Thursday, May 23, 2024
Thursday, May 23, 2024
Home » LVMH Sales Soar Despite China Slowdown

LVMH Sales Soar Despite China Slowdown

by Keegan Fraser
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The luxury conglomerate was helped by strong sales of its fashion and leather goods. Solid results in Europe, the US and Japan also helped offset a poor performance in China, which suffered due to lockdowns in the second quarter.

The results underscore the French company’s resilience. LVMH’s diverse offerings — from handbags to spirits to luxury hotel stays — and global footprint are enabling it to withstand a worsening economic outlook. It also shows that well-heeled customers aren’t feeling a global surge in inflation that has caused lower-income shoppers to rein in spending at retailers such as Walmart Inc.

LVMH’s biggest brand, Louis Vuitton, has been able to maintain profitability “at an exceptional level,” during the first half, the company said. Its executives have been actively restricting entry-priced products such as its classic monogram-coated canvas bags. Instead, the brand is promoting higher-priced leather handbags.

“The top end of the portfolio has done better than the entry price, but it’s on purpose because we intend to rebalance the two,” LVMH Chief Financial Officer Jean-Jacques Guiony said about Vuitton’s strategy during the analyst call.

Geographically, LVMH was helped by a 48 percent revenue recovery in Europe, followed by solid rebounds in Japan and the US. Asia, excluding Japan, barely grew during the quarter.

LVMH’s outlook on the US economy isn’t “particularly gloomy and pessimistic,” Guiony said, citing recent quarterly performance. “We’re trying to manage the business for the growth it can generate.”

Should there be a downturn, Guiony said LVMH would react swiftly by cutting costs and store openings. Past experience, notably during the 2008 global financial crisis, has shown LVMH has a “strong rebound capacity,” he added.

In China, store traffic is still “way below” last year’s levels, Guiony said, adding that LVMH is waiting to see how demand evolves there.

The luxury conglomerate didn’t experience pushback from customers after raising prices across the board this year, mostly in the first quarter. Guiony doesn’t expect LVMH’s fashion and leather brands to be very active when it comes to further price increases in the second half of the year. Thanks to the recent appreciation of the dollar against the euro, LVMH noticed more American tourists spending in Europe toward the end of last month, Guiony said.

LVMH’s wine and spirits division was a notable outperformer during the period. The division — which suffered some supply constraints in the past — bounced back with organic revenue jumping 30 percent. It was helped by demand for Champagne in Europe, the US and Japan, as well as price increases for Hennessy Cognac.

First-half profit from recurring operations rose to 10.24 billion euros ($10.35 billion). Analysts expected 9.51 billion euros. Organic revenue for its biggest fashion and leather goods unit in the second quarter grew 19 percent, better than the 17 percent gain analysts expected.

Source: Retail News Asia

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