LVMH Q1 earnings report - 17% rise in sales
French luxury firm LVMH has reached new stock price highs following positive sales data, indicating the commercial benefits of China’s post-pandemic reopening.
The company, which is the world’s largest luxury group under the control of billionaire Bernard Arnault, reported global sales of €21bn for the first quarter of the year, showing a 17% increase compared to the same period in the previous year and surpassing analyst expectations. LVMH’s fashion and leather goods division, which represents the company’s largest sector, maintained strong sales growth, expanding by 18% to €10.7bn.
In this article you will find the key points from the LVMH Q1 earning report.
LVMH Q1 earnings report - Chinese rebound, U.S. slowdown
The luxury market in China has shown signs of recovery after the country’s stringent zero-Covid policies resulted in a downturn, while the pace of sales growth in the US, luxury’s biggest market, has stalled, according to LVMH. The world’s largest luxury group, headed by billionaire Bernard Arnault, reported global sales of €21bn for the first quarter of 2023, up 17% from the same period last year and beating analysts’ expectations. The company’s fashion and leather goods division, its largest, continued to perform strongly, with sales rising by 18% to €10.7bn.
Jean-Jacques Guiony, LVMH’s chief financial officer, stated that the group is now out of the zero-Covid period, with China showing signs of improvement. LVMH’s Asia-wide sales rose by 14% in the first quarter of 2023 compared with an 8% decline in the final three months of 2022. While the group does not provide specific numbers for China, Guiony stated that the country accounts for around 80% of its regional activities. Guiony said, “We were very affected by events in China in December, our business was practically at a standstill. This gives an indication of the magnitude of the improvement.”
He added that the group expects the normalisation of the Chinese market to continue, and it is optimistic that it will happen this year. However, the situation in the US is different, with the pace of sales growth remaining the same as the previous quarter as American consumers grappled with higher interest rates and an uncertain economic outlook. While sales increased by 8% in the fourth quarter, it remained unchanged in the first three months of this year. Guiony noted that many US buyers also travelled to Europe, resulting in some displacement of their activities there.
Throughout the pandemic, the luxury sector has been resilient, except for a brief downturn in March 2020 when the world shut down. However, China’s decision to pursue strict zero-Covid measures as the disease spread last year affected the performance of many groups in their fastest-growing market. Many luxury brands temporarily closed stores and warehouses at the end of last year due to sick employees, impacting the fourth-quarter results of LVMH, Burberry, and Cartier-owner Richemont.
Despite the challenging end to the year in Asia, LVMH has reported record profits and sales for two consecutive years in January, and it continues to go from strength to strength. The group, which owns brands such as Louis Vuitton, Dior, and Moët & Chandon, has become the world’s first luxury house to surpass €20bn in annual sales at the beginning of this year, with Louis Vuitton being its flagship brand.
The group reported a 30% increase in sales in its travel retail and department stores division to €3.9bn, driven by the performance of beauty retailer Sephora and the return of travel. Guiony said that there had been no travel retail in Asia for the past two years to popular destinations for Chinese shoppers such as Hong Kong and Macau, but it was now coming back step by step as travel restrictions were lifted. He added that it would take time for travel retail to return to normal in Asia and even longer in Europe.
In conclusion, LVMH’s first-quarter results demonstrate the luxury sector’s resilience despite the pandemic’s impact on various markets. While the Chinese market is showing signs of recovery, the US market’s pace of growth has slowed due to higher interest rates and an uncertain economic outlook. However, the group’s travel retail and department stores division has seen a rebound in sales, driven by Sephora’s performance and the return of travel.
LVMH company profile
LVMH Louis Vuitton - Moët Hennessy SE is a publicly traded conglomerate that owns a collection of luxury brands in fashion, accessories, homeware, perfumes, and alcohol.
Its net sales are categorized into the following product families:
- Fashion and leather items: brands include Louis Vuitton, Kenzo, Celine, Fendi, Marc Jacobs, Givenchy, and more.
- Watches and jewels: brands include Bulgari, TAG Heuer, Zenith, Hublot, Chaumet, Fred, Tiffany, and more.
- Wines and spirits: champagne brands include Moët & Chandon, Mercier, Veuve Clicquot Ponsardin, Dom Pérignon, and more (ranked No.1 worldwide). Wine brands include Cape Mentelle, Château D’Yquem, and more. Cognac brands mainly include Hennessy (ranked No.1 worldwide), and whisky brands mainly include Glenmorangie.
- Perfumes and cosmetics: perfume brands include Christian Dior, Guerlain, Loewe, Kenzo, and more. Makeup brands include Make Up For Ever, Guerlain, Acqua di Parma, and more.
Selective distribution through Sephora, DFS, Miami Cruiseline chains, Le Bon Marché, and La Samaritaine department stores also contributes to sales. The products are marketed through a global network of 5,664 outlets as of the end of 2022.
The current stock price - 892.80 EUR