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The backstory: Once upon a time, Hong Kong was the go-to place for shopping for Chinese tourists looking to snag luxury items at lower prices. But things haven't been the same for the past few years. Between the social unrest and COVID and the tourism drop, many big fashion names like Tiffany, Valentino and Burberry had to close stores in the city.
More recently: On another note, luxury juggernaut LVMH, which owns Dior, Givenchy, Marc Jacobs, Tiffany and a bunch more brands, had a killer first quarter, with its fashion and leather goods sales shooting up by 18%, dropping the jaw of analysts. And the group has excited Chinese buyers to thank for this, with the unit's sales in China spiking by double digits. This comes after China's first-quarter GDP growth rate also beat analyst expectations, hitting 4.5%, the most since the first quarter of last year.
The development: LVMH is now reportedly shaking things up by shifting its focus away from Hong Kong and towards bustling cities in mainland China like Shanghai, Chengdu, Guangzhou and Shenzhen. According to insiders speaking to Bloomberg, execs expect Chinese consumers to spend more in the mainland and for spending on luxury items to double pre-COVID times. LVMH is also moving some senior execs and brand headquarters to the mainland as well.
"We registered some pretty nice pick-up in China, which bodes well for the rest of the year," said Jean-Jacques Guinoy, the chief financial officer of LVMH, two weeks ago.
"Most luxury retailers don't think Hong Kong will return to the dizzy levels of 2014 when the market here peaked," said Simon Smith, Savills' senior director of research and consultancy, in Hong Kong last month.
"Clearly China is booming and we don't expect that to fade away any time soon," said Aurelie Husson-Dumoutier, an analyst at HSBC, in an interview with Bloomberg TV. "If the US consumer doesn't bounce back very strongly, we still have very very strong prospects from Europe that has been stronger for longer and also China."