Specialist
Director at LVMH Fashion (Shanghai) Trading Co Ltd (LVMH Moët Hennessy Louis Vuitton SE)
Agenda
- 2022 growth outlook in light of China’s recent lockdowns, highlighting pricing and category dynamics
- Competitive analysis – Gucci (PAR: KER) vs Hermès (PAR: RMS) vs Prada (HKG: 1913) and others
- Channel mix analysis – retail growth and online outlook
- Lockdown implications on China’s 2022 profitability, as well as medium-term profitability drivers
Questions
1.
How have sales trended in mainland China since the beginning of March 2022? We’re expecting growth trends in China’s personal luxury goods market to be poor, given the lockdowns. Could you compare this on a YoY basis or perhaps vs pre-coronavirus, whatever you think is most useful?
2.
You mentioned that you’re hoping we could see a bounceback through H2 2022. What are your expectations in terms of sales growth for Q3 2022 and Q4 2022 in mainland China?
3.
I think there were a lot of comparisons to the previous lockdown in China and the rebound in sales that we saw after the 2020 lockdowns, so do you think that the China-based customer is in a better or worse position exiting this round of lockdowns vs the 2020 round of lockdowns? Could the bounceback in demand, or the revenge spending that we saw previously, be expected at the same level, perhaps stronger or weaker?
4.
On the one hand, we have lockdowns, but, on the other hand, you’re still expecting positive growth. I think many apparel brands and some of the payments data are showing that sales are down substantially in March 2022, anywhere between 35% to 50% YoY. Why do you think luxury is still growing in this context, or, more importantly, how is luxury still growing in this context?
5.
In terms of offsetting the declines we’re seeing in retail to reach positive growth in 2022, what’s primarily driving that? Is it other cities showing increased demand and offsetting the declines in Shenzhen or Shanghai, or is it the online channel primarily offsetting that decline in the retail channel?
6.
How prevalent is the online channel in relation to total sales in China, given the current lockdown situation? Are there any rough indications of current penetration levels and how those are changing due to the situation?
7.
Coronavirus has obviously accelerated online sales penetration more broadly, but do you think the most recent round of lockdowns has permanently raised the sales level for the online channel, so we might exit the current lockdowns with a higher base?
8.
You touched on the dynamic around travel and how prevalent that was pre-coronavirus. How much growth are we seeing from Chinese customers abroad, so in Europe or the US? Is that still a factor, given the current restrictions around travel?
9.
How do you expect performance to differ across megabrands in China such as Hermès, Gucci and Chanel, given the current demand environment?
10.
How do you expect performance to differ for Hermès and Chanel vs Gucci, Prada and Burberry? Do you have any figures in mind in terms of the relative performance in the current demand environment?
11.
Could you discuss the difference in performance across soft luxury players, so leather goods players, and then the hard luxury brands such as within the Richemont portfolio, so brands such as Cartier?
12.
Do you think there’s an argument that hard luxury is less able to offset through the online channel, given the importance of the retail channel?
13.
On the point around seasonal soft luxury players, Gucci comes up several times as a brand that is struggling with brand heat in China or losing momentum. What do you think are the key challenges with Gucci in China specifically?
14.
How are you expecting some of the smaller brands in the Kering portfolio – such as Saint Laurent and Bottega Veneta – to perform in the current challenging demand context?
15.
You mentioned Gucci is struggling to put the best product out there. Does this mean we might need a shift in the top in terms of the creative designer?
16.
If we do see a drop in Chinese luxury demand in the order of 2-4% vs what was expected, how do you expect this to trickle down to the profitability line?
17.
What might numerous shops and malls being closed mean for rental expenses? Are luxury brands in China receiving relief from landlords regarding rents?
18.
You referenced a growth in the online channel, so how does that impact profitability in the China market?
19.
In terms of that shift to online, one of the key operating partners on a global level is Farfetch, obviously, in terms of the online market. How much competition is Farfetch facing from domestic players in mainland China? Is it more than historic levels?
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary one week trial.
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited
