Luxury brands say China's latest Covid wave has whacked consumer demand

cnbc.com:

BEIJING — Luxury brands have slashed expectations for their China business this year after the country's latest Covid lockdowns, according to an Oliver Wyman survey shared exclusively with CNBC.

Forecasted growth for luxury and premium consumer brands was cut by 15 percentage points, and down nearly 25 percentage points for luxury brands alone, according to survey results released Wednesday.

Premium and luxury goods businesses now expect only 3% year-on-year growth in their mainland China business this year, down sharply from an 18% surge they forecast a few months ago, the report said. That's based on a weighted average of the survey results.

Oliver Wyman said its survey of executives in May covered more than 30 of the consulting firm's clients across premium consumer and luxury goods, representing more than $50 billion in retail sales.

Shanghai, the city with the largest gross domestic product in China and a hub for foreign business, faced the brunt of China's Covid outbreak this spring — the country's worst since the initial shock of the pandemic in early 2020. The city ordered people to stay home and most businesses to shut for two months, before attempting to reopen on June 1.

«There is still a very high uncertainty of what will be the future Covid [measures] in China,» Kenneth Chow, principal at Oliver Wyman, said in a phone interview this week.

«There is a huge doubt about whether the consumer confidence [can] recover quickly, as in 2020 and 2021,» he said, citing the firm's interviews with executives.

China's retail sales plunged by 11.1% in April from a year ago, following a 3.3% increase during the first three months of the year. Consumer spending in China never fully recovered from the initial phase of the