The Global Demographic Tailwind

[DewDiligence]

China's Newfound Taste for Luxury

http://online.wsj.com/article/SB125604764565396475.html

›21-Oct-2009
By MATTHEW CURTIN

In China, this is the year of the ox. Chez LVMH Moët Hennessy Louis Vuitton, this is the year of China.

Chinese customers, both at home and on vacation, have become the biggest buyers of Louis Vuitton clothes and handbags and Hennessy cognac, ahead of both the Japanese and the Americans.

The French company's exposure to China helps explain why it is pulling out of the industry slump faster than expected. The number of Vuitton stores in China will increase by half to 30 by year end, while Sephora, LVMH's perfume retailer, will have 70. Across the company, robust Asian demand almost entirely offset falling sales of brandy, champagne, jewelry and watches.

Where LVMH goes, the luxury industry looks set to follow. Daimler rushed out a trading update early because of an unexpectedly good three months, partly at Mercedes. Sales in China were 56% higher in September compared with a year earlier.

Emerging markets will account for at least 80% of growth in the luxury-goods sector, averaging around 9% a year, compared with 2% in the developed world, according to Francesca Di Pasquantonio at Deutsche Bank. LVMH is well-placed to capture this growth, with stores in India, Indonesia, Vietnam and, coming soon, Mongolia.‹