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World’s biggest luxury group says there are no signs a feared crackdown in China is affecting sales

LVMH has seen no sign of a slowdown in the luxury boom in China, its second-biggest market, since the authorities there hinted at a crackdown on the mega-rich and called for a focus on “common prosperity” in August.

Investors have worried that new curbs on conspicuous consumption in China would cast a pall over luxury goods companies, as they did during an anti-corruption campaign that began in 2012. This has sent luxury stocks down since the summer, with LVMH 8.5 per cent lower, Gucci-owner Kering down 15 per cent and Hermès with an 8 per cent fall.

But LVMH’s chief financial officer Jean Jacques Guiony said LVMH, the world’s biggest luxury group, had not seen “any change” to its business in China since then.

“It’s difficult to analyse the potential impact but there is nothing alarming so far,” he said. “The bulk of our customers in China are not billionaires but the affluent and upper middle classes,” he added.

LVMH also reported forecast-beating third-quarter sales on Tuesday powered again by its all-important Louis Vuitton brand, which brings in the majority of group operating profit, and continued strong demand in the US and China.

Quarterly revenue was €15.5bn compared to analysts’ expectations of €15bn. The key metric of organic sales growth, which strips out the effect of currency fluctuations and acquisitions, came in at 11 per cent in the quarter, compared to the same period in 2019 before the pandemic.

LVMH’s biggest division of fashion and leather goods, which brings in almost three-quarters of annual operating profit and includes brands such as Louis Vuitton and Christian Dior, expanded 38 per cent on an organic basis compared to the same period in 2019. It brought in €7.4bn in sales compared with €5.4bn in the same quarter in 2019.

Luca Solca, analyst at Bernstein, said the fashion and leather goods division had beat consensus expectations, which will “come as a relief to investors”.

“Our growth rate remains strong and we have almost completely erased the impact of the health crisis in under a year,” Guiony said. “If you had told me in April 2020 that we would end up here, I would have been very happy.”

That LVMH has recovered so quickly from the pandemic shows how growth at its biggest brands has compensated for steep declines elsewhere, such as its travel retail business DFS, which has been badly hurt by the continued strict curbs on travel in Asia.

The group, which is headed by billionaire Bernard Arnault, has taken market share from smaller luxury groups in everything from handbags to apparel, opening up a bigger gap between the sector’s leaders and the rest.

Christopher Rossbach, the chief investment officer of asset management firm J Stern & Co which owns LVMH shares, said he believed investor concerns about a slowdown in China because of the political situation were “misplaced”.

LVMH’s broad range of products had options for “all budgets”, and in China the group sells mostly to affluent and upper-middle class people, not necessarily the super-rich.

“We believe it is positioned for share gain and will emerge as a major beneficiary of the ‘common prosperity’ policy,” he said.

LVMH does not provide financial guidance, nor do its rivals. Kering and Hermès will report third-quarter sales later in October.

Aurinia Pharmaceuticals, the US-listed biotechnology company developing treatments for rare diseases, is at the centre of a fresh round of takeover speculation.

Betaville...

The investment group already owned over 80 percent of the historic Florentine pharmaceutical and beauty firm since last year.

Chief executive officer Rémy Baume also gave an update on the label's sustainability efforts.

PARIS — As it prepares to celebrate its 25th anniversary next year, French contemporary brand Zadig & Voltaire has laid out an ambitious growth plan for 2022-2025, which includes a major push in China.

At a presentation in Paris, chief executive officer Rémy Baume, who took up his position last year, said the rock-chic label posted consolidated revenues of 292 million euros in its 2020-2021 fiscal year, which ended in July.

“The brand has been accelerating and pivoting — to a new level of visibility, of recognition, of desirability across the world. The circumstances of COVID-19 have [led us] to be in advance on our roadmap,” he said.

By 2025, the brand aims to hit 550 million euros in turnover, with Baume outlining the four growth pillars that will support this progression, particularly in China. While he did not specify figures for its year-on-year growth between 2019 and 2021, he indicated that the company did not post losses in 2020, despite store closures and lockdowns.

