LVMH Sales Growth Slows as Europe, US Gains Fail to Offset China Lockdowns
Sales at LVMH’s fashion and leather goods business rose 19 per cent in the second quarter, a slowdown on prior quarter's growth. Dior and Louis Vuitton continue to perform strongly.
Photo: Victor Virgile/Gamma-Rapho via Getty Images
LVMH said sales growth slowed in the second quarter as a strong performance in Europe and the US failed to fully offset the impact of China's Covid restrictions.
Revenues rose 19 per cent in the second quarter of 2022 to €14.7 billion, compared to 23 per cent growth in the first quarter, LVMH said in a statement today. Still, the sales beat analyst expectations. The luxury conglomerate also said its business in China is “normalising”, but still lags behind where it was last year. Sales in the fashion and leather goods division, its largest, rose 19 per cent in the second quarter, compared with a 30 per cent rise in the first quarter. Europe and the US were the key growth drivers (up 48 and 22 per cent respectively) in the second quarter, while Asia was down 8 per cent.
LVMH joins Richemont and Burberry who also reported an ongoing hit to China sales from Covid-19 lockdowns. Chief financial officer Jean-Jacques Guiony dismissed concerns and stressed LVMH's resilience in a call with analysts, noting a trend in Americans shopping in Europe particularly as the US dollar strengthens. “Bear in mind that in the last three months, we have been doing plus 22 per cent growth in the US on top of a 30 per cent growth last year. Needless to say that we are not particularly gloomy and pessimistic as to the outlook.” Still, he added if things worsen, “we'll cut costs, openings, etc. The key is to react swiftly.”
Louis Vuitton brand campaign shot at the Mont Saint-Michel.
Photo: Viviane Sassen
“LVMH has enjoyed an excellent start to the year, to which all of our business groups contributed,” said Bernard Arnault, chairman and CEO of LVMH in a statement. “We approach the second half of the year with confidence, but given the current geopolitical and health situation, we will remain vigilant and count on the agility and talent of our teams to further strengthen our global leadership position in luxury goods in 2022.”
China is a key cause of concern for analysts. “On the supply chain side, things – if not back to normal – have normalised in a great way so we are not suffering any warehouse closure,” Guiony said. He pointed to a rise in online sales in China during the quarter, but said stores are still below where they were last year. “We see a progressive normalisation of the business but on average we are very far from where we were last year. I expect to give you better and more favourable news in Q3.”
On Russia, LVMH's Guiony said the war in Ukraine “speeded up decisions that we had been contemplating for a while” to pull its beauty retailer Sephora out of Russia. For its other brands in Russia, he said “we keep our business in a frozen state, in a wait and see attitude”.
Dior men's Fall 2022 campaign.
Photo: Rafael Pavarotti
Louis Vuitton is “a bit below” the division’s sales growth average, Guiony said and Dior is “a bit above” while other brands are “more or less in line with the division growth.” LVMH called out the “remarkable success of the ready-to-wear and leather goods created by Hedi Slimane” for Celine, notably with the new line of high-end leather goods for its Triomphe and 16 collections; Loewe's “excellent momentum”; as well as Loro Piana and Marc Jacobs's “excellent first half of the year.”
BNP Paribas Exane analysts including Antoine Belge noted price increases helped Louis Vuitton, Dior, Fendi, Celine, Loro Piana and Loewe achieve record high profitability in the first half of 2022. Bernstein analyst Luca Solca said LVMH reported a “strong first half beat to consensus numbers, despite Covid-19 restrictions in China.”
Source: Vogue Business
https://www.voguebusiness.com/