Many companies worldwide have welcomed the reopening of China’s economy in the post-pandemic era. In particular, the luxury sector, which had suffered from muted growth in 2022, is finally reaping the effects of a resurgence in spending from the Chinese. As one of the first luxury groups to share its Q1 results, LVMH reported a 17 per cent growth in organic revenue compared to the same period in 2022. Over the past three months ending 31 March, the conglomerate totalled €21 billion in global sales.
LVMH, the parent company of major luxury brands like Louis Vuitton, Dior, and Tiffany & Co., saw most of its business groups record double-digit organic revenue growth. Its Selective Retailing sector, which comprises Sephora and DFS, saw the most significant increase at 30 per cent (€3.9 billion). Trailing behind is the Fashion & Leather Goods sector at 18 per cent growth (€10.7 billion), followed by Perfumes & Cosmetics and Watches & Jewellery which both grew by 11 per cent. However, its Wines & Spirits sector only saw a marginal growth of 3 per cent, which the group cited “softer economic environment” as the prevailing cause of the slowed growth.
Looking at LVMH’s Q1 financial results, it can be seen that while sales have grown across the geographical regions, consumer demands are plateauing in key markets like the US and Europe. The strong post-pandemic buying spree that has helped to keep sales buoyed at European labels such as Louis Vuitton, Dior, Chanel and Hermès are starting to see more restrained spending due to rising inflation rates. The money saved during the pandemic had also been used up, and the unfavourable economic conditions only added to the reluctance to spend.
Revisiting the financial result for 2022, LVMH reported that the US market saw a 15 per cent growth and the region accounted for 27 per cent of the group’s overall revenue. In contrast, Q1 2023 results showed that the US only grew by 8 per cent for the first three months.
Chief Financial Officer Jean-Jacques Guiony shared his views on the region in the following statement: “The business is slowing down a bit due to a bigger share of the business taking place outside of the US, but also due to the fact that the local business seems to be slowing down. Nothing to write home about but nevertheless, what we’ve seen both in jewellery and in fashion and leather is a little bit of a slowdown throughout the quarter. It’s difficult to draw any perspective for the rest of the year. For the time being, it’s perfectly manageable and we still keep a good level of business.”
While over in Asia, the region saw sales grow by 14 per cent in the first quarter of 2023. Chief Financial Officer Jean-Jacques Guiony said in the earnings call that the company was “extremely optimistic” about the region which China accounts for almost 80 per cent of sales. The numbers reported for the first three months, he added, “bodes well for the rest of the year”. The lifting of health restrictions and travel has helped the region to rebound. Japan, an important market in the Asia Pacific region, saw strong momentum where it grew 34 per cent.
One should also note that the growth in Asia, supported mainly by China, is only starting to show as it emerges from the shadows of Covid-19. The growth potential is yet to be seen. LVMH understands the importance of this crucial market and has been allocating more resources to make its brands known to the people. At the recent Paris Fashion Week, famous celebrities from the region were invited to the show such as Chinese singer Liu Yuxin, Chinese actress Liu Yifei, South Korean K-pop idol Cha Eunwoo from Astro and BTS’ Jimin. New store openings and pop-ups have started to spring up in major cities like Tokyo, Seoul, Shanghai and Singapore. The group has planted the seeds and is waiting to reap the benefits in the coming future, and looking at the trajectory of growth, Asia will likely take up a bigger pie of the global sales for the group.
At the individual sector level, its Fashion & Leather Goods business unit helped the group earn €10.7 billion. The group highlighted exceptional performance at its biggest brand, Louis Vuitton, where it is “driven by creativity and iconic products”. Since the start of the year, its collaboration with Japanese artist Yayoi Kusama has been popular with customers and further drives home the brand’s proposition as a “cultural maison”. Another major update at Louis Vuitton is the appointment of Pharrell Williams as the artistic director for menswear. At Dior, the brand continues to show exceptional success across its product categories. Strong demand for RTW collections by Maria Grazia Chiuri and Kim Jones is observed. The spectacular Fall 2023 show in Mumbai underscored the brand’s commitment to showcasing its skilled metiers and craftspeople. Over at its other brands, Celine’s popularity reigns with the strong appointment of ambassadors like BTS’ V. The rise of “quiet luxury” has boosted search enquiries and sales for Loro Piana as people look towards fashion styles that are understated and are not logo-driven.
First quarter results of its Watches & Jewellery unit saw an 11 per cent increase to €2.5 billion. Brands such as Tiffany & Co. had a great start to the year, and it is looking forward to the reopening of its flagship on Fifth Avenue, New York, later this month, which the group said contributed 10 per cent of the brand’s global sales before its closing. At Bulgari, the brand celebrated the 75th anniversary of its Serpenti collection with an exhibition at the Museum of Contemporary Art Shanghai. Its watch maisons like TAG Heuer, Hublot and Zenith all had a great showing at the Watches and Wonders Geneva 2023 last month.
The Perfumes & Cosmetics business group maintained its strategy of selective distribution, resulting in an 11 per cent increase in revenue during the first quarter of 2023. Dior performed exceptionally well and further solidified its leading position with significant growth in its iconic fragrances such as Sauvage, Miss Dior, and J’Adore. The maison’s makeup and skincare segments also contributed to its success. Guerlain saw positive results from its Aqua Allegoria line, L’Art & La Matière collection, and introduced a new liquid foundation to its renowned Terracotta collection. Parfums Givenchy unveiled its latest fragrance, Gentleman Society. Fenty Beauty benefited from increased visibility through Rihanna’s promotion during the American Super Bowl.
In its concluding statement, the group said that despite the uncertainties around the global economy and geopolitics, LVMH is steadfast in developing its brands, driven by a sustained policy of innovation and investment and the quest for high-quality, desirable products.
” LVMH remains both vigilant and confident at the start of the year,” the company said, providing no specific forecast other than to “further strengthen its global leadership position in luxury goods in 2023.”
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