Louis Vuitton is getting wiped out in China

China’s slowing economy is giving French luxury brand Louis Vuitton a serious headache.

The company has closed one store in each of the cities of Guangzhou, Harbin, and Urumqi, according to a report in the Financial Times,

These are provincial cities where the economic slowdown has been more pronounced due to a traditional reliance on the manufacturing industry. The closures leave around 50 Louis Vuitton stores across China.

The three closed stores are the first of many as the company adjusts to the slowdown in China’s economy, and a waning desire for luxury goods thanks to the country’s anti-corruption campaign, the FT said.

“According to my information, 20% of Louis Vuitton’s stores in China will have disappeared by mid-next year: that is a closing rate of about one store per month,” Emmanuel Hemmerle, managing partner of a major leadership consultancy in Shanghai, told the FT.

Louis Vuitton is just one of the Western luxury brands struggling in China. Last week British firm Burberry posted worse than expected results, blaming poor sales in the country.

Poor performance from luxury brands is largely thanks to the country’s economic slowdown which has seen growth forecasts cut to less than 7% after years of double-digit GDP growth.

This, in combination with the huge anti-corruption and anti-extravagance campaign led by president Xi Jinping, has seen luxury goods become less accessable to the growing Chinese middle class, and less acceptable for members of China’s elite, where extravagant displays of wealth are now being frowned on.

Another issue affecting Louis Vuitton in China is a growing perception that the brand is not quite good enough for the country’s elites, and is now seen as middle class, meaning those who can afford the brand, do not buy it. In February, Business Insider spoke to Sara Jane Ho, the founder of an elite Chinese etiquette school, who said “I can’t buy Vuitton, I’ve seen it too much, it’s a brand for secretaries.”

Louis Vuitton Jennifer Lopez Advert
Jennifer Lopez in a Louis Vuitton advert. Louis Vuitton Advert

According to sources cited by the FT, most of the stores Louis Vuitton is planning to close will be in places like Harbin, so-called ‘rust belt’ cities in Northeasten China.

Despite the closures, Louis Vuitton said on Monday that it has recently opened new stores in both Beijing and the coastal city of Hangzhou, and said that it “will continue investing in China in the current store network in order to enhance the level of experience we wish to offer to our clients.”

Louis Vuitton’s parent company LVMH released interim results for Q3 in October, and they showed that the Asian market is hugely challenging overall. Year to date organic growth has fallen by 6% in the Asian region across the whole company, which includes luxury drinks brands Moet Champagne, and Hennessy Cognac.

Jean-Jacques Guiony, LVMH’s CFO, made a tentative announcement of the store closures last month when announcing the company’s results, saying on a call “We may be closing down a couple of stores in China where we have two stores in second-tier cities”.

Business Insider has reached out to Louis Vuitton for confirmation of the store closures and will update this story when the company responds.

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