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China Daily Website

Luxury brands continue to cash in on China market

Updated: 2012-07-28 09:32
By Wang Wen ( China Daily)

China's increasing luxury market was still a growth driver for some main international luxury groups' total revenue in the first half of 2012, despite the slight slowdown in market growth.

On Thursday, the French-owned PPR SA, for instance - the world's third-largest luxury group by turnover, which owns Gucci and Bottega Veneta - revealed it generated 1.17 billion euros ($1.4 billion) in sales from the Asia-Pacific region, excluding Japan, in the first half of 2012, an increase of 16.2 percent compared with the same period in 2011.

The region - its second best earner after Western Europe - contributed 18 percent to total group revenues of 6.39 billion euros, a 16.7 percent rise compared with the first six months of 2011.

The Gucci brand, gained huge popularity in China, said Chief Financial Officer Jean-Marc Duplaix, where sales soared by 35.6 percent across all of China in the first half of 2011, including Hong Kong, Macao and Taiwan, and 17.2 percent on the mainland in the first half of 2012.

At rival LVMH Moet Hennessy Louis Vuitton SA, the leading luxury group which owns a stable of top names including LV, Fendi and Kenzo, revenues were also boosted from Asia.

Total revenues of 12.9 billion euros in the first half of 2012, were 26 percent better than 2011, with countries in Asia, excluding Japan, contributing the most, the group said.

"Sales to customers from China and America were particularly strong during the period," LVMH added.

Luxury brands continue to cash in on China market

Both luxury giants said that they were optimistic that business in China, especially, will continue to expand.

Gucci set up a head office in Shanghai with its own chairman to underline its commitment to the country earlier this year, and Bernard Arnault, the group chairman and CEO of LVMH, said it will continue to pursue further market share.

LV reopened its largest store in China on Tuesday, which it said highlighted the group's growing ambition in the market.

The only blot on the luxury landscape in recent weeks was from Burberry Group Plc, the United Kingdom's largest luxury company, which revealed that its revenue growth in Asia-Pacific area for the three months to June 30 dropped to 18 percent from 67 percent in the same period of 2011.

But analysts say that's unlikely to stem the spending being seen on other brands.

"The market in China is positive in the long term and will keep growing maybe even for 10 years," said Yang Qingshan, a guest researcher on luxury goods and services at the University of International Business and Economics in Beijing.

Zhou Ting, executive director at the research center at UIBE, added: "The growth of China's luxury market was going slow in the first half of 2012, along with the slowdown in China's economy, but the market will continue to increase."

She said that it won't just be first-tier cities which will continue to sell plenty of luxury goods, as there is also huge potential in the country's smaller cities.

However, consumers there are more price-sensitive, and if the economy continues to slow, sales could be affected.