Every brand has its own distinct audience, and nowhere is this truer than with those in the luxury industry. The men and women who are loyal to Burberry, for example, are very different from the men and women who are loyal to Roberto Cavalli. And likely Cartier, Four Seasons and Rolls Royce, too. Therefore, it’s not always accurate or prudent to project overall growth from one company’s strong quarter–or, on the flip side, prepare for the worst based on another’s poor holiday season.
In the case of luxury group LVMH, however, whose reach extends far and wide into spirits, fashion, leather goods, jewelry, perfumes, retail, print publications, hotels and more, its success or failure really does serve as a legitimate litmus test for the luxury sector writ large. And today, with the announcement that the group’s revenue was up an astonishing 25 percent in Q1, totaling a healthy $8.6 billion, luxury executives and investors all over the world cautiously celebrated.
What is most interesting about LVMH’s double-digit growth isn’t the impressive showing in the U.S. and European markets (those that analysts had projected to be more modest due to lingering recessions), but the stagnating if declining growth in another: Asia. Save for Japan, which experienced an uptick of 11 percent, LVMH in Asia — despite being home to the world’s fastest-growing luxury hub, China — underperformed with a still strong but slowing 10 percent growth. This isn’t to say the Chinese aren’t buying Louis Vuitton and Givenchy anymore, because they most certainly are, they’re just not buying them in their home country. With a luxury tax that can tack on as much as 30 percent to the final price point, it’s no wonder even the richest of China’s elite are flocking to Paris, London and New York to for their big ticket shopping.
It’s unclear if the Chinese government will ever amend its tax code to seriously deal with the exorbitant tax, but one thing is certain: luxury companies investing heavily in Chinese expansion are paying very close attention.