Vuitton, K11 Musea in talks over next-level VIP store

Bloomberg and staff reporter

New World Development, the Hong Kong real estate company controlled by the billionaire Cheng family, is in talks with luxury giant Louis Vuitton to open a mega store in one of the developer's signature malls, according to people familiar with the matter.

The new store would occupy about 40,000 square feet at K11 Musea, making it one of Louis Vuitton's largest in Asia, said the sources. It is about the same size as the Louis Vuitton flagship store in Osaka that opened in 2020.

The store could feature a museum, a cafe, and a lounge for the brand's VIP customers, sources said. Details over rent remain unclear.

Discussions are at an advanced stage, but details could still change and the deal could still fall apart, they said.

New World did not immediately respond to a request for comment.

A spokesperson for LVMH declined to comment.

New World's shares rose 7.7 percent yesterday. LVMH stock rose as much as 1 percent in early trading but was still down about 28.5 percent in the past 12 months.

If an agreement is reached, the expansion of fashion conglomerate LVMH's largest brand would inject some confidence into Hong Kong's retail industry and help its ailing commercial property sector.

It would also be a boost for New World, which has been struggling with debt woes and uncertainty over its leadership.

The group's retail rents and valuation for its investment properties could rise with the new store strengthening its retail presence and drawing stronger foot traffic, said Bloomberg Intelligence analysts including Patrick Wong and Daniel Fan in notes.

Located near the famous Victoria Harbour and with a fashion-forward design incorporating arts and cultural elements, K11 Musea is a popular destination for tourists. Its exclusive private members clubs have also attracted a group of wealthy clientele through the Cheng family's networks.

K11 Musea is accelerating its pivot to luxury shopping, with Prada opening a new store in the mall and other high-end labels, including LVMH's Loewe and Kering's Saint Laurent and Balenciaga upgrading their facilities. The mall also hosted Louis Vuitton's first-ever fashion show in Hong Kong in 2023.

LVMH's plan to open a mega store in one of Hong Kong's most upscale shopping malls, with significant space reserved for non-retail and VIP elements, underscores luxury brands' efforts to wring more growth from the ultra-rich at a time when China's economic slowdown has sapped demand for discretionary consumption among middle-class shoppers.

Fashion houses are designing more unique shopping experiences to develop personal connections with customers, and are focusing more on clients less affected by the downturn.

While Hong Kong has been suffering from declining retail sales and a slow recovery in tourism, more than 80 percent of mainlanders believe the city remains the luxury goods hub in Asia, according to a December report from consultancy MDRi.

The city also has the highest concentration of millionaires in the Greater China region and ranked No 9 on a list of wealthiest cities in the world, a report published last year by investment migration company Henley & Partners in partnership with intelligence firm New World Wealth showed.

While the luxury industry experienced a decline in sales last year from an extraordinary surge in demand after the pandemic, Goldman Sachs sees moderate growth this year and a recovery in demand in China from the third quarter.

Editorial: Page 4