LVMH third-quarter revenue grows 19% driven by US, Japan and Europe – WWD

PARIS — The third quarter went well for LVMH Moët Hennessy Louis Vuitton despite growing concerns about a global recession.

“I learned that in economics, when things are announced in advance, they generally do not happen because economic agents take measures to avoid them,” Jean-Jacques Guiony, chief financial officer, told analysts. of LVMH, during a conference call on Tuesday. .

The luxury conglomerate said on Tuesday that its “growth continues unabated.” Revenues climbed 19% in the third quarter, with Europe, the United States and Japan benefiting from a combination of strong local demand and the return of foreign visitors.

The group’s sales in Asia also showed “significant improvement”, helped by the partial lifting of COVID-19 restrictions.

Total revenue in the three months to September 30 totaled 19.76 billion euros, significantly exceeding the Bloomberg consensus estimate of 18.83 billion euros. This represents a 19% increase on a comparable basis compared to the same period last year.

For the third quarter, LVMH recorded double-digit organic growth in all its divisions.

In its key fashion and leather goods division, organic sales rose 22% in the period, beating the consensus forecast of 16.2%.

Sales of watches and jewelry rose 16%, against a consensus of 14.3%, as Asia recovered in the third quarter, thanks to the improving pandemic situation in China.

Fragrances and cosmetics also beat the consensus, posting a 10% increase. Meanwhile, the selective retailing division, which recorded 15% growth, fell short of analysts’ forecasts.

Reporting its third quarter results after the Paris Stock Exchange closed, LVMH said its sales for the first nine months of 2022 amounted to 56.5 billion euros, a jump of 28% year-on-year.

Growth was driven by the fashion and leather goods division, which rose 24% to 27.82 billion euros organically, with Louis Vuitton and Christian Dior Couture continuing to shine, and Céline and Loewe experiencing “very strong growth”. . Loro Piana also maintained “good momentum”.

Dior was singled out for its exceptional growth in all product categories, with an “excellent performance” in its leather goods and ready-to-wear as well as the “continued success” of creations such as the Lady Dior bag.

Watches and Jewelry grew 16% organically, driven by Bulgari’s jewelry-led growth; and the “strong momentum” of Tiffany & Co. in the United States, where its Lock collection got off to a “solid start”, although analysts asked Guiony about a perceived slowdown at Tiffany.

The executive reiterated that the US jeweler’s growth was still in double digits and while he admitted that it had slowed from the buoyant previous quarters, its overall performance in organic terms was “still very satisfactory”.

He described the group as “extremely pleased” with how Tiffany’s business has responded to the changes enacted since the 2021 acquisition and that its performance was “still well above what [LVMH] had in mind” following its purchase.

The strong performance of the watches made him say it was “a category well suited to an inflationary environment,” but he could not identify a root cause. “I’d rather have good numbers that I can’t fully explain than the other way around,” joked Guiony.

Selective distribution jumped 20% in the first nine months of the year. Sephora achieved an “excellent performance”, with a strong rebound in activity in its stores. Meanwhile, its travel retail counterpart DFS continued to suffer from lingering difficulties due to the persistence of health restrictions in Asia.

Across all geographies, the group described “a balanced mix of revenues globally”, although Asia’s share fell to 32% from 36% in the same nine-month period in 2021, Europe and the United States benefiting from this reshuffle.

There were a plethora of questions surrounding China, ranging from growing its consumer base to duty-free strategy, particularly in Hainan when the country reopens to international travel.

Overall, the executive cautioned against talking about a recovery in China, stressing that “things are better than in the second quarter”, but “they are not back to normal” while the blockages and supply chain disruptions continue.

As for duty free, while there are “important deals to be done” in Hainan, the question was “non-starting” because LVMH would not move “at the expense of [its] business philosophy, which is to control the business [it does] in [its] own retail stores,” Guiony pointed out, noting that pay-as-you-go stand-alone shops on the island were an option.

Asked about the evolution of digital retail as consumers return to stores, Guiony said that excluding mainland China where the pandemic continues to impact operations, business was returning to brick and mortar, with the growth rate of digital slowing.

“But don’t get me wrong, digital is still seeing double-digit growth,” the executive said, citing its 13% share of total sales, up from 14% last year.

The prices also had analysts questioning Guiony about the group’s plans – particularly at Louis Vuitton and Dior – both in the context of a possible recession and in light of the continued strength of the dollar.

This led Guiony to comment that “it seems like pricing power is the kind of godsend that comes from the sky” with the haves and have-nots among the brands, recalling that both houses now enjoyed a desirability cultivated by “marketing, product and distribution strategies” – plus long periods of time.

Raising prices in Europe because U.S. consumers flock to reap the benefits of a strong dollar was not on the table right now, Guiony said, noting that “currencies would be a tailwind this year and next year” in all sectors of activity. The currency impact for the third quarter increased from 8% to 10% in the third quarter.

Overall, “luxury is not a proxy for the general economy,” Guiony reminded, noting that affluent consumer behavior was more sensitive to real estate or stock market shocks than NGDP fluctuations “at this point.” .

Although the sector is not immune to shocks or recession – Guiony noted that the latter “has not yet fully materialized…if it ever does” – “the most important point [was] that unlike some industries, [luxury businesses] have the ability to pass [increased costs of doing business] to customers,” he said.

For the moment and like its competitors, the luxury group is facing “a certain pressure on prices” but, according to Guiony, “nothing unpleasant”.

Bernstein’s Luca Solca later commented in a note analyzing LVMH’s results that “high-end consumers have yet to feel the impact of higher inflation and weaker macro-economic growth – the relief of emerging alive from the pandemic has outweighed any bad news, as consumers who may adopt a “carpe diem” attitude: no one wants to be the richest person in the graveyard.

For the last quarter of 2022, the luxury juggernaut expressed confidence that its current growth trend will continue, despite the uncertain economic and geopolitical context.

Kering and Hermès International are due to publish their third quarter results on October 20. At the same time, Compagnie Financière Richemont will publish its first-half results on 11 November.

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