Baume pinpointed the progression of its accessories, which account for 35 percent of sales worldwide — 50 percent of overall sales in Europe, 35 percent in the U.S. and much less in other markets — as a sign of the brand’s power and presence among luxury labels, although he added that founder Thierry Gillier’s vision of “relaxed luxury” still stood.

One immediately visible area of growth is its digital business, which now represents 23 percent of the turnover for the 2021 fiscal year, up from around 15 percent in 2019.

Baume expects this figure to grow to 30 percent of the business, but to be less an “enlarged [footprint] than a deepening of these activities,” dubbing this a “move from omnichannel to ‘no-channel’ because the goal is to create a fluid, seamless customer journey regardless of their point of entry.” Initiatives in this field will include live shopping, although the executive declined revealing timelines or specifics.

With 60 percent of its business happening in store, particular attention will continue to be paid to its retail network, with plans to open 140 stores by 2025.

“Physical experience is primordial and the sensory life happens in stores,” the executive noted, showcasing a number of recent renovations or new flagship implantations, such as its King’s Road boutique in London; the revamped space at Paris’ Le Bon Marché, which saw the retail surface doubled from its previous iterations; and a brand new store in Wuhan, China.

This marks a new push by Zadig & Voltaire in China, which currently represents less than 5 percent of its sales. Previously, international expansion had been concentrated on the United States, which now accounts for 25 percent of the business, a result Baume described as “remarkable for a French label on a complex market.”

“Between now and 2025, we want to grow from 16 to 60 stores [in China], because it represents the right level of visibility and facilitates access to the Chinese customer,” he said, adding that its digital presence would also grow to expand beyond T-mall, where Zadig & Voltaire has been present for a year.

Baume noted that the brand’s pricing, which is in step with its price range in Europe — around 400 euros for leather goods and averaging 350 to 400 euros for ready-to-wear — placed it favorably in a market where imported brands often have heavy markups.

Zadig & Voltaire is also restructuring its operations in the region, having purchased the 50 percent share that belonged to its former partner IT Group last September. The recruitment of a new and autonomous team, based in Shanghai and led by Jean Lahire, a Hong-Kong based executive who previously helmed Delvaux and Celine’s Asian developments, is near complete.

The brand plans to focus on communication to “make itself understood, in a way that suits the Chinese worldview,” according to Baume, who revealed that an upcoming fashion show would be held in China.

To mark these new developments, the company has also updated its Chinese name to “Sadigé,” dropping an earlier double-barreled transliteration in favor of a simpler three-character “androgynous and gender neutral” moniker, using characters that expressed “a cool, chic and stylish woman,” and making references to “fashion, the Parisian universe, style and good taste.”

For its corporate social responsibility axis, the executive presented a snapshot of the progress to date, which includes transport by air reduced by 46 percent since 2019; use of certified or durable materials, including 100 percent of cashmere and wool made with sustainable or regenerated fibers as of fall 2022, and women representing 54 percent of its executive committee.

Baume also announced the launch of the “VoltAIRe” program, focusing on air quality and carbon footprint reduction as a priority. “Our program is global and is about creating a focal point [on specific topics] because these are programs with a five- or 10-year timeline,” he said.

In an exclusive interview, CEO Fabio d'Angelantonio discusses the health and growing business of the company as it prepares to roll out the collection on Oct. 13 in Japan and globally two days later.

MILAN — “This is a second love letter to Japan, after the opening of our flagship store in Ginza last year.”

The words of Fabio d’Angelantonio, chief executive officer of Loro Piana, reflect the luxury company’s longstanding business relationship with Japan, one of its main markets, built on shared values, attention to detail and appreciation of minimal, clean lines. “Beauty is in simplicity,” d’Angelantonio contended.

For these reasons, asking Hiroshi Fujiwara to design a capsule collection for Loro Piana — the first for the brand — fits not only with the history of the label but also with its evolution. Over the past five years, under the leadership of d’Angelantonio, the brand has reached out to a younger generation. The capsule is in line with that strategy, through a genderless apparel and an accessories collection that has an urban, less formal approach.

