The Zhitong Finance App learned that Shen Wan Hongyuan released a research report saying that the sales growth rate of luxury brands recovered sequentially in 23Q4, the pace of differentiation among brands continued, top luxury products such as LVMH and Hermes maintained steady growth, jewelry brands driven Lifeng Group's growth, Kering Group's performance was weak, and mainland China's customer base clearly drove the surrounding travel consumer market. In the long run, it is expected that the long-term value preservation effect of top luxury and luxury products will further highlight the brand value of leading groups. China's luxury consumption fundamentals are still strong, and it will still be the main growth engine for the global luxury goods market.

Recommended targets: China Free China (601888.SH), Wangfujing (600859.SH). Recommended attention: Hermes, LVMH Group, Lifeng Group, Kering Group, Prada (01913).

Shen Wan Hongyuan's main views are as follows:

The performance of luxury goods groups was divided in 2023. Hermes and LV maintained brand scarcity, and their growth performance was impressive; Kering Group's growth rate was slightly weak. According to the company's announcement, LVMH Group achieved revenue of 86.2 billion euros in fiscal year 2023, an increase of 8.8% over the previous year, and realized net profit of 15.17 billion euros, an increase of 8% over the previous year. Its brands collaborated to achieve new highs in revenue and profit.

Thanks to excellent quality and craftsmanship, Hermès's revenue in '23 reached 13.4 billion euros, up 15.7% year on year, up 20.6% year on year at fixed exchange rates, and recurring revenue increased 20% from 4.697 billion euros in 2022 to 5.65 billion euros. The revenue of Kering Group's major brands generally showed a downward trend. In '23, sales fell 4% year on year to 19.566 billion euros, net profit fell 17% year on year to 2,983 billion euros, and brand growth slowed.

The Asia-Pacific market performed well in 23Q4, and luxury goods groups continued to be optimistic about the long-term consumption potential of the Chinese market

According to Bain & Company, the luxury goods market in mainland China will return to a normal growth path in 2023. The market size is expected to increase 12% year on year in 2023. Over the long term, China's luxury consumption fundamentals will remain strong, and it is expected to achieve mid-single digit growth in 2024.

In 23Q4, luxury goods groups continued to be optimistic about China's consumption potential. LVMH and Hermès increased their investment in the Chinese region. Currently, LVMH is leading the market in the Asia-Pacific region. According to 36 krypton, LV and Dior and other brands plan to open larger stores in China to enhance interaction with consumers. According to Gateway Fashion, Hermès invested 250 million euros to improve its distribution network in Asia, focusing on the Chinese market.

23Q4LVMH/Hermès/Kering Group/Lifeng Group in Japan grew 23%/15%/21%/8%, mainly benefiting from growing domestic sales and strong travel consumption. Lifeng Group excels in the Asian market by continuously expanding its product line, improving service quality, and strengthening brand promotion. The revenue growth rate of luxury goods groups in Europe and the US is divided. Hermès relies on local consumers and high-net-worth travelers to contribute revenue, and has performed strongly.

Each group's 23Q4 performance rebounded month-on-month, and LVMH and Hermès grew resilient enough

According to the company's announcement, LVMH's main business revenue was +8.8% year over year, and net profit increased 8% year over year, mainly driven by the continuous trend of product price increases and excellent product performance. The Asian region (including Japan) is still one of LVMH's main consumer markets. Among them, luxury consumption in Japan is impressive, and the organic revenue growth rate for the whole year of 23 reached 28%.

Hermès's 23-year performance showed revenue of 13.4 billion euros. Leather products and horse equipment contributed more than 40% of revenue. Ready-to-wear, accessories, watches, etc. grew significantly, and sales in various segments increased by about 20% across the board. According to the Beijing News, Hermès's products plan to continue to increase prices by 8%-9% in '24 to make up for rising costs and maintain the tone of high-end luxury brands. Affected by high inflation and declining purchasing power, the revenue of Kering Group's major brands generally showed a downward trend, mainly affecting the mid-tier customer base due to high inflation and declining purchasing power. Relying on the jewelry division and the Asia-Pacific market, Lifeng Group achieved revenue of 5.6 billion euros in 23Q4, a 4% year-on-year increase, and an 8% year-on-year increase at a fixed exchange rate.

Risk warning: Macroeconomic risks falling short of expectations, industry competition intensifies risks, and risk of damage to brand image.