Luxury woes deepen for LVMH with Sephora layoffs in China

Cosmetics retailer Sephora China has fired both office and store staff while persuading others to resign, with an estimated 10% of more than 4,000 employees in the country affected

LVMH founder Bernard Arnault, centre, with his son, Antoine Arnault, and Bernard's wife Hélène Mercier at a star-studded event last year. Picture: Cindy Ord/Getty Images

Cosmetics retailer Sephora is cutting hundreds of staff in China, according to people familiar with the matter, as one of LVMH’s biggest brands tries to turn around a loss-making operation in the world’s second-largest economy.

Sephora China has fired both office and store staff while persuading others to resign, with an estimated 10% of more than 4,000 employees in the country affected, said sources, who asked not to be identified for fear of retribution. Some senior executives, including the country leads for retail and e-commerce, have also left the company, one source said.

The shakeup comes after Sephora appointed former Nike Asia e-commerce chief Ding Xia as its new Greater China head in a bid to revive its fortunes in the mainland. The brand has been struggling to expand in China — a market executives at billionaire Bernard Arnault’s luxury empire consider key to eventually hitting a global sales target of €20bn.

“In response to the challenging market environment and to ensure our future growth in China, Sephora China is currently streamlining our organisational structure in our head office to ensure we have the right capabilities for long-term sustainable growth,” a company spokesperson said.

Sephora’s operations in China are something of a beachhead for one of LVMH’s biggest brands, with the retailer otherwise retreating across the rest of the region, shuttering its Taiwan and South Korea operations over the past year. 

Yet the success the brand has in the US, Europe and the Middle East — which made it LVMH’s second-largest revenue contributor after Louis Vuitton as of 2022 — is proving elusive in China.

While Sephora has expanded to some 300 stores since entering China in 2005, the country is increasingly difficult for higher-end retailers to navigate as consumers seek out cheaper goods amid a slowdown.

In Western markets, Sephora has leveraged its high-quality sales service in physical stores and established itself as a way for consumers to discover niche brands. This strategy is less effective in China, where online shopping is the dominant mode of consumption and Alibaba Group’s Taobao and Tmall feature millions of labels.

Bloomberg