European recovery helps LVMH overcome lockdowns in China


A tourism boom in Europe and resilient sales in the United States helped LVMH, owner of Louis Vuitton, post higher-than-expected revenue for the second quarter, offsetting a decline in its Chinese business after strict Covid-19 lockdowns. 19 began to wreak havoc.

However, the French group’s momentum slowed further from one quarter to the next after the setbacks in Chinasecond market in the luxury industry.

Revenues reached 18.4 billion euros, up 19% year on year excluding the effect of acquisitions and currency movements – higher than the average of 11% forecast by analysts, but lower than the 23% increase recorded three months earlier.

The world’s largest luxury group, however, said it was encouraged by sustained demand elsewhere, notably in South Korea and Singapore, despite an 8% drop in sales for the entire Asia region excluding Japan.

“We’ve been hit hard by China, there’s been a big downturn and there’s no magic bullet,” chief financial officer Jean Jacques Guiony told the Financial Times. He added that there was a “big question mark” over the outlook for this market, and “there is nothing that allows us to predict whether these hard lockdowns will return or not”.

But a rebound in other countries was helping the industry, Guiony added, including in Europe where a return of American tourists and a strong dollar were encouraging spending in shopping capitals like Paris and Milan.

Guiony said LVMH, typically one of the top performers in the luxury sector, was “optimistic, confident and vigilant” at the same time, despite potential headwinds.

Along with an uncertain period ahead for China, fears of a US recession are still swirling and inflation is soaring around the world to become a growing challenge for manufacturers. In the luxury industry, this includes higher transportation costs or higher commodity prices like gold.

But high-end brands have long had a greater ability to pass price increases on to consumers, and LVMH, home to spirits brands like Hennessy and fashion labels Christian Dior and Fendi, has followed suit this year. on items ranging from cognac to handbags.

It posted higher profits and operating margins for the first half of 2022, with core profit up 34% from a year ago to 10.2 billion euros, while profit net rose 23% to 6.5 billion euros.

Harry Barnick, principal analyst at research firm Third Bridge, said LVMH’s resilience despite its Chinese woes would not necessarily be replicated at rival groups, including France’s Kering, which is behind brands like Gucci and Saint Laurent.

“LVMH has a more balanced portfolio and adapts better to local markets,” Barnick said, adding that Gucci has more exposure to Asia.

LVMH’s results come after the group’s 73-year-old CEO and biggest shareholder, billionaire Bernard Arnault, changed the structure of his family holding company Financière Agache last week, a step seen as paving the way for his eventual succession. .

Agache was transformed into a joint-stock company known as sponsorship, which allows owners to sell share capital while retaining ironclad control over the business. A handful of French family businesses have sponsorship structures like Hermès and Michelin.

The new holding will be owned equally by Arnault’s five children – all of whom have jobs at LVMH – and will give them long-term control of the business, in a structure with lock-in clauses and take-over rules. of decision. The family owns 48% of LVMH and 63.5% of the voting rights.


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