LVMH celebrated another record year in 2022 as the conglomerate announced total revenue of €79.2 billion, which is a 23 per cent increase compared to 2021. The net profit was up 17 per cent, hitting €14.1 billion for the same comparative period. While the growth for the entire year was in double digits, its fourth-quarter sales only grew by 9 per cent, which is the time since 2020 but still above the consensus forecast of a 6 to 7 per cent rise according to analysts.
The owner of the world’s most luxurious brands, like Louis Vuitton, Dior and Tiffany & Co., cited that despite the ongoing economic and geopolitical challenges, it can “create desire”. But looking at the results more deeply, one would notice that the acceleration LVMH used to have has slowed down over the past quarters. Many of its sales are intrinsically linked to China’s economy and policies. Stringent Covid-19 lockdown and quarantine measures have impacted luxury sales across the brands. This is reflected in the drop in organic revenues in Asia — which fell 8 per cent in the three months to 31 December.
LVMH reported that sales in other key markets like Europe, Japan and North America had “strong growth in business” as international travel resumed. In particular, Europe saw a 22 per cent increase while across the Atlantic, the US only grew by 7 per cent. Jean-Jacques Guiony, chief finance officer of LVMH, explained that the stronger US dollar prompted many buyers to flock to Europe, where they make their purchases.
Across the different groups, CEO and Chairman Bernard Arnault made a point to highlight that its fashion and leather group remained to be the core of its business. Louis Vuitton’s revenue surpassed €20 billion for the first time, while Celine doubled to more than €2 billion under creative director Hedi Slimane’s helm. At Dior, its products continue to be popular among buyers and the fashion show presentations are a source of inspiration for many.
At the watches and jewellery maisons, it saw revenue growth of 18 per cent in 2022 while profit from recurring operations was up 20 per cent. At the forefront is Tiffany & Co., which saw its High Jewellery revenue doubled, and other products like the Lock bracelet collection enjoyed great success in the US. Bvlgari’s High Jewellery and High Watchmaking collection continue to be its main drivers, such as the Serpenti line and the record-breaking Octo Finissimo Ultra. Elsewhere, TAG Heuer’s newly launched Carrera Plasma ushered in a new era of watchmaking with the addition of lab-grown diamonds and Hublot was in the spotlight as the official timekeeper for the prestigious 2022 Football World Cup in Qatar.
Change of Guards
Aside from the spectacular growth, the LVMH group also underwent several shifts in its management level. Long-time CEO of Louis Vuitton Michael Burke has stepped down to take up the advisor role within the group, while Pietro Beccari, CEO of Dior, will be his successor. In turn, Louis Vuitton’s executive president for product Delphine Arnault, the eldest child of Bernard Arnault, will become CEO at Dior.
The changes within the family-owned conglomerate signal a need for continual renewal, which Bernard Arnault explained, “In a large company, as in any human organisation, you have to evolve. I think it’s very bad to keep a form of organisation [that] leads to a spirit of routine.”
Despite this significant shakeup, Bernard Arnault has shot down the rumours of his stepping down as CEO and Chairman. LVMH’s board of directors had agreed to extend the retirement age to 80 years old — in line with France’s new policy.
A Focus in Asia
Based on the financial results, Asia’s share of sales is one of the smallest but the group is recentring its effort into the region. The world’s largest luxury group announced new brand ambassadors to its Maisons over the past months like BTS’ Jimin at Dior Men, Big Bang’s Taeyang at Givenchy, Park Bogum at Celine, NewJeans’ Hyein at Louis Vuitton, and Lee Minho at Fendi.
These appointments tell of LVMH’s new area of focus — Asia. A report by Morgan Stanley estimated that South Koreans’ total spending on luxury goods grew by 24 per cent to US$16.8 billion. The country has outspent major powerhouses like the US and China, making it the largest consumer of luxury goods. It makes sense that the group is investing more resources into the region, with spin-off shows and special showcases to capture a larger market share. Hence, the spade of new Asian ambassadors at the various Maisons is to capitalise on the rise of Asian idols, particularly South Korean celebrities.
However, one would be remiss to ignore the potential that China holds despite not having the highest appetite for luxury consumption. The Middle Kingdom is the world’s second-largest economy, and many sectors depend on this enormous country for growth. It is an open secret that the Chinese economy has been slowing over the past two years, which could partly be due to the strict zero-Covid policies that the government had been enforcing but it has inevitably hurt the economy.
The Chinese government understands the need to revitalise the country so it has lifted the ban on international travel and scrapped the need for quarantine. With travel now possible, businesses like LVMH hope it would help to make up for the falling sales number from the West as soaring inflation and geopolitical challenges dampen consumer sentiments.
“I’m quite confident that the Chinese leaders being very shrewd, they will surely take advantage of the period that is starting to revitalise Chinese growth. If this is the case — and we’ve seen signs of it in January — then we have every reason to be confident, even optimistic, about the Chinese market,” Bernard Arnault shared with analysts at the release of the 2022 financial results.
In addition, international travellers from China will likely choose destinations nearby the country like Singapore, Thailand and South Korea. Therefore, more emphasis would be made in the region to engage with Chinese customers continuously. Countries in the West will likely see international tourists return in the second half of 2023.
“The Group will pursue its brand development focused strategy, underpinned by continued innovation and investment as well as a constant quest for desirability and quality in its products and their distribution,” the press release for the 2022 financial results concluded.
“Driven by the agility of its teams, their entrepreneurial spirit and its well diversified presence across businesses and geographic areas in which its customers are located, LVMH enters 2023 with confidence and once again, sets an objective of reinforcing its global leadership position in luxury goods.”
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