China's overall economy may be struggling, but that doesn't seem to be stopping consumers there from splurging on more luxury clothing.
Inflation data from China on Thursday showed prices fell a “worryingly low” 0.8% in January from a year earlier, the sharpest fall since the end of the financial crisis in fall 2009 and the fourth straight month of declines.
And despite a bounce this week, China's benchmark stock index, the SSE Composite CN:510210, has fallen 5.1% so far in 2024 – extending a three-year decline in Chinese stocks as the country's economy recovers post-COVID-19. Crisis had difficulty recovering -19 pandemic.
While this contrasts with a U.S. economy that has shown signs of revival recently, earnings reports from some apparel companies on Thursday suggested that upscale consumers in China are spending more on clothing while American consumers are more thrifty.
While gains in China come from a low base – as last year's results were hit by COVID-related closures – luxury brands still praised the growth.
Luxury lifestyle products company Ralph Lauren Corp.
R.L
on Thursday reported a 5.6% year-over-year increase in revenue for its fiscal third quarter. But while sales in North America were flat, sales in Asia rose 16%, while sales in China rose more than 30%, it said.
Growth in China “exceeded our expectations, although year-over-year comparisons were easier due to the rise in COVID cases,” Ralph Lauren CEO Patrice Louvet said, according to an AlphaSense transcript of the company's earnings call with analysts.
And Tapestry Inc.
TPR
,
The parent company of luxury brands Coach and Kate Spade said its revenue rose 2.9% in its second fiscal year, which ended Dec. 30.
Sales in North America were “at the same level” as a year ago, while international sales rose 12%, Tapestry said Thursday, adding that the “strong” growth outside the U.S. was supported by a 19% jump in sales in the metro area China is underlined.
“[W]“We continue to see an increase in tourist travel spending in mainland China, with increases across Asia and Europe,” Tapestry Chief Financial Officer Scott Roe said on its earnings call.
While Under Armor Inc.'s
UA
UAA
Sportswear may not be considered luxury; their prices are in the higher segment. The company reported revenue Thursday that fell 6% from a year earlier.
This decline was driven by a 12% decline in North American sales, which offset a 7% increase in international sales. Although Under Armor didn't increase sales in China, Chief Financial Officer David Bergman said in its earnings release that “China was a significant contributor to growth in the third quarter.”
The earnings reports came as the SSE Composite rose 1.2% on Thursday, rising 6.1% in a three-day winning streak that began after it closed at a four-year low on Monday. The current three-day performance is the best since rising 6.1% over a period ending March 18, 2022.
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