Luxury retail group LVMH Moët Hennessy Louis Vuitton saw its profits suffer a severe decline in the first half as the coronavirus pandemic crippled its business worldwide.
In a Nutshell: While the half could have been better, it also probably could have been far worse. The public health crisis impacted the company’s revenue worldwide, and suspension of international travel severely penalized travel retail and hotel activities, the French luxury conglomerate said.
“We continue to be driven by a long-term vision, a deep sense of responsibility and a strong commitment to environmental protection, inclusion and solidarity. In the current context, we remain even more firmly dedicated to showing continuous progress in these areas. Thanks to the strength of our brands and the responsiveness of our organization, we are confident that LVMH is in an excellent position to take advantage of the recovery, which we hope will be confirmed in the second half of the year, and to strengthen our lead in the global luxury market in 2020,” Bernard Arnault, chairman and CEO, said.
LVMH reported a strong recovery in the second quarter in China, while its major brands continued to show “good resilience” in an economic retail environment disrupted by the global health crisis. Sales across Europe and the United States have gradually improved since May. The Louis Vuitton maison, for example, has leveraged its digital prowess to strengthen ties with customers and drive sales, the company said. Christian Dior is also showing better resilience and has a new Parisian boutique on rue Saint-Honoré, in addition to new collections unveiled online through a portrait by a Ghanaian artist who inspired the men’s spring-summer 2021 collections, and a Cruise 2021 show held behind closed doors in Lecce, Italy.
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Net Sales: Revenues fell 27 percent to 17.39 billion euros ($20.43 billion) from 25.08 billion euros ($29.46 billion) a year ago.
By business group, fashion and leather goods posted a 23 percent decline in revenue for the half to 7.99 billion euros ($9.39 billion) from 10.43 billion euros ($12.25 billion). Fashion apparel wasn’t LVMH’s worst-performing category, even though apparel sales in general have been down worldwide. Perfumes and cosmetics fell 29 percent in the period, while watches and jewelry slid 38 percent. Selective retail, its travel group, saw declines of 32 percent. Wines and Spirits emerged as the best-performing group in the period, despite a 20 percent sales decline.
Earnings: For the first half, the company saw an 84 percent drop in net profit to 522 million euros ($613.2 million) from 3.27 billion euros ($3.84 billion) in the year-ago period.
In addressing an outlook for 2020, LVMH said it will further strengthen its policy of “controlling costs and being selective in its investments.”
“The impact of the epidemic on revenue and annual results cannot be precisely assessed at this stage without knowing the timetable for the return to normal business in the different areas where the Group operates,” the company said. “After a second quarter severely affected by the crisis, we can hope that the recovery will materialize gradually in the second half.”
The closing date of LVMH’s planned $16.2 billion acquisition of American jeweler Tiffany & Co. “depends on the receipt of final regulatory approvals.”
CEO’s Take: “LVMH showed exceptional resilience to the serious health crisis the world experienced in the first half of 2020. Our Maisons have shown remarkable agility in implementing measures to adapt their costs and accelerate the growth of online sales. While we have observed strong signs of an upturn in activity since June, we remain very vigilant for the rest of the year,” Arnault said.