Richemont and Burberry Group Plc said consumer spending in China is already rebounding after three years of pandemic lockdowns and a virus surge that cost the luxury-goods makers almost a quarter of their sales there last quarter.
(Bloomberg) — Richemont and Burberry Group Plc said consumer spending in China is already rebounding after three years of pandemic lockdowns and a virus surge that cost the luxury-goods makers almost a quarter of their sales there last quarter.
Burberry Chief Financial Officer Julie Brown pointed to “very promising signs in January” in the key luxury market. A Richemont spokeswoman said customer traffic has come back, leading to a strong retail rebound.
Demand for luxury goods in China — the industry’s biggest growth engine — was muted by continued Covid-19 restrictions for much of last year. The abrupt end to the government’s Covid-Zero policy is prompting optimism about a V-shaped recovery as the infection surge that kept consumers and store employees at home in December abates.
“We’ve seen a change in traffic, we’ve seen some strong trade coming through,” Burberry’s Brown said on a conference call Wednesday.
Unilever, the consumer-goods giant, is gearing up for “revenge spending” by Chinese households freed from lockdown.
Chief Executive Officer Alan Jope, speaking on a panel Tuesday at the World Economic Forum, said he expects a surge in consumption in the world’s second-biggest economy after it ended its Covid-Zero policy much sooner than anyone foresaw.
“There’s 2 trillion of excess household savings in China right now,” Jope said. “That’s going to show up in travel, in domestic consumption.”
Richemont shares rose as much as 2.6% in Zurich trading, erasing earlier losses, and Burberry gained 1.5% in London.
Dire December
The optimism about this year overshadowed somewhat disappointing quarterly reports. Richemont said revenue rose 5% excluding currency shifts in the last three months of the year, falling short of analysts’ estimates, as revenue plunged 24% in China.
At Burberry’s, comparable-store sales rose 1% in the quarter, below the 1.4% gain analysts anticipated, hurt by a 23% drop in China.
The abrupt end to China’s strict Covid curbs in early December led to a rapid spread of the virus that affected both supply and demand. Consumers were reluctant to head out to shops, while Richemont said so many employees were ill that many boutiques had to close or reduce their opening hours.
The turmoil occurred just before the Chinese New Year, normally a peak season for luxury sales.
–With assistance from Dasha Afanasieva.
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