April Earnings: Kering Lags LVMH As BYD Boasts Fivefold Profit Growth

Brands have yet to fully reap the benefits of China’s borders reopening in the first quarter of 2023. As such, those who fared well during the pandemic are continuing to do so, while those that struggled are now modestly recovering — very modestly in the case of Gucci — as the country eases back into normalcy.

Meanwhile, L’Oréal and Chinese electric car maker BYD are consolidating their position as leaders of their respective fields. Both are expanding rapidly in China and around the world through acquisitions and launching sub-brands, building out their consumer base and diversifying their geographic footprint.

Kering lags luxury peers

Unlike luxury rivals LVMH and Hermès, which posted stellar Q1 2023 YoY sales growth of 17 percent and 23 percent, respectively, Kering had a flat first quarter. In the period ended March 31, sales at the French luxury group rose just 1 percent to $5.6 billion (5.08 billion euros) due to a decline in North America and a gradual recovery in China.

Organic sales at Gucci climbed 1 percent, an improvement on the 14 percent decline in 4Q 2022. On a call with analysts, Chief Financial Officer Jean-Marc Duplaix said Gucci will focus on reinforcing its structure in China, elevating its brand perception and enhancing the retail experience.

Gucci’s Year of the Rabbit capsule collection features ready-to-wear, bags, shoes, and accessories. Photo: Gucci

“We know that the brand had been quite weak compared to some peers,” Duplaix said. “It’s a work in progress, but we start to see some encouraging signs across the different stores.”

Although performance so far has been mixed, the company has made some major moves that could put it on an upward trajectory. In January, Kering appointed Sabato de Sarno as Gucci’s new creative director, a designer who is tasked with ushering in exciting changes following the exit of his predecessor, Alessandro Michele. The following month, the group announced the creation of a new beauty division, which could help it narrow the gap (if ever so slightly) with LVMH, an established player in the beauty segment. 

L’Oréal benefits from balanced footprint

Another giant in the beauty segment, L’Oréal outperformed, posting sales of $11.5 billion (10.38 billion euros), up 13 percent YoY. Not only did the owner of Maybelline New York and CeraVe report growth across all its divisions, it also posted double-digit growth across all the regions it operates in, except for North Asia due to a reduction of stock-in-trade in mainland China at the very beginning of the year.

According to L’Oréal, Chinese consumer demand for beauty recovered in February, as did footfall in its brick-and-mortar stores. Moreover, the group benefited from the gradual resumption of travel to Hong Kong, Macau, and Hainan, with consumers flocking to the latter for the annual China International Consumer Products Expo earlier this month. Prior to this, the L’Oréal Paris brand presented an art exhibition in Shanghai as part of its brand elevation strategy.

L’Oréal CEO Nicolas Hieronimus said in a statement: “This performance, which has yet to benefit from China’s reopening, demonstrates the strength of L’Oréal’s balanced multipolar model.” 

This recovery, plus L’Oréal’s recent acquisition of Australian luxury beauty brand Aesop, which has a nascent footprint in China, leaves plenty in the tank for sales and profit growth this year.

BYD profit surges

Chinese electric vehicle (EV) company BYD posted a fivefold increase in profit in Q1, amounting to $596.5 million (4.13 billion RMB) — an impressive increase of 410.9 percent. Revenue climbed 80 percent to $17.3 billion (120.17 billion RMB). The Shenzhen-based company delivered 552,076 vehicles and reportedly outsold rival Vokswagen, consolidating its leadership in its home market.

These stellar metrics follow profit and revenue declines in Q4 2022, triggered by a price war with Tesla. Still, the Chinese car manufacturer managed to overtake Tesla as the world’s top seller of EVs in 2022 and has since ramped up its competitiveness by debuting a new high-end sub-brand in January to expand into the premium car segment.

In January, BYD unveiled a luxury SUV and supercar to push further into the high-end segment. Photo: BYD

By unveiling a new model in April that’s about half the price of the cheapest EVs on the market, BYD should be able to defend its title as the world’s largest EV maker. Moreover, its plans to expand beyond China into Europe and Latin America could help the Chinese brand become a global name and steer the world towards an electric future.


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