Over a year since China abandoned its Covid-Zero strategy, the anticipated rebound in spending on luxury goods has fallen short of expectations. L’Oreal shares experienced a significant decline of up to 7.7% following a sharp sales drop in North Asia, while Hermes International, known for its luxury Birkin bags, surpassed earnings forecasts but highlighted Asia-Pacific excluding Japan as its weakest market.
L’Oreal’s CEO, Nicolas Hieronimus, expressed disappointment in the lack of recovery in China, citing subdued consumer confidence. This trend echoes observations from other fashion brands, indicating that demand among Chinese shoppers, both domestically and abroad, remains cooler than anticipated. In contrast, regions like the US and Japan have shown unexpected resilience in luxury sales.
Hermes reported a notable 22% surge in sales in the Americas, surpassing expectations and signaling a resurgence in consumer confidence and lower inflation. Despite challenges in North Asia, particularly in the travel retail market, L’Oreal remains optimistic about China’s long-term potential, emphasizing its sizable beauty market as a significant opportunity for growth.
While some brands, like Swatch Group, fell short of predicted sales records in China, there is no indication of scaling back ambitions for the country’s market. Despite short-term uncertainties, the sheer scale of China’s beauty market makes it highly appealing to luxury brands, with potential for substantial growth even at modest rates.
