Luxury goods companies have found steady demand from young Chinese consumers, flush with cash and ready to spend. Meanwhile, American Millennials can’t keep up with their Chinese counterparts for a variety of reasons. Carol Ryan explains at The Wall Street Journal:
Luxury brands have done a great job of attracting young Chinese shoppers. Cash-strapped U.S. millennials will be a tougher sell.
Chinese spending on Gucci handbags, Burberry trench coats and the like has been surprisingly resilient despite the country’s weakening economy. That has buoyed the stock-market valuations of listed European luxury players this year. Bellwether stock LVMH Moët Hennessy Louis Vuitton LVMUY -3.97% now trades for almost 25 times next year’s estimated earnings—close to 2018’s 15-year high.
The Chinese are the most important luxury shoppers in the world, buying one-third of all designer goods sold last year. They are also unusually young: They start making purchases in their 20s, two decades earlier than U.S. consumers, according to Fung Business Intelligence.
For now, Chinese millennials show no sign of tightening their belts. That could be because their spending power is boosted by a wall of cash put aside by their parents’ generation. As China’s social welfare spending has been low by international standards in recent decades, the country has one of the highest household savings rates in the world at 46%—more than double the global average, data from the International Monetary Fund shows.