LVMH Moët Hennessy Louis Vuitton is positioned for a strong year after posting a 32 percent jump in first-quarter revenue.
In a Nutshell: The luxury conglomerate said its fashion and leather goods division had an excellent start to the new fiscal year, achieving organic revenue growth of 52 percent in the first quarter of 2021, versus the same year-ago period and a 37 percent increase compared with the same 2019 period.
Helping the quarter was the watches and jewelry group, which saw organic revenue growth of 35 percent in the quarter, when LVMH integrated jewelry titan Tiffany & Co. Also growing on the fashion front was organic revenue from LVMH’s Perfumes and cosmetics group, which posted an 18 percent increase in the quarter. The wines and spirits group saw organic revenue rise 36 percent from last year, and a 17 percent gain from the 2019 reporting period.
In short, every business group saw first quarter increases except for the selective retailing division, which reported an organic revenue decline of 5 percent. That’s not a surprise given the impact of store closures across Europe for its Sephora business. and the DFS operation continues to experience a “significant decline” in activity because of continued restrictions on international travel. Online sales at Sephora have helped offset the decline.
“In a context that remains turbulent, LVMH is well-equipped to build upon the hoped-for recovery in 2021 and regain growth momentum for all its businesses,” the company said on Tuesday.
LVMH said the quarter’s results marked a “return to growth” after several quarters of decline last year because of the coronavirus pandemic. Organic revenue grew 8 percent compared with the first quarter of 2019.
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By geographic region, LVMH said the U.S. and Asia enjoyed strong growth in the quarter, while Europe remains impacted by the pandemic due to store closures across several countries and the suspension of tourism.
Net Sales: Total revenues rose 32 percent to 13.96 billion euros ($16.71 billion), and up 30 percent on an organic basis.
By business group, fashion and leather revenue rose 45 percent to 6.74 billion ($8.07 billion) euros, and up 52 percent on an organic basis. The company said its Louis Vuitton Capucines bag was showcased, along with several new innovations, during runway shows in the quarter, while in Japan, Louis Vuitton reopened its flagship store in the Ginza district of Tokyo after extensive renovations. Christian Dior also saw an “excellent start to the year,” buoyed by the continued success of the Lady Dior bag and response to new ready-to-wear collections. “Celine had great success with the creations of Hedi Slimane. Loewe continued its very successful expansion of the lines created by J.W. Anderson,” LVMH said.
Watches and jewelry revenue was up 138 percent to 1.88 billion euros ($2.25 billion), and increased 35 percent on an organic basis. Perfumes and cosmetics saw revenue rise 12 percent to 1.55 billion euros ($1.86 billion), or up 18 percent on an organic basis. Wines and spirits revenue increased 29 percent to 1.51 billion ($1.81 billion), or up 36 percent on an organic basis. Selective retailing saw sales fall 11 percent to 2.34 billion euros ($2.80 billion), or down 5 percent on an organic basis.
Dana Telsey, chief investment officer at Telsey Advisory Group, has an “Outperform” rating on shares of LVMH. “Longer term, we continue to view the company’s exposure to an array of consumer verticals (soft goods, spirits, and beauty to name a few) as a competitive advantage as it is not over-reliant on the hard luxury category, and we see the [Tiffany] acquisition as a rare opportunity to add a true heritage brand at a reasonable valuation,” she wrote in a research note.
Cowen & Co.’s Oliver Chen also has an “Outperform” rating on shares of LVMH stock. “LVMH remains our Best Europe Idea in luxury and strong [first quarter 2021] results reaffirm our conviction in the stock. LV and Dior’s strong momentum continues to drive share gains in an attractive luxury industry and these brands’ strong pricing power should continue to support above industry growth,” he said, also in a research note. “LVMH saw sales declines in Europe with the impact of store closures, but we believe store closures will likely translate to higher online luxury sales growth.”
Company’s Take: “The Group will continue to pursue its strategy focused on the development of its brands, driven by strong innovation and investment as well as by a constant quest for quality in their products and their distribution. LVMH relies on the talent and motivation of its teams, the diversification of its businesses and the geographical balance of its revenue to further strengthen its global leadership position in luxury goods in 2021,” LVMH said in a statement.