Chinese Tourists Boost Europe Luxury Sales

LONDON—Luxury goods have enjoyed a heady recovery in Europe from the dark days of 2009, and the good news looks set to continue into Christmas, with sales boosted by spending from Chinese tourists.

But retailers caution that if the euro climbs sharply, some of that retail strength could diminish.

Global sales in the luxury market—which includes such high-end goods as apparel, handbags, watches and cosmetics—declined 8% last year, according to consulting firm Bain & Co. Sales and earnings have surged since then, as have stock prices. The Dow Jones Luxury Index, which measures the performance of companies world-wide that derive a sizeable portion of revenue from luxury goods and services, has risen 34% in the last year. And a large proportion of the recovery has come from tourists in Europe taking advantage of a euro that in June hit its lowest level in four years.

Francesco Trapani, chief executive of Bulgari SpA, singled out Chinese shoppers as “a big factor” in the Italian jeweler’s 11% rise in third-quarter European sales.

At PPR SA’s Gucci, sales to tourists in Europe are now above 50%. And in the first nine months of 2010, the number of Chinese customers nearly doubled from a year earlier to almost 22% of sales in Europe, says the company, which owns such fashion houses as Yves Saint Laurent, Alexander McQueen and Stella McCartney.

Well-heeled Chinese consumers are attracted to Europe by luxury goods that are either more expensive or aren’t available at home.

Consulting firm Tourism Economics estimates Chinese visits to Western Europe will rise to 2.4 million this year from two million in 2009. And their spending is on the rise. Chinese tourists spent 99% more in the first 10 months of this year than a year earlier, according to tax-free shopping specialists Global Blue. The average transaction this year is €718 ($932) in the kind of high-end stores that provide tax-refund facilities.

While luxury companies have been courting shoppers in emerging markets for several years—most have a substantial retail presence in such countries as China and Dubai—those consumers’ footsteps in European stores have become louder this year.

Burberry PLC, the U.K. company known for its trenchcoats and iconic plaid, says Chinese tourists alone account for around 30% of total London sales and traffic from Russian and Middle Eastern shoppers has increased recently. Although the company doesn’t have Europewide figures, CEO Angela Arhendts said last week that its department-store partners are seeing similar trends in the big European cities. Burberry’s first-half sales in Europe rose 12% at constant exchange rates, to £224 million ($348 million).

The rising importance of tourist spending is leaving companies vulnerable to a gain in the euro, however. Bain predicts that luxury-sector sales will rise 3.5% world-wide next year, down from 6% this year at constant exchange rates. And because China’s yuan trades in line with the U.S. dollar, any weakening in the American currency against the euro also will weaken the yuan.

LVMH Moët Hennessy Louis Vuitton cited tourists for contributing to its 24% increase in third-quarter European sales. But it warned of less favorable currency rates and tougher comparisons to year-earlier figures, going forward.

Cie. Financière Richemont, the maker of Cartier watches and Van Cleef & Arpels jewelry, said it is “relaxed but vigilant” about the Christmas season, when luxury retailers generate a hefty portion of their sales. The maker of Cartier watches and Van Cleef & Arpels jewelry generates around half of its European sales from tourists.

The euro now trades around $1.30, up from $1.19 in June, and so far tourism numbers are holding up. The euro traded above $1.40 as recently as a month ago, but has dropped back amid revived concerns about European banks and sovereign debt.

The historical tie between exchange rates and tourism is strong. Between 2006 and 2009 the euro appreciated by over 20% against the dollar, while arrivals from long-distance markets to the euro zone rose just 1%, according to Tourism Economics. The firm estimates that had the euro not strengthened, long-distance travel would have increased by around 10%.


—Mimosa Spencer in Paris, Francesca Angelini in Rome,
John Revill in Zurich
and Francis Bray in London contributed to this article.

Source: The Wall Street Journal

  • About post
buy phentermine onlinebuy ambien no prescriptionbuy tramadol without prescriptionphentermine for salebuy ambien onlineambien online no prescriptionbuy ambien onlinebuy valium no prescriptionbuy tramadol online without prescriptionbuy xanax online no prescriptionambien for salebuy valium no prescriptionvalium online no prescriptionxanax online without prescription
2012 - © China Travel Trends