LVMH Proclaims ‘Excellent’ Start to 2023 as Q1 Sales Rise 17%
A solid rebound in Chinese demand, decent progress in the U.S. and almost inexplicable buoyancy in Japan has bolstered confidence at LVMH Moët Hennessy Louis Vuitton.
On Wednesday, the French luxury giant trumpeted an “excellent start” to 2023, reporting revenues in the first quarter jumped 17 percent thanks to robust demand for leather goods, and sharp increases at Sephora and DFS.
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Revenues at the world’s largest luxury conglomerate totaled 21.04 billion euros for the three months ended March 31, despite “a geopolitical and economic environment which remains uncertain.”
The numbers mark an acceleration from the fourth quarter, when sales gained 15 percent, but came in a shade down from the 19 percent logged in the third quarter of 2022.
All business divisions except wines and spirits recorded double-digit gains in first quarter, with LVMH citing “strong growth momentum” in Europe and Japan thanks to both local customers and international travelers, and a “steady performance” in the U.S., which continues to grow.
“Asia experienced a significant rebound following the lifting of health restrictions,” the company noted in a statement issued after the close of trading on the Paris Bourse. The company had been banking on a recovery in China following President Xi Jinping’s decision to reverse strict COVID-19 restrictions.
“We registered some pretty nice pick-up in China, which bodes well for the rest of the year,” Jean-Jacques Guiony, chief financial officer of LVMH, told a video conference. “So we’re really back to where we were prior to the complicated period of 2022.”
Only cosmetics remain “a little under pressure in mainland China,” he said, citing sustained interest in fashion, leather goods and jewelry especially.
Overall revenues in the fashion and leather goods division, headlined by its star mega-brands Louis Vuitton and Christian Dior, rose 18 percent. Celine, Loewe, Loro Piana, Rimowa and Berluti also received shoutouts for “remarkable” performances.
Barclays had forecast 11 percent growth for the fashion and leather goods division, and HSBC a 15 percent bump in overall LVMH totals.
By region, Japan improved 34 percent in the quarter; Europe, 24 percent; Asia excluding Japan, 14 percent, and the U.S., 8 percent.
The company noted growth is “normalizing” in Europe versus 2022, while U.S. business was described as “good but softer.”
“LVMH is making the most of sustained European and American demand growth, while reaping the benefit of a rapid and strong rebound in Chinese spend,” Bernstein analyst Luca Solca said in a research note.
During the video conference, Guiony was quizzed mainly about prospects for China and the U.S., with the latter market sending off mixed signals in the first quarter. The executive noted a slowdown throughout the quarter for fashion, leather goods and jewelry, while acknowledging healthy business in watches, jewelry, cosmetics and Champagne. Its cognac business is also off in America, due partly to hefty price increases last year and high inventory levels.
“I’m not worried at all,” Guiony commented, noting that the “cognac business is cyclical in the U.S.” and dismissing suggestions that trendy tequila might be the culprit. “It will take three to four months to absorb the excess inventory.”
The executive reminded one analyst that back in September, everyone was expecting 2023 to be a “horrendous year” for luxury in the U.S., which has not come to pass so far. “It’s normalizing, but it’s not bad either,” he concluded. “It’s very difficult to make predictions.”
Asked about the impressive numbers in Japan, Guiony cited “a little bit of growth from tourists” and a “domestic consumer who is still shopping a lot,” confident about the economy and unworried about inflation.
He apologized for not offering a deeper and more thorough explanation, demurring: “I’d rather have good business that I can’t explain than the other way around. We really enjoy these exceptional numbers, which are a great tribute to the quality of the business that our people are doing in Japan.”
Revenues jumped 28 percent in organic terms in selective retailing, headlined by the “exceptional performance” of beauty chain Sephora, particularly in North America, Europe and the Middle East.
Sephora’s first store in London, located in the Westfield shopping center, opened last month and “enjoyed an excellent start,” LVMH said.
Meanwhile, duty-free operator DFS “benefited from the recovery of international travel, and in particular from the gradual return of travelers to the flagship destinations of Hong Kong and Macau.” Guiony suggested the retailer could return to breakeven after a difficult 2022 marred by widespread pandemic-related lockdowns.
First-quarter intake from watches and jewelry grew 11 percent, with LVMH flagging a “very good performance” for high jewelry, “remarkable” progress for Chaumet, an “excellent” start of the year for Tiffany & Co., and “excellent progress” at its watchmaking maisons, which include Tag Heuer, Hublot and Zenith.
“Jewelry is doing a bit better than watches,” Guiony commented.
Perfumes and cosmetics logged a 10 percent improvement in organic revenue growth, with LVMH noting that “Fenty Beauty benefited from the strong visibility given to the brand by Rihanna during the Super Bowl.”
The singer whipped out a compact to touch up her makeup in the middle of her set, winning the Fenty brand strong visibility and online buzz.
“Makeup is doing well, but fragrances are doing even better and the skin care business if flattish,” he noted.
High stock levels of cognac held back revenue gains in the wines and spirits division to 3 percent, with LVMH touting good growth for its Champagne, wine, whiskey and vodka brands. Overall, Champagne and wines gained 14 percent, while cognac and spirits fell 5 percent.
”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.”
Rival French luxury conglomerate Kering, parent of Gucci, Saint Laurent and other brands, is scheduled to report its first-quarter tallies on April 25, while Hermès International reveals its on Friday.
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