Beauty Looks from Paris Fashion Week Spring 2022

“We opened up to Fujiwara’s aesthetic, which has brought a dose of dynamism and energy to the brand,” d’Angelantonio said in an exclusive interview at the Loro Piana showroom in Milan. For example, the Japanese designer created a new logo for the collection, dubbed Loro Piana featuring Hiroshi Fujiwara, which shows an arrow shooting out of the Italian moniker.

As reported, Fujiwara, founder of the streetwear project Fragment, teased the collaboration with Loro Piana at the end of last month.

The collaboration stems from a chance encounter between d’Angelantonio and Fujiwara at a Loro Piana store in Japan. “He understands and appreciates the brand because he has been a Loro Piana customer for years,” said the executive, praising Fujiwara for his multifaceted skills as a designer, a leader of streetwear culture, a producer, musician, visual artist and DJ.

Fujiwara introduced and re-elaborated Japan’s “happy print” on knitwear, which shows a sort of chain-like motif. “Happiness is very appropriate now,” said d’Angelantonio, as everyone is trying to return to a normal life post-pandemic. In fact, the executive noted how the launch campaign shows the models holding hands and embracing, in a sign of hope that physical contact will no longer be frowned upon.

The precious Loro Piana cashmere is part of the lineup, but Fujiwara conceived a sophisticated way to treat it by simulating a distressed look and adding drop stitching. “It actually takes very complicated craftsmanship to obtain this effect,” d’Angelantonio said.

The designer placed a new Loro P logo on beanies and cashmere scarves with knotted fringes. “There’s a sense of irony and ease running through the collection,” the CEO said. The colors range from white and azure to gray and black — hues that are not part of Loro Piana’s usual core palette.

“The collection reflects the idea that Loro Piana is opening up to the interpretation of a designer,” noted d’Angelantonio. “And the designer detached himself from his own brand.”

The executive was pleased with the end result, an understated and interesting collection produced in Italy that respects the Loro Piana brand, he said. “There’s a Japanese word, Iki, that expresses simplicity and understatement, but masks sublime quality at the same time,” he said, drawing parallels with the Loro Piana brand.

The capsule will first be available in Japan on Wednesday at the Loro Piana Ginza flagship and at a pop-up at Isetan. Two days later, it will be rolled out in all Loro Piana flagships and in several pop-ins and pop-ups around the world, including, for example, at Le Bon Marché in Paris.

Time will tell if other collaborations will follow. “The brand is often in demand for its purity,” he noted. “We are open to exploring other possibilities, but let’s see how this goes. As a first, we really like it and it’s stimulating.”

Loro Piana reached the 1 billion euro sales mark in 2019, and d’Angelantonio is driving a phase of success that is seeing not only a generational shift, with the average age of customers dropping by eight years over the last five years, but also an acceleration in sales in the past two years. Revenues in 2021 are forecast to surpass the 2019 figures.

The executive expects “a very positive” fourth quarter after a strong performance in the third quarter. “We have high hopes in a big return to consumer spending for the holidays and we will roll out a great gifting selection, rich and colorful,” he said.

Also, d’Angelantonio has been channeling energies in local activities to respond to the travel restrictions. “One-fits-all does not work. We have a strong brand, but local execution is important, and even more so in Asia and the Middle East, with products dedicated to local calendars and specific moments. We need to be close to local organizations and accelerate the regional interpretations, which challenges us to be prepared for timely production.”

Loro Piana has a total of 152 stores, of which 135 are directly operated. The company has secured locations for new units in Doha, Qatar, and Palo Alto, Calif., to open in the next 12 months. It is also planning an expansion in China’s second- and third-tier cities next year and in the Middle East, a market that has become increasingly key for the brand. A second store will open in Dubai, probably in 2023, and the company is planning units in Saudi Arabia in the second half of 2022 or early 2023.

“I am proud that the brand is healthy and that the company is evolving, but at the same time, it remains loyal to the vision of Sergio and Pier Luigi Loro Piana,” d’Angelantonio concluded, referring to the brothers who developed and expanded the family company, which came under the control of LVMH Moët Hennessy Louis Vuitton in 2013.