Double-digit growth in the U.S. and Asia continued to fuel third-quarter gains at LVMH Moët Hennessy Louis Vuitton, whose European manufacturing base has largely staved off supply-chain disruption.
In a Nutshell: CFO Jean-Jacques Guiony said the company doesn’t expect any supply chain issues other than rising shipping costs. “We are faced with the rising costs of shipping, which is a fact of life,” he told analysts on a conference call, pointing out that LVMH has the margins to absorb the increases.
The most recent global price increases came in March or April of 2020, Guiony added.
LVMH said the fashion and leather goods business group recorded organic growth of 38 percent for the third quarter, the same percentage it reached for the first six months of the year as the U.S. and Asia continued to post double-digit growth. For the nine-month period, the business group recorded organic revenue growth of 57 percent.
“Growth in the third quarter of 2021 remained exceptional compared to the third quarter of 2020, which marked a return to growth after a declining first half of 2020,” LVMH said.
The Louis Vuitton brand is celebrating its 200th anniversary, with innovation and quality powering its recent performance. Christian Dior has also shown momentum in the quarter, LVMH said.
And at Fendi, Kim Jones’ inaugural collection “successfully rolled out in stores.” Celine brand reported strong growth in its ready-to-wear and leather goods lines created by Hedi Slimane. Loewe and Marc Jacobs brands also performed well.
The company’s other categories—wines and spirits, perfumes and cosmetics, selective retailer and watches and jewelry—all also saw gains in the third quarter. In watches jewelry, the company said Tiffany enjoyed “remarkable performance, particularly in its major market the U.S.” Tiffany wasn’t consolidated into the company’s operations until this year. And in selective retail, LVMH’s Sephora business expanded its U.S. distribution through the opening of shop-in-shops at Kohl’s department stores. Two hundred Sephora departments in Kohl’s were planned for this year, with another 400 to open in 2022.
“We continue to see strong revenue growth in Asia and the US, and the start of a promising gradual recovery in Europe,” said Christopher Hollis, director of financial communications.
According to a company presentation, Asia represents 36 percent of total revenue, comprising LVMH’s largest market, with the U.S. No. 2 second at 25 percent, followed by Europe at 15 percent. Japan represents 7 percent of total revenue, while France is 6 percent. The balance of 11 percent is from other markets.
“We continue to believe Chinese luxury demand remains solid and the sequential slowdown in Asia is largely attributable to Covid-related lockdowns. Supply chain risk should be minimal, but we monitor rising freight costs. We expect robust consumer demand for Louis Vuitton and Dior, especially around the holiday season,” Oliver Chen, luxury and retail analyst at Cowen & Co., said. He noted that while there was a sequential slowdown in Asian sales, that was mostly due to volatility in August due to Covid-related restrictions.
While LVMH is relatively immune from manufacturing supply pressure because most goods are sourced and manufactured in Europe, rising freight costs could be a future issue and “we expect management to lean into pricing if cost pressure persist longer than expected,” Chen said.
Net Sales: Revenues for the third quarter ended Sept. 30 rose 30 percent to 15.51 billion euros ($17.89 billion) from 11.96 billion euros ($13.79 billion).
In the fashion and leather goods category, revenue rose 25 percent to $7.45 billion euros ($8.59 billion) from $5.95 billion euros ($6.86 billion). The company said organic growth in the sector rose 24 percent in the quarter from last year and was up 38 percent from the same 2019 quarter.
For the nine months, overall revenue for the group grew 46 percent to 44.18 billion euros ($50.94 billion) from 30.35 billion euros ($34.99 billion).
In the fashion and leather goods category for the nine months, revenue rose 53 percent to 21.32 billion euros ($24.58 billion) from 13.93 billion euros ($16.07 billion).
Net Income: The company didn’t provide third quarter earnings.
Company’s Take: “LVMH is counting on the dynamic nature of its brands and the talent of its teams to further strengthen its global leadership position in luxury goods once again in 2021,” LVMH said.