China's demand for high fashion is pandemic-proof

SHANGHAI • If evidence were needed of how far China has moved beyond the pandemic, perhaps the strongest was the scene at Christian Dior's fall fashion show earlier this week in Shanghai.

The show's 750 guests lined the catwalk in the Long Museum West Bund to watch models strutting to disco tunes, one in a sequinned jumpsuit and another in a bright pink dress.

Most held up smartphones to film the women's ready-to-wear collection by Dior creative director Maria Grazia Chiuri, which was live-streamed around the world. Those inside were not even wearing masks.

Asia has been a lifeline for luxury companies like Dior parent LVMH, thanks to its quick exit of the strictest lockdowns that have bogged down Europe - and, to a lesser extent, the United States - in the past year.

As the first of the major fashion houses to report first-quarter results, LVMH posted sales growth on Tuesday that smashed analysts' estimates, driven largely by demand from the region.

That suggests more good news to come from the industry, even if growth varies widely across regions, brands and product categories.

After recovering from a steep downturn last year, luxury is benefiting from the appetite among younger millennial and Gen Z Asian shoppers for high-end shoes and handbags.

Those shoppers are increasingly spending their money at home and online, rather than travelling to the expensive luxury emporiums of Paris and Milan as they would have done before the pandemic.

"It does seem this sector is Covid-19-proof," said Professor Andrew Shipilov, an expert on strategy from French business school Insead. Luxury, he said, is "still the sector people spend money on when they cannot spend on travel. It's one of the (pandemic's) winners".

The luxury goods market in China grew 48 per cent last year as travel disruptions boosted domestic spending, according to a December report from Bain.

The consultancy expects this growth to forge ahead, putting the country on track to claim the biggest share of the market by 2025.

LVMH, which also owns Louis Vuitton, derived almost half of its revenue from the region in the first quarter. Sales from Asia, excluding Japan, surged a staggering 86 per cent on an organic basis.

That was followed by the US, which grew 23 per cent. In Europe, where countries are struggling to control renewed outbreaks, sales were down 9 per cent from the same period last year.

Shares of LVMH rose as much as 3.2 per cent on Wednesday. The gain increased the company's market value by almost €10 billion to €308 billion (S$493 billion), making it Europe's largest company by that measure.

That has catapulted founder Bernard Arnault to become the fourth-richest person in the Bloomberg Billionaires Index, worth US$135 billion (S$180 billion), just behind American business magnate Bill Gates.

Shares of luxury rivals also rose, with Gucci owner Kering up as much as 2.7 per cent and Hermes International up 1.4 per cent. They will report first-quarter sales next Tuesday and Thursday respectively.

With catwalks having gone virtual for most of the past year in fashion capitals Paris and Milan, Dior and Vuitton have tried to entice customers by showcasing collections in sumptuous locales such as the Chateau de Versailles through Instagram and other platforms.

At LVMH's largest unit, fashion and leather goods, revenue surged 52 per cent in the first quarter.

"The appetite of the Asian customer is driven partially by their inability to travel to Europe," Prof Shipilov said. "They still want to signal their love of luxury and appreciation for European cultural heritage. This is how they're trying to stand out."

BLOOMBERG