A Shanghai storefront for Kering-owned label Bottega Veneta, which saw significant China growth numbers in the first half.
Top global luxury conglomerates Kering and LVMH have both released their financial results for the first six months of 2013, and the numbers for China in particular represent a continuation of slow growth that differed dramatically between certain labels and product categories. While the brands’ “mega-labels” were once again not the major China standouts for either company, the growth of niche fashion labels, beauty products, and alcohol for non-gifting purposes in particular spotlighted the continued market influence of Chinese consumers buying for personal consumption in the wake of the government’s crackdown on corruption and luxury gifting.
Overall revenue growth was on a slow uptick for the second quarter for both conglomerates, with non-Japan Asia factoring in as a more important region for LVMH than for Kering. Kering saw a 7.9 percent year-on-year rise in its luxury division, which CEO François-Henri Pinault referred to as “robust growth.” Its Asia-Pacific region revenue excluding Japan grew by 3.4 percent year on year in the first half, and contributed 25.9 percent of total group sales, down 26.1 percent from the previous year.
LVMH’s year-on-year revenue growth rose from its lower-than-expected 7 percent in the first quarter to 9 percent in the second quarter. In contrast to Kering's downturn, Asia excluding Japan now comprises 31 percent of the corporation’s revenue, up from 28 percent at the end of 2012. According to Kering, the reason for the hampered Asia sales was a “slowdown in growth in China and a lackluster market for timepieces in the Asia-Pacific region in the first quarter.”
As Chinese consumers continue to favor individual style over logo-heavy designs, niche labels remained a bright spot amongst the numbers. For Kering, Bottega Veneta once again “performed especially well” in the first half, with sales up 25.9 percent year on year in mainland China, with the Asia-Pacific market excluding Japan accounting for 90 percent of Bottega Veneta’s emerging market business. Greater China was one of the strongest performing regions for Yves Saint Laurent, which saw its revenue jump 24.3 percent. LVMH has not been as quick in pursuing China expansion for its niche equivalent Céline, which had contributed to the company’s slower growth in the previous period as the interest in mega-labels declined. In addition, the conglomerate did not spotlight China numbers for mega-label Louis Vuitton, which has been trying to up its exclusivity both globally and in China in recent months.
Kering’s mega-label Gucci saw sales in emerging markets that were only 2.1 percent higher than the first half of 2012, while in mainland China, sales only rose “at a moderate pace during the period,” according to the company.
The numbers also demonstrated growth in consumer goods categories that have been less associated with "gifting" practices under scrutiny in the government's current crackdown. LVMH’s Perfumes and Cosmetics division saw “considerable revenue growth” that was “particularly” apparent in China, and its Selective Retailing Division was boosted by Chinese tourists shopping at Sephora, "particularly at its stores in Hong Kong and Macao," according to the report. The company’s wine and spirits sales picked up in China, but not so much as a result of gifting. “In China, Hennessy offset the impact of government measures, thanks to its strong sales momentum in the nightlife and restaurant segments,” said the company. China became more significant to its Wines and Spirits division, as non-Japan Asia sales rose to comprise 35 percent of the total profits in the first half as opposed to 30 percent at the end of 2012.