Chinese shoppers splash on luxury goods, not on ‘eat out’

Bloomberg

Chinese consumers are back to binging on luxury handbags, cosmetics and cars. But this shopping enthusiasm is not
extending to mass consumption in sporting goods and restaurants.
An uneven recovery is under way in China as the world’s biggest consumer market also becomes one of the first nations to rebound from the coronavirus pandemic that continues to ravage the global economy.
Bored after months of strict social distancing measures and unable to vacation overseas, wealthy Chinese consumers are seeking comfort in retail therapy. This bodes well for dozens of luxury goods makers whose growth was fueled by China’s increasing affluence in the past decade.
Bloomberg analysed June-quarter revenue for over two dozen companies that are market leaders in China across key consumer goods categories.
Three pandemic-triggered trends emerged, driven mostly by pent-up desire to spend, focus on healthy lifestyles or wariness of public spaces.
Luxury goods makers saw double-digit revenue growth in the latest quarter compared to the same period last year, underscoring the strongest recovery trend. Inability to travel overseas has boosted businesses in the domestic tourism hotspots and duty-free shops.
“The pent-up demand from nearly two months of lockdown between February-March likely led local shoppers to purchase more aspirational brands
than mass brands,” said Catherine Lim, a Singapore-based Bloomberg Intelligence analyst. “Consumers are definitely looking to treat themselves following the scare from the outbreak.”
LVMH’s China sales last quarter rose 65% from a year ago while overall group revenue dropped 38%. The wine-to-watches luxury group has seen “a very good offset in China for the rest of the business, which is suffering,” Jean-Jacques Guiony, LVMH’s chief financial officer, said.
Kering SA’s sales in mainland China jumped over 40% after a hit in the first quarter.
But these spoils are not shared by mass-category consumer products. Other firms such as Anta Sports Products Ltd. and electrical-appliance maker Midea Group have seen little or no sales growth between April and June. Total retail sales were still decelerating in July, highlighting the continuing economic pain from the coronavirus outbreak.
The government data as well as market research show that the pandemic “deals a bigger blow to the low-income consumers who have to further tighten their belt,” said Luo Yixin, a consumer analyst at Huatai Financial Holdings.