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LVMH’s fashion and leather goods sales grew 21 per cent in the second quarter to €10.43 billion, the company said Tuesday, roughly in line with consensus expectations of 20.8 per cent. Growth was led by a strong performance in Asia, but the US market remained a laggard.
For the entire group, organic revenue growth was 17 per cent in the quarter to €21.2 billion compared to the same period in 2022. Profits from recurring operations were up 13 per cent in the first half, to €11.6 billion.
“LVMH achieved outstanding results during a six-month period of ongoing economic and geopolitical uncertainty. The strong creative momentum and excellent distribution of our maisons continued to inspire dreams, as demonstrated by the enthusiastic reception given to Pharrell Williams’s first fashion show for Louis Vuitton as well as the reopening of the New York ‘landmark’ of Tiffany & Co,” LVMH chairman and CEO Bernard Arnault said in a statement.
Asia, excluding Japan, and Europe sales rose 34 per cent and 19 per cent, respectively, while sales in the US fell 1 per cent, a deceleration compared to the first quarter when sales in the US were up 8 per cent. By comparison, Richemont’s share price was down 6.5 per cent after the Swiss conglomerate reported sales up 19 per cent in the quarter ending 30 June, below consensus expectations (at 20 per cent) with a 2 per cent fall in revenue from the Americas. Burberry also reported revenue in the US fell 8 per cent. Prada, Moncler, Kering and Hermès are to report their numbers later this week.
Customers in the US have pulled back on spending as cost of living has increased, a pinch felt by other luxury players. “We experienced a bit of pressure with the American customer, to varying degrees amongst brands,” LVMH CFO Jean-Jacques Guiony said. “All in all, we have a situation where the aspirational customer is suffering a bit. We are experiencing drops with entry-price products, online sales and second-tier cities, which is a clear sign that the aspirational customer is not shopping as much as they used to.”
Operating margin in the first half was 27.4 per cent, compared to 27.9 in the first half of 2022, “a slight erosion in the profitability”, as Guiony put it. Asked whether the advertising and promotional spending in the first half is the new normal, Guiony said: “I don’t think so. We had in the first half of the year a number of events. Bear in mind, there’s a cost coming with these events, but on top of that, there’s also marketing support on advertising and media that we have to do to make them more efficient. The cost of all these initiatives was quite high. I am not saying that we regret it.” He added that the 1.1 billion views of Pharrell Williams’s debut show were “worth the investment”.
Bernstein analyst Luca Solca says LVMH’s overall performance “hints at a first step to normalisation” for luxury. “In the absence of a hard landing recession — the sector should soon find an even keel…LVMH is no exception and should emerge once again as the most solid long-term investment in this space, as it benefits from scale, strong mega-brands, diversification with multiple growth engines, a long and deep management bench.”
“Thanks to the desirability of our brands, we approach the second half of the year with confidence and optimism but will remain vigilant within the current environment and count on the agility and talent of our teams to further strengthen our global leadership position in luxury goods in 2023,” Arnault stated.
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