Tod’s profits soar as sales grow in China

Italian luxury retailer Tod’s shares climbed ~5% on Thursday after its first half operating profit exceeded expectations by tripling YoY, Reuters reported.

• Between January and June, Tod’s notched $64.3 million in earnings (not accounting for taxes and interest).

The luxury group credited the positive results to growing sales and a successful mix of product offerings. It attributed about 23% of its sales growth to China, which has seen more engaged shoppers since Covid restrictions lifted earlier this year.

And Tod’s isn’t the only luxury brand to benefit from the region’s resurgence:

• Since the restrictions were lifted, conglomerate LVMH grew its organic sales 18% in Q1 within its fashion and luxury goods division.
• Likewise, Prada saw a 22% bump in Q1 largely due to growing sales in China (as well as in Europe).

Now what? But if brands like Tod’s want to see continued growth, they might want to look at the rich, financially independent, and young customers in China.

A Vogue Business and Barclays study from July this year found luxury consumers in China were spending over $2,075 on luxury fashion goods in Q2, and most of these luxury consumers are wealthy millennial and Gen Z women over the age of 25 who reside in major cities like Beijing and Shanghai.

“We have been arguing that the recovery of the Chinese luxury market will be mostly driven by the wealthiest cohorts rather than the middle class in 2023 due to the macro uncertainties,” Carole Madjo, head of Barclays luxury goods equity research, told Vogue Business. “This trend is now clearly reflected in this survey.”