French luxury firm LVMH Moët Hennessy Louis Vuitton felt the sting of the coronavirus outbreak in Q1, when the company said revenue tumbled 15 percent.
In a Nutshell: Hoping to gradually restore its global network of flagships and boutiques in May or June, LVMH emphasized it has proven its ability to be “resilient in an economic environment disrupted by a health crisis that has led to the closure of stores and manufacturing sites in most countries in recent weeks, as well as the suspension of international travel.”
Manufacturing and store closures during the first half will impact annual revenue and results, said LVMH, which is thinking about the eventual return of in-store shopping.
“We can only hope that the recovery happens gradually from May or June after a second quarter which will still be very affected by the crisis,” particularly in Europe and the U.S.,” the company said.
LVMH said it has been able to unify its many corporate divisions to combat COVID-19. That includes initiatives by its different maisons, or fashion houses, to support health authorities and medical staff, such as shifting production to making gel for hand sanitizers or medical masks.
“The health and safety of our employees and customers must remain our top priority. On a global scale, the group works closely with the teams of each of our Maisons to provide them with all the resources they need. Thanks to everyone’s commitment and the strength of its brands, the LVMH group maintains good resilience in the face of this worldwide challenge,” chairman and CEO Bernard Arnault said.
LVMH remains focused on preserving the value of its brands, based on the “exceptional quality of its products and the responsiveness of its teams.” It said the efforts will continue to include controlling costs and ensuring teams remain responsive to changing needs and market conditions.
LVMH said it plans to propose a 30 percent reduction of the dividend to 4.80 euros ($5.21) a share for shareholder approval at its June 30 annual shareholders meeting. Arnault and each of the executive board members have elected to give up their pay for the months of April and May, in addition to their variable compensation for 2020, the company. In addition, board members agreed to reduce their attendance fees by 30 percent for 2020.
The company didn’t say anything about its planned acquisition of Tiffany & Co., or whether that might see a delay in the close of the deal.
Last week, LVMH walked back plans to furlough some staff and take advantage of the French government’s coronavirus assistance scheme that would support laid-off workers, the Financial Times reported. LVMH’s attempt to shed employees onto the government’s coffers sparked immediate controversy, given Arnault’s status as the nation’s richest person and the company’s 2019 revenues of more than $58.5 billion.
Net Sales: For the quarter ended March 31, LVMH said revenues fell 15 percent to 10.60 billion euros ($11.49 billion).
In fashion and accessories, the fashion and leather goods business group saw sales fall 9 percent to 4.64 billion euros ($5.03 billion). That wasn’t as bad as sales of watches and jewelry, which dropped 24 percent to 792 million euros ($858.8 million). The sector was impacted by store closures around the world as the coronavirus spread across borders. One plus that counteracted the retail chill was the increase in online sales, which LVMH said saw “rapid growth.” The Louis Vuitton and Christian Dior fashion houses were cited as brands that “continued to show creative momentum.”
Results in the fashion and leather goods business were better than LVMH’s wines and spirits operation, which declined 13 percent to 1.18 billion euros ($1.28 billion). In selective retailing, which includes its DFS operation, sales fell 25 percent to 2.63 billion euros ($2.85 billion) as its Sephora beauty concept were shuttered in China for a major part of the quarter and duty-free shops saw declines in activity as travel bans keep fliers out of airports.
The company did not provide any earnings for the quarter.
CEO’s Take: “For several weeks, our teams have once again demonstrated that excellence, creativity and responsiveness will allow us not only to overcome this crisis but, above all, to emerge even stronger when it fades,” Arnault said.