Between a major war, a turbulent emergence out of a pandemic and record-high inflation, there are a lot of reasons why luxury goods would be the first to take a hit. Instead, the opposite seems to be happening. Demand for high-end fashion items from Dior and Louis Vuitton is driving the strong growth of luxury giant LVMH (LVMH) .
People Are Buying A Lot Of Luxury Fashion
While renewed COVID-19 lockdowns in China caused a significant cut in sales last quarter, the French luxury goods conglomerate still kicked off earnings season by reporting a 30% rise in fashion and leather goods sales. All in all, the luxury parent company behind brands like Louis Vuitton, Moët, and Sephora brought in 18 billion euros ($19.5 million USD) in the three months leading up to March 31.
That is 29% higher than the company's 2021 sales.
Brands like Dior and Celine saw particularly high growth while Louis Vuitton was around the average 30%. Fendi, Loro Piana, Loewe, and Marc Jacobs were also singled out for strong sales by the company in large part due to new products and directions that helped draw in customers despite the uncertainty around them.
"Continuing its commitment to the development of high-quality craftsmanship, the Maison inaugurated two new precious leather workshops in France," LVMH wrote of Louis Vuitton on Tuesday.
Champagne, Makeup Sales Also Doing Well
Although fashion and leather goods is LVMH's most popular segment, it is also the one behind cosmetic brands like Sephora and high-end wine and champagne makers like Dom Pérignon and Moët & Chandon. Perfume and cosmetics sales are up 23% while, at the lowest of all LVMH segments, wines and spirits only saw 8% growth.
LVMH's overall numbers far outpace a season that many analysts predicted would be disrupted by concurrent geopolitical and health crises -- different sets of analyst consensuses had pinned LVMH growth at 17% or 23%.
"LVMH produced another material beat to consensus expectations," Bernstein analyst Luca Solca wrote in a note to investors. "The year starts on a high note. All eyes and questions are most probably on China and the effect of the pandemic."
While LVMH did not extrapolate on why luxury goods remain so popular, some have hypothesized on everything from them being a pick-me-up (for the wealthy, naturally) during difficult times to some picking up Dior bags as an investment opportunity.
What Happens In China Affects Us All
Revenue from the United States, Europe, and Japan grew by the double digits while the rest of Asia saw growth of only 8%.
With China making up a large segment of the brand's luxury customer base, it can only stand to reason that the country's choice to tighten COVID-19 related restrictions (with the city seeing more than 13,000 new cases a day, the entire city of Shanghai went into renewed lockdown in early April) severely limited people's ability to go out and shop. Car sales in the country also fell 10.5% from March of last year.
LVMH executives stressed that what is happening in China could affect luxury sales globally — prolonged lockdowns in the country are sure to impact the luxury market overall.
"The only thing that I can confirm is that we will be impacted by that," LVMH Chief Financial Officer Jean Jacques Guiony said during the analyst call on Tuesday. “The situation is changing pretty fast, and what is true today may be wrong tomorrow.
