LVMH sales soared as Chinese shoppers bounced back from the world’s strictest lockdowns and splashed out on luxury items.
(Bloomberg) — LVMH sales soared as Chinese shoppers bounced back from the world’s strictest lockdowns and splashed out on luxury items.
Organic sales at the group’s biggest unit, which sells fashion and leather goods, rose 18% in the first quarter, LVMH said in a statement Wednesday. That’s almost twice the gain that analysts were expecting from Europe’s most valuable company.
The division’s growth in China came in at a double-digit percentage, LVMH Chief Financial Officer Jean-Jacques Guiony told analysts on a call.
LVMH is “extremely optimistic” for China in 2023, Guiony said. “Numbers in the first quarter bode well for the rest of the year” there.
Shares of LVMH have rebounded by more than 20% so far this year after the slump in Chinese demand began to recede and the mainland moved toward living with the coronavirus. Asia, excluding Japan, represented 30% of sales in 2022, compared with 35% in the previous year — demonstrating just how much strict measures to fight Covid weighed on demand for Christian Dior handbags and Tiffany rings.
Demand is surging again in every region. Geographically, Japan saw the strongest quarterly growth in the first quarter, rising 34% on an organic basis, followed by a 24% uplift in Europe and a 14% jump in Asia outside Japan. Although the US grew 8%, Guiony said LVMH had seen a “little bit of slowdown” there for its fashion and leather goods, as well as jewelry and watches. “For the time being, it’s perfectly manageable,” he said.
LVMH will have a major milestone when Tiffany’s flagship store in New York City reopens at the end of this month. This shop contributed almost 10% of total Tiffany sales before LVMH took over the brand two years ago, Guiony told analysts. Its reopening should have a “positive impact” on sales while also benefiting the overall branding and marketing efforts of the US jeweler, he added.
The French luxury conglomerate said its selective retailing unit, which includes Sephora, grew 28%, the strongest overall growth rate among all the divisions.
What Bloomberg Intelligence Says
“LVMH’s 1Q organic-sales growth of 17% — almost double the pace of consensus (9%) — is a solid start to the year, that’s likely to be an early driver for full-year analyst upgrades into the low-teens range. Success at the company’s biggest division, Fashion & Leather, underpins solid margin headway. Progress at the No. 2 unit, Selective Retail, confirms the international-travel recovery.”
— Deborah Aitken, consumer-products analyst
LVMH Upgrades Likely on 17% Organic Gain, Double Street’s: React
LVMH will only do product price increases this year that Guiony described as “tactical,” after having proceeded with significant increases last year across the group. He acknowledged that Hennessy cognac sales in the US took a hit in the quarter likely due to price rises that consumers rejected. He also described the cognac market there as being “cyclical” historically.
Paris-based LVMH is the first luxury-goods maker to publish first-quarter sales and is generally considered a bellwether for the rest of the industry. Hermès International, the Kelly bag maker, reports quarterly sales April 14.
LVMH’s multibillionaire founder, Bernard Arnault, saw his fortune cross the symbolic $200 billion threshold last week. On Wednesday, it stood at $198 billion, according to the Bloomberg Billionaires Index, making Arnault the world’s wealthiest person.
Read More: Bernard Arnault’s Fortune Soars Past $200 Billion for First Time
(Updates with CFO comments starting in third paragraph.)
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