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As Q1 Revenue Falls, LVMH Plays the Waiting Game

Updated April 16, 4:41 p.m. EST.

PARIS – Luxury spending is slowing as aspirational customers tighten their purse strings, but LVMH Moët Hennessy Louis Vuitton has no plans to trim its prices to woo back this once-booming cohort. Instead, it is playing the waiting game.

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The French luxury conglomerate said group sales fell 2 percent at actual exchange rates in the first quarter, signaling an end to several years of post-pandemic euphoria, with consumers in the United States and Europe shrinking back from rising prices.


Revenues totaled 20.69 billion euros in the three months ended March 31 as the normalization of growth rates impacted LVMH’s sales of high-end goods including jewelry and Champagne.

This represented a rise of 3 percent on a like-for-like basis, down from the 10 percent recorded in the fourth quarter, but in line with market expectations.

Organic sales at LVMH’s key fashion and leather goods division were up 2 percent, following a 9 percent increase in the fourth quarter, also matching the consensus forecast from analysts.

The watches and jewelry unit reported a 2 percent decline in like-for-like sales, while the wines and spirits segment saw a 12 percent drop. Bucking the overall trend were perfumes and cosmetics, up 7 percent, and selective retailing, with a revenue rise of 11 percent.

Chief financial officer Jean-Jacques Guiony said the spiraling prices of luxury goods were not in question, indicating that LVMH continued to raise prices for certain products in the first quarter and is willing to sit out the slump.

Neither does its star brand Louis Vuitton intend to court less wealthy customers by upping its share of canvas over leather goods, he told analysts and reporters in a conference call on Tuesday.

“The breadth of the brand, as you know, is quite large and we try to satisfy the various segments of the customer base by offering product at different price segments and in different materials,” Guiony said.

“Frankly, I don’t think the situation of aspirational customers in the Western part of the world is connected in any way with the offer. The question is inflation, which is taking its toll with a particular intensity on this group of customers,” he argued.

“As long as inflation will be a factor for this group of customers, we will not do miracles and basically we expect only a gradual improvement with this population in the coming quarters,” he added.

As prices soar into the thousands, many aspirational shoppers can no longer afford handbags from top designer brands. A Louis Vuitton Speedy 25, for instance, now costs $1,550, versus $1,000 in 2019.

“We had repeated price hikes coming either from currencies, but more importantly from inflation that we had to reflect, and sometimes we anticipated a little bit, taking advantage of the strong demand to avoid doing too much too late,” Guiony explained.

“No doubt that the aspirational customer has to adjust to that new normal,” he continued. “Most of our competitors have been doing the same, so I’m not particularly worried as to the acceptance of the new level of prices from aspirational customers. It’s just that it is going to take time, as we can see on the market, so don’t worry but be patient.”

While the group does not break down performance by label, Guiony indicated that Vuitton performed a little better than the division average, while Dior was “slightly” below. He emphasized that LVMH remains confident in the growth potential of its major fashion brands, with Vuitton, Dior, Celine and Fendi leading the charge.

“The first rank will be Vuitton. It’s by far the largest of the group and it’s on Vuitton that we are counting moving forward to develop the business,” he said.

“This brand has always been able to reach new frontiers in the past and we hope to do exactly the same with Dior, with a different positioning, but the same extraordinary potential moving forward,” Guiony added.

Earlier this year, LVMH chairman and chief executive officer Bernard Arnault sought to put a positive spin on the sector slowdown, but he was clearly banking on less anemic growth rates than the latest figures suggest.

“We have reached a stage where we no longer need such strong growth and for me, between 8 and 10 percent is ideal,” he said at the time, noting that he prefers to focus on the desirability of his brands with exclusive products, rather than chasing higher sales.

LVMH shares have risen by more than 8 percent so far this year, but some analysts have downgraded the stock, noting that sluggish Chinese demand is likely to continue weighing on the luxury sector for the foreseeable future.

In a mixed bag of economic indicators, China reported on Tuesday that its economy grew 5.3 percent in the first quarter, faster than expected, but that March retail sales came in below expectations, suggesting the outlook for consumer spending remains cloudy.

While the situation in China is hogging the headlines, Guiony said inflation was not an issue there, noting that LVMH saw spending by Chinese customers rise 10 percent in the first quarter, though there was a shift to purchasing overseas.

Overall, there is less of a gulf between entry-level and elite clients in Asia, he said.

In fact, LVMH increased its jewelry prices by 4 percent to 6 percent in the first quarter, Guiony said, without providing details. It is understood that Bulgari raised prices in Asia, while Tiffany & Co. implemented a global price increase in early January.

Meanwhile, the fashion and leather goods division raised prices by 2 percent worldwide during the quarter, Guiony said.

By region, LVMH said organic sales were up 2 percent in the U.S. and Europe in the first quarter, while Asia, excluding Japan, registered a 6 percent drop, reflecting a tougher comparison base, and the fact that Chinese consumers are buying more when they travel.

“We are totally agnostic as to where the business with mainlanders takes place, whether it is in China, whether it is elsewhere in Asia, or whether it is outside Asia,” Guiony demurred.

One beneficiary of this trend is Japan, where revenues jumped 32 percent as tourists took advantage of the weak yen, despite a series of price increases designed to level out price differentials.

Signaling that there is pent-up demand among aspirational consumers, Sephora posted “excellent” sales growth in North America, Europe and the Middle East in the first quarter. Asked to share the beauty retailer’s “secret sauce,” Guiony highlighted its merchandising prowess.

“Sephora is not just engaging into a transactional relationship with its customers. It is also a place where people discover, try and do other things than they would do in a traditional store,” he said, noting that it’s no accident that Artemis Patrick, the new CEO of Sephora North America, has a merchandising background.

It’s one of several key executive appointments at LVMH as Arnault, 75, sharpens his succession plan.

Toni Belloni, one of his most trusted lieutenants, will step down as group managing director and chairman of the executive committee following LVMH’s annual general meeting on Thursday. He will be succeeded by Stéphane Bianchi, a relative newcomer to the company who was previously in charges of its watches and jewelry division.

Meanwhile, group veteran Michael Burke has succeeded Sidney Toledano, 72, as head of LVMH Fashion Group. Toledano left the executive committee and became an adviser to Arnault in the handover, which took effect on Feb. 1.

At Thursday’s meeting, shareholders are also expected to approve the appointments of Arnault’s sons Alexandre and Frédéric to the board.

Alexandre Arnault, executive vice president of product and communications at U.S. jeweler Tiffany & Co., and Frédéric Arnault, CEO of LVMH Watches, will join their siblings Antoine Arnault, head of communication, image and environment at LVMH, and Delphine Arnault, chairman and CEO of Christian Dior Couture, on the board.

That leaves the youngest sibling, Jean Arnault, who is in his mid-20s and is marketing and product development director for watches at Louis Vuitton. “He’s got time, he’s young,” his father commented at a press conference in January where he announced the nominations.

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