The news that the latest first-quarter results for Burberry and LVMH (French luxury goods conglomerate Louis Vuitton Moet Hennessy) are experiencing mixed fortunes in the east, probably comes as no surprise. How many very English trenchcoats can you sell for US$2,500 (HK$19,410) in China? It’s always been a mystery to me how a brand, which when I was growing up in the seventies, was the damp day uniform for everyone’s mother and grandmother in the countryside, could turn into a fashion icon now.
It was strictly rural Pony Club Mum wear too, not trendy sophisticated city mum, when the former was the height of uncool. I would have rather got soaked in the rain than borrow Mum’s dowdy Burberry mac. And now look at them, the height of fashion, selling like hotcakes. But I digress. There’s no accounting for taste and you have to take your mum’s Hermes head scarf off to genius brand gurus. It will be pit-head donkey jackets next. But surprisingly the latest figures show Burberry is the one holding up well, while the vast brand stable of LVMH is languishing. The FT reports that analysts have been assessing whether demand for luxuries from cognac to Euro couture to LV handbags and trenchcoats has been waning of late in Asia. The latest set of LVMH numbers would indicate that’s the case.
Analysts forecast growth year-on-year of five or six per cent for the Louis Vuitton label, but in fact it only notched up three per cent. It’s share price had dipped by the end of last week from 5.8 per cent to euro 123.30.
A more sluggish economy plus the austerity measure introduced by China’s new leadership to curb officials’ spending are blamed by the group’s finance director Jean-Jacques Guiony. The beefy renminbi, strengthening against the euro, means more and more Chinese go on shopping spree holidays to Paris, Frankfurt and Rome and stock up on US$2,00 (HK$1,553) handbags for much less in rmb terms.
Burberry’s recent success –its share price also edged up 0.4 per cent to pounds sterling 12.99 on the first quarter results, is credited to its speedy opening of several own-brand stores across China. Burberry sales shot up 15 per cent year-on-year in Asia, giving them 42 per cent of their total global sales in Asia. That’s up a bit from 40 per cent last year. Retail tourism also kept their Euroland sales afloat, even if only at breakeven point, compared to last year.
The irony of all this is that these two brands, Burberry with its distinctive check and LV with its monogrammed handbags, are among the most counterfeited products in the world. I thought you buy luxury brands to stand out from the crowd. But if you are a rich mainland businessman’s girlfriend and he buys you a genuine LV bag or Burberry mac and scarf, how are people going to know it’s the real thing, when every office girl in the street is sporting an almost identical fake?