Luxury goods buck economic slowdown

Fuelled by surging demand in China, luxury goods makers are bucking the global economic slowdown and reaping huge profits on sales of high-end handbags, expensive jewellery and posh perfumes.

Results for the first-half of 2012 released this week showed major brands, including world leaders LVMH, PPR and Luxottica with rising profits driven by growing sales in emerging markets.

The results beat analyst expectations and allayed fears that the cooling down of China's economy would dampen luxury sales. Company bosses even expressed confidence that year-end figures would show continued growth.

Paris-based LVMH, whose assets include jeweller Bulgari, fashion house Louis Vuitton and a string of top champagne and spirits brands, said Thursday its net profit was up 28 percent in the first half at 1.68 billion euros ($2.06 billion).

Sales were up 26 percent, with 29 percent of revenues coming from Asia outside Japan, the group's largest market.

"We approach the second half of the year with confidence," company CEO Bernard Arnault said, with LVMH noting the "global market (is) experiencing strong growth" despite "an uncertain economic environment in Europe."

Another leading French luxury and retail group, PPR, said the same day its first-half net profit was up 5.9 percent to 477 million euros, following a 17 percent jump in sales.

PPR's sales of luxury goods, which include fashion brands like Gucci, Yves Saint Laurent and jeweller Boucheron, were up by nearly a third, compensating for a 9.2 percent drop in sportswear sales dragged down by its Puma brand.

"Business in greater China remained extremely buoyant, with sales climbing by an overall 21.5 percent, fuelled by a 24.4 percent surge in mainland China," the company said of its luxury division.

Italy's Luxottica, the biggest eyewear maker in the world, said its first-half profits jumped 20.6 percent to 195.5 million euros.

The company, which produces Oakley and Ray-Ban sunglasses as well as eyewear for Chanel and Prada, said sales rose by just one percent in Europe but were up 35 percent in emerging markets.

The results echoed similar figures released earlier this month by French luxury goods group Hermes, which reported first-half sales up 21.9 percent to 1.59 billion euros, with Asian sales excluding Japan up 25 percent.

Analysts say China now accounts for about 40 percent of the global luxury goods market and that Chinese appetites are driving sales not only in the country but abroad, as Chinese tourists often rack up sales while on foreign trips.

Despite high taxes on luxury goods in mainland China, companies are also increasingly expanding into its retail market, with PPR alone opening 22 stores in China in the first half of the year.

Still, analysts are warning that some sort of slowdown in luxury goods sales is to be expected if China's red-hot economic growth continues to cool.

China's economy grew by a still-strong 7.6 percent in the second quarter, but the expansion was at its slowest pace in more than three years as global economic problems started to hit the world's second-largest economy.

Thomas Mesmin, an analyst at CA Chevreux, said it was inevitable that a global economic downturn would have an impact on luxury goods.

"Saying that luxury goods are resistant to the crisis sounds good, but it's wrong. There is a fairly strong correlation between the development of the global economy and the luxury market," he said.

"We are accustomed to caviar, but we're probably going to have to eat a little more salmon," he said.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • ISIS has not penetrated Phl – AFP
    ISIS has not penetrated Phl – AFP

    Security officials yesterday maintained that the Islamic State of Iraq and Syria (ISIS) has not penetrated the Philippines following an expert’s warning that the group poses a threat to the country. Abu Sayyaf, BIFF (Bangsamoro Islamic Freedom Fighters), private armed groups to our knowledge are the people making problems down south,” Armed Forces chief Gen. Gregorio Catapang Jr. said. The BIFF and the Abu Sayyaf have pledged allegiance to the ISIS but it remains uncertain whether they are …

  • Cerbo named national police intel chief
    Cerbo named national police intel chief

    Philippine National Police officer-in-charge Deputy Director General Leonardo Espina yesterday ordered the appointment of PNP spokesman Chief Superintendent Generoso Cerbo Jr. as chief of the Directorate for Intelligence. …

  • Pump prices up anew
    Pump prices up anew

    Oil companies announced yesterday another round of price hikes with independent oil firms among the first to issue their respective announcements. PTT Philippines, the local subsidiary of Thailand’s biggest oil firm, and Phoenix Petroleum Philippines, another independent oil company, were among the first to issue their respective advisories. Seaoil Philippines also issued its announcement. …

  • PNP to ease rules on gun permit processing
    PNP to ease rules on gun permit processing

    The Philippine National Police will simplify requirements for getting a firearm’s permit under the new gun control law, PNP officer-in-charge Deputy Director General Leonardo Espina said yesterday. Espina said they are working to simplify the process to secure a license to own and possess firearms (LTOPF) amid complaints of excessive requirements from gun holders. Espina directed the Firearms and Explosives Office (FEO) to make it easier for legitimate gun owners to comply with the …

  • Mercy for Mary Jane: Pacman joins appeals
    Mercy for Mary Jane: Pacman joins appeals

    World boxing superstar Manny Pacquiao took time out yesterday from final preparations for his $400-million megafight with Floyd Mayweather Jr. to plead for the life of a Filipina on death row in Indonesia. Pacquiao, a national hero in the Philippines, added his voice to a chorus of global opposition led by United Nations Secretary General Ban Ki-moon to the executions of a group of foreign drug convicts, including compatriot Mary Jane Veloso. The eight-division world champion, who will face …

  • Phl condoles as Nepal death toll hits 3,700
    Phl condoles as Nepal death toll hits 3,700

    Foreign rescue teams equipped with heavy cutting gear and relief supplies were landing round the clock at Nepal’s only international airport on the outskirts of Kathmandu, which has been devastated by Saturday’s 7.8-magnitude quake. “We need more helicopters for our rescue operations in rural areas,” said Nepal Home Affairs spokesman Laxmi Prasad Dhakal. In a statement issued yesterday, Aquino said a team from the Philippine embassy in New Delhi, India would travel to Nepal to meet the needs …

  • Heat index to rise to 39.9ºC on Friday
    Heat index to rise to 39.9ºC on Friday

    People in Metro Manila should stay indoors on Friday, wear lightweight and light-colored clothing and drink plenty of water as the heat index – the temperature as felt by the human body – may reach 39.9 degrees Celsius on that day. The Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) said this level of apparent temperature may cause heat cramps, heat exhaustion or heat stroke. “Heat index is a human discomfort index that gives the apparent temperature, or …

  • Indonesia rebuffs last-ditch bids to delay drug-convict executions
    Indonesia rebuffs last-ditch bids to delay drug-convict executions

    By Kanupriya Kapoor and Jane Wardell CILACAP, Indonesia/SYDNEY (Reuters) - Indonesia said the execution of nine drug traffickers would go ahead this week, rebuffing last-minute appeals from Australia and the Philippines to spare their nationals and ignoring a decision by the Constitutional Court to hear a final challenge. Australia began the day with a plea for a stay in the execution of Myuran Sukumaran and Andrew Chan, saying reports that their trial had been tainted by corruption needed to …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options