Hermès, L’Oréal Bounce Back In China Despite Ongoing Lockdowns

The third-quarter earnings period started off strong with LVMH announcing double-digit growth in October — staving off concerns that macroeconomic headwinds would send consumption spiraling. Since then, competitors Kering, Hermès, Zegna and others have also reported increases in revenue, painting a promising picture of recovery. Even in Greater China, where lockdowns remain a concern, the slight easing of health restrictions over the past few months has worked in luxury’s favor: from leather goods to outdoor gear, here are some of the brands that are charging ahead. Hermès Like its rival LVMH, Hermès reported an impressive sales streak in the third quarter. Revenue rose by 24.3 percent at constant exchange rates to 3.1 billion euros (3 billion or 22.6 billion RMB), shooting past analyst estimates of 15.3 percent growth. This occurred even as the Birkin bag-maker raised prices by an average of 3.5 percent in January across categories — before tacking on an additional 3 to 5 percent for watches and jewelry in July. Local demand and the resumption of travel retail were largely to thank for the rebound, with all global markets posting double-digit growth. Sales in home market France were up 10.9 percent while the Asia-Pacific region (excluding Japan), responsible for the biggest portion of the French house’s sales, jumped 34 percent. According to the company, sales in Greater China picked up strongly despite closures in Macau, Chengdu, and Dalian in July and August, benefiting its leather goods line in particular. As Hermès stated in a press release, “Our highly integrated craftsmanship model and balanced distribution network, as well as the creativity of the collections and clients’ loyalty allow us to look to the future with confidence.” And this confidence clearly extends to the mainland, where the heritage label recently unveiled new stores in Wuhan and Shanghai, bringing its brick-and-mortar network up to 27 shops. L’Oréal Beauty did not fare poorly either, with L’Oréal significantly outperforming the market and maintaining its position as the world’s top beauty company. In Q3, sales grew 9 percent to 9.57 billion euros (9.58 billion or 69.9 billion RMB), bringing total revenue up to 27.94 billion euros (27.9 billion or 204 billion RMB) for the nine months ended September 30. CEO Nicolas Hieronimus credited this result to the group’s rebalancing strategy, with all regions making progress including North Asia. Although its largest division, L’Oreal Luxe, was impacted by repeated lockdowns in Hainan, the 26-brand portfolio managed to reach record market share in mainland China. This was driven by blockbusters in the fragrance market such as Libre by Yves Saint Laurent, “tremendous momentum in the ultra-premium segment” with skincare brands like Helena Rubinstein, and Carita’s debut in China. The French conglomerate also topped the rankings on Douyin, with L'Oréal Paris taking the top spot among skincare brands. To maintain this momentum and strengthen its long-term outlook, the company has recently ramped up investments in China. On September 22, L’Oréal China Corporate Venture Capital took a minority stake in Documents, a domestic luxury fragrance brand that is known for its Gen Z clientele and avant-garde aesthetic. And last month, it began progress on its first D2C intelligent fulfillment center in Suzhou, which is expected to triple the L’Oréal’s DTC parcel capacity in 2025 and provide local consumers with more customized products. VF Corporation In contrast to its luxury fashion and beauty counterparts, the American apparel company that owns Vans, The North Face, Timberland, and Dickies did not beat expectations in the three months ended October 1. Revenue was down 4 percent to 3.1 billion (22.4 billion RMB) but up 2 percent in constant dollars. Of the four big brands, Vans faced a particularly challenging quarter as a disappointing back-to-school season in the Americas dragged sales down 8 percent. In Greater China, sales slipped 10 percent —an improvement from the 30 percent drop in the prior quarter — with 7 percent of the group’s APAC stores being temporarily closed at the end of October due to COVID-19. However, CFO Steve Rendle noted a bright spot: “We’re seeing pockets of growth in this market led by The North Face.” This is unsurprising given Chinese consumers' growing interest in outdoor activities and eagerness to share their “mountaincore” style on social media. In fact, The North Face grew nearly 30 percent in Greater China over the last two quarters when other brands were still being impacted by disruptions. For the rest of fiscal 2023, the company maintains its outlook of plus 5 percent to 6 percent growth in constant dollars while taking “near-term actions to drive higher revenue in our half two amidst the difficult and highly promotional environment.” Part of this will involve providing more latitude for “local-for-local decision making” around product, storytelling and brand strategy, explained Rendle. Other exciting developments include Supreme’s official entry into China via Dover Street Market earlier this month, as well as The North Face’s new collaboration with Kaws, which saw pop-ups land in Shanghai, Nanjing, Chongqing and Shenzhen.

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Hermès, L’Oréal Bounce Back In China Despite Ongoing Lockdowns