Virus Outbreak: Louis Vuitton sales help LVMH weather lockdowns
Bloomberg
LVMH weathered a new round of COVID-19 lockdowns thanks to the resilient appeal of its Louis Vuitton bags.
Sales of fashion and leather goods soared 18 percent on an organic basis in the fourth quarter, the luxury conglomerate said on Tuesday. Analysts had expected growth of 11 percent.
Demand from Chinese consumers, who have been spending at home with travel abroad virtually impossible, has helped LVMH withstand the effects of the pandemic.
A woman walks past the shopfront of the French luxury brand Louis Vuitton during an extended lockdown due to the COVID-19 pandemic in Frankfurt, Germany, on Thursday last week. Photo: Reuters
Revenue in Asia and Japan rose 21 percent and 5 percent respectively in the period, while Europe lagged behind with a drop of almost a quarter.
Overall, organic revenue at LVMH fell 3 percent to 14.3 billion euros (US$17.3 billion) in the fourth quarter, an improvement from the past three quarters, signaling that the dominant luxury conglomerate is on a steady recovery.
Full-year profit from recurring operations was 8.3 billion euros. Analysts expected 7.2 billion euros.
At Louis Vuitton — the company’s cash cow — LVMH was able to put cost controls in place that limited profit’s decline to 2 percent. Performance was also helped by price increases.
“After several years of flat prices, I think 2020 was the year to do that,” LVMH chief financial officer Jean-Jacques Guiony said during an analyst call.
Meanwhile, Christian Dior gained market share last year and the label benefited from the successful launch of the Bobby handbag.
While there are “risks” regarding the COVID-19 situation in China, the country “has proven quite in control over the last few quarters,” Guiony said. “It’s not the place where I would assign the largest lockdown risks.”
LVMH did not disclose the share of its online sales last year, as that rate is not sustainable if the pandemic gets under control and shoppers return to physical stores, Guiony added. That share was 9 percent in 2019.
He also said there was no reason to believe tourism — in Europe notably — would disappear forever.
“We see no particular reason why we should be shutting down stores particularly in Europe,” Guiony said. “We think we can recover the lost business with tourists coming back and developing the local client base.”
LVMH’s selective retail unit, which includes Sephora and DFS, was the hardest hit last year amid a halt in international travel. That unit swung to a loss of 203 million euros for the year.
Guiony said that returning that business to its pre-pandemic levels would take time.
The biggest luxury conglomerate has become even larger recently. Earlier this month, LVMH completed a deal to buy Tiffany & Co.
The company plans to take about three months to dive into Tiffany’s business model and get a clearer picture of the problems it is facing, Guiony said.
The conglomerate is seeking to improve its margin, he said, without giving specific targets.