LVMH sales rocket as Chinese consumers go on a spending spree
LVMH sales soared as Chinese shoppers bounced back from the world’s strictest lockdowns and splashed out on luxury handbags and jewellery. The share price hit a record high.
Organic sales at the group’s biggest unit, which sells fashion and leather goods, rose 18% in the first quarter, LVMH said late on Wednesday. That is 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, CFO 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.” But he said LVMH is seeing a slowdown in US growth, with cognac demand and sales of leather goods particularly affected.
“There’s a lot to like in these results despite the US,” said Stifel analyst Rogerio Fujimori, calling the quarter’s performance a “strong start to the year”.
LVMH rose as much as 3.7% to a record in early Paris trading, lifting the Louis Vuitton owner’s market value to about €433bn.
The share price has climbed by more than a quarter this year after the slump in Chinese demand receded and the mainland moved towards living with the coronavirus.
Demand grew in every region in the first three months as shoppers snapped up luxury items, from Christian Dior handbags to Tiffany rings.
Japan saw the strongest quarterly growth, leaping 34% on an organic basis, followed by surges of 24% in Europe and 14% in Asia outside Japan.
Although US demand grew 8%, Guiony said LVMH had seen a “little bit of slowdown” there for its fashion and leather goods, as well as for jewellery and watches.
More notably, demand for its Hennessy cognac was affected severely as consumers pushed back against price increases, Guiony said.
The drinks maker led those hikes following rising input costs for the glass used in the bottles, he said. Guiony described the cognac market in the US as historically “cyclical”.
Commenting on the outlook for product price increases, Guiony said that fewer hikes are likely this year.
“Clearly China is booming, and we don’t expect that to fade away any time soon,” said Aurelie Husson-Dumoutier, an analyst at HSBC, in an interview with Bloomberg TV. “If the US consumer doesn’t bounce back very strongly, we still have very, very strong prospects from Europe, which has been stronger for longer, and also China.”
LVMH will reach a milestone when Tiffany’s flagship store in New York City reopens at the end of April. This shop contributed almost 10% of total Tiffany sales under the previous owners, Guiony told analysts. Its reopening should have a “positive impact” on sales while also benefiting the overall branding and marketing efforts of the US jeweller, he said.
The French luxury conglomerate said its selective retailing unit, which includes Sephora, grew 28%, the strongest overall rate among all the divisions.
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, will report its quarterly sales on Friday.
LVMH’s founder Bernard Arnault’s fortune topped the symbolic $200bn mark last week. On Thursday, it stood at $198bn, according to the Bloomberg Billionaires index, meaning he is still the world’s wealthiest person.