Luxury goods maker Kering gave the markets a pleasant surprise on Friday as earnings at its flagship Gucci luxury brand thrashed expectations and raised hopes of more good things to come as more new designs are set to be introduced this year.
Gucci revenue advanced 4.8%, compared with the 1.5% growth analysts anticipated – the brand’s strongest result in three years. However, while the company reported that conditions in Hong Kong and Macau (China’s luxury market bellwethers) were still lacklustre, there is hope for the sector more broadly.
The domestic Chinese market for luxury goods may be struggling, but investors shouldn’t discount the huge amount of high-end products Chinese tourists buy.
Indeed, they spent $116.8 billion (£87 billion)) on luxury when abroad in 2015, according to China Daily.
Put another way this is 46% of all global luxury goods, and Chinese tourists form a consumer group any other country would be very proud of. Fully 1% of the population holidayed overseas last year, that’s 120 million people.
Many Chinese want to get their bling overseas because imported luxury goods face high import tariffs.
The China Chamber of International Commerce found last year luxury goods could cost 68% more in China than they do in the US and Europe.
Tariffs have seen many overseas brands throw in the towel and shut mainland stores, altogether. Louis Vuitton bailed out of some Chinese cities last year, with Armani, Prada Hermes and Burberry doing likewise.