At first glance, the number of people buying pricy leather bags may not seem like a helpful bellwether for the health of the global economy.
But solid earnings at LVMH, the fashion conglomerate that owns brands like Louis Vuitton, Fendi and Dior, are a good indicator that consumers are getting comfortable spending on big-ticket items again.
What’s happening: LMVH reported Thursday that its fashion and leather goods division returned to growth last quarter, with revenue rising 12% compared to the same period last year. Shares are up more than 6% in Paris.
The coming months still look difficult. Sales in China — the only major economy expected to grow this year — have experienced a rebound, but can’t carry the entire business. Sales of luxury goods are also closely tied to international tourism, which LVMH Chief Financial Officer Jean Jacques Guiony said is poised to remain muted until there’s a Covid-19 vaccine.
“I am not particularly hopeful that we’ll see a lot of tourist inflows before that,” Guiony told analysts on a conference call.
A strong July through September, however, is encouraging, especially heading into the holiday season.
Jeweler Tiffany — which LVMH wanted to take over before the pandemic hit — also reported this week that sales in mainland China were “extremely strong” and “positive sales trends are continuing in October.”
More data: It’s not luxury, but Amazon said that its Prime Day sale earlier this week was its most successful to date. Amazon declined to provide a sales figure, but some analysts had predicted it would make as much as $10 billion. (In a press release, however, the company focused on how much money the event generated for small businesses. Any link to growing antitrust scrutiny?)
Big picture: Consumption drives economies like the United States, so it’s crucial that customers keep spending even as the trajectory of the pandemic remains uncertain heading into the winter.
LVMH and Tiffany said that activity in the United States was improving. With consumer spending still below where it was in January, that must continue.
Up next: Investors will be keeping close watch on US retail sales data for September out Friday. Economists surveyed by Reuters expect sales to tick up 0.7% from the previous month. That would mean the rate of growth has been roughly flat for the past two months.
Source: https://www.cnn.com/