throughout the year. The least optimistic scenario predicts growth from 5 to 10% compared to 2021 against 10 to 15% if the increase in sales in Europe and the United States is maintained and those in China return again. Either way, it should be a good year »concluded Joëlle de Montgolfier.

(With AFP)