Shares in global luxury goods groups, which rely heavily on Chinese shoppers, rose on Tuesday after Beijing further relaxed some COVID restrictions that had been in place for the past three years, fuelling hopes of a full-blown reopening soon.
China, which is gradually moving away from a strict zero-COVID policy that battered its economy, kept consumers indoors and sparked a wave of public discontent, accounts for 21% of the world's 350-billion euro luxury goods market, behind North America and Europe.
Before the current slowdown, it had for years been the fastest growing region, with young, urban, middle class professionals powering the luxury market by splashing out on Hermes' 10,000 euro-plus Birkin handbags and Gucci's 1,000 euro fur-lined loafers. It is expected to become the top market for the industry by 2025 and already generates about 35% of annual sales at Gucci, French group Kering'sWith Europe facing an energy crisis and the U.S. economy also cooling due to higher interest rates, China is looking to a recovery next year and the luxury world is hoping to take advantage of that."With infection rates still increasing it won't necessarily mean international trade will snap back to pre-pandemic levels super quickly," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. "Recovery may still be slow, particularly given the caution among consumers, and is likely to build in popular holiday shopping destinations regionally first," she said. "Brands will be gearing up for the return of wealthy, globetrotting Chinese tourists." According to a recent report by the McKinsey consultancy, while non-luxury fashion sales are expected to rise between 2% and 7% in 2023, luxury sales should climb 9% to 14% over the same period. "China will likely remain a core market for fashion consumption in the long term, with significant untapped opportunities among a customer base whose sentiment for luxury brands in particular is holding strong," it said.
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