LVMH is preparing a major boutique opening in China. Is the demand for luxury returning?

Luxury holding LVMH is preparing a series of large-scale openings of Louis Vuitton and Dior boutiques in Beijing and Shanghai, Bloomberg wrote, citing sources. The company expects to return the interest of Chinese buyers to the luxury segment after a sharp drop in sales last year. Revenue from the Asian region, which includes China, accounts for a large part of LVMH's revenue structure, exceeding even sales in the United States. The company's shares rose 2% in Paris trading on November 11.

LVMH is set to open major new boutiques in China in December and is considering further expansion in the country, sources told Bloomberg. Some of those stores will be located in the Taikoo Li Sanlitun shopping mall in Beijing, which is owned by developer Swire Properties.

According to the agency's interlocutors, the luxury holding company is also in talks with Swire about opening a new Christian Dior boutique - LVMH's second largest fashion brand after Louis Vuitton - in one of the landmark shopping centers in Shanghai, the HKRI Taikoo Hui complex, in 2027.

A new Dior boutique in Shanghai may be located next to the giant Louis Vuitton space in the shape of a cruise ship, which opened in late June and caused a stir on social networks. As the Financial Times wrote, visitors took photos so often that signs had to be put up with "shooting rules." According to Swire, the project helped the mall double its retail sales in the third quarter. A LVMH helped it grow sales in China by 7% year-on-year in the same period, the FT reports.

In total, the holding's revenue in the Asian region, which includes the Chinese market, grew by 2% last quarter - after a 9% drop in the first half of the year. Sales in Asia (excluding Japan) brought LVMH 27% of revenue in the first nine months of this year, while U.S. sales amounted to 25%, according to the presentation to the report. However, the Asian region's figures were two percentage points higher in 2024, reflecting the general decline of the luxury market in these countries. Despite macroeconomic uncertainty, demand in China remains encouraging, assured LVMH CFO Cecile Cabani in a conversation with analysts after the report was published. This market has been the main growth driver for the company for a long time, Bloomberg recalls.

Louis Vuitton's megapboutique in Shanghai, which includes exhibition space, is in line with the luxury brands' new strategy in China, Bloomberg writes. They now rely on large-scale design solutions and cultural elements, as affluent shoppers increasingly prioritize personal experiences and well-being over just brands, the agency explains.

It believes the downturn in the country's luxury goods market is coming to an end - after sales in the industry fell nearly 20% last year. The rebound in sales at Swire's leading shopping malls is also indicative of rising demand, Bloomberg points out. For example, HKRI Taikoo Hui reported a jump in sales of about 42% in the first nine months of this year - compared to a 21% drop in the same period in 2024.

Some analysts are cautious about strengthening demand for luxury goods. "Consumption in China remains under pressure," the Financial Times quoted Nick Anderson of Berenberg as saying. He noted that the global luxury goods boom before the pandemic was largely driven by one-off factors - including stimulus measures in the US and the rise of Chinese consumers. Consulting firm Bain estimates that the global luxury market will grow at only 0-4% through 2025, compared with a compound annual growth rate of 5-6% between 1996 and 2024.

LVMH shares added more than 2% in Paris trading, with the company's value virtually unchanged since the beginning of the year.

Last week Barclays analyst Carole Maggio reiterated his recommendation to hold LVMH securities in the portfolio, as well as the target price at €560, which implies a fall in quotations by almost 10%.

Of the 24 analysts covering the luxury brand's securities, 14 advise buying them (Buy and Outperform ratings), nine advise holding (Hold) and only one advises selling (Sell).

This article was AI-translated and verified by a human editor