Bernard Arnault Explores China’s Thriving Luxury Market Amidst Sales Rebound

Bernard Arnault, the chairman and CEO of luxury conglomerate LVMH, has embarked on his first visit to China since the end of strict COVID-19 restrictions. This trip follows the notable rebound in luxury spending in China, which has contributed to LVMH’s recent surge in sales. Arnault’s presence in the country comes as Beijing aims to attract global business leaders and rebuild business confidence while separating Western corporations from their governments’ stance on China.

Reports from state media indicate that Arnault was seen visiting several LVMH brand stores, including Christian Dior and Bulgari, located in Beijing’s WF Central and SKP malls. As the world’s richest person until recently, he is keen on capitalizing on the recovering Chinese luxury market, which experienced a downturn during the pandemic.

LVMH’s first-quarter sales surpassed analyst expectations with a 17% increase compared to the previous year. The company’s chief financial officer, Jean-Jacques Guiony, expressed optimism about the Chinese market during an earnings call, highlighting a “nice pickup” and a positive outlook for the rest of the year. Guiony noted that consumers were returning to stores, and online sales were also picking up. This normalization trend in China’s luxury market, he added, was expected to benefit LVMH significantly in 2023.

China’s luxury goods spending rebounded swiftly following the end of its strict zero-COVID policy in December. While the country’s economic momentum has waned in recent months, luxury goods sales have continued to accelerate. Government statistics reveal a significant surge of 19.5% in retail sales of jewelry, gold, and silver during the first five months of 2023, compared to the same period the previous year.

China was one of the world’s largest luxury goods markets prior to the COVID-19 pandemic. In , Chinese consumer spending accounted for roughly 17% of the global luxury market, a decrease from 35% in 2019, according to Bain & Co. However, the consulting firm predicts a resumption of momentum this year as local consumer demand remains robust and China recovers from the pandemic’s impact. With a large population of middle- and high-income consumers, China is considered a behemoth for luxury growth among emerging markets.

Arnault’s visit to China aligns with Beijing’s strategy to attract global CEOs and allay concerns about unfriendly policies toward foreign capital. Recent raids by Chinese authorities on foreign consultancies have caused unease among Western companies about their future in the country, resulting in declining business confidence. By engaging with influential business figures like Arnault, Beijing aims to reverse this sentiment and boost private-sector investment while addressing rising unemployment.

Elon Musk, CEO of Tesla, and Jamie Dimon, CEO of JP Morgan, were among the high-profile business leaders who visited China last month, further highlighting the country’s charm offensive. Musk’s trip involved meetings with senior officials who encouraged increased investment and operations in China. Chinese leaders are keen to separate businesses from their governments’ China policies to counter Western attempts to reduce dependence on the Chinese economy.

At a recent World Economic Forum event, Chinese Premier Li Qiang emphasized that decisions related to “de-risking” and reducing dependency on China should be left to companies, rather than being dictated by governments. He stressed that businesses are more sensitive to such risks and are best positioned to assess them. Li’s statement suggests that governments and relevant organizations should avoid interfering in the decision-making processes of businesses concerning their China-related risks.

Bernard Arnault’s visit to China signifies the importance of the resurgent Chinese luxury market to LVMH and the wider industry. It also highlights the Chinese government’s efforts to attract global business leaders and solidify its position as a major player in the global economy. As one of the world’s largest luxury conglomerates, LVMH recognizes the significance of China’s affluent consumer base and their growing appetite for high-end goods.

The resurgent Chinese luxury market has been a beacon of hope for luxury brands worldwide, especially in the wake of the pandemic. With China’s economy recovering at a faster pace than many other countries, the Chinese consumers have once again embraced luxury spending, propelling the industry forward. This resurgence has not only boosted LVMH’s sales but has also created opportunities for other luxury brands to thrive in the Chinese market.