3 minutes
LVMH rebounds in Asia and remains stable in the US in the first quarter
LVMH continues its run into 2023 with sales of 21.03 billion euros in the first quarter. The luxury giant recorded an organic increase of 17%, similar to the organic growth of 2022, whereas in the fourth quarter of 2022, it had only grown by 9%. Over the period, its sales were driven mainly by the fashion and leather goods division (+18% to 10.7 billion) and selective distribution (Sephora, etc.), which soared by 30% (+28% on a like-for-like basis) to 3.9 billion, thanks to the strong rebound in China and the rest of Asia, while sales in the United States continued to remain stable.
"Asia is experiencing a significant rebound following the lifting of health restrictions," the group noted in a statement. With the lifting of anti-Covid measures at the end of the year, China is in fact showing the beginnings of normalisation, which over the first three months has benefited the LVMH fashion and leather goods division in particular. The group's sales in Asia (excluding Japan) increased by 14% between January and March 2023 compared to the same period a year earlier, representing 36% of its total revenues. By the fourth quarter of 2022, sales in this region had fallen by 8%, remaining flat for the year as a whole.
In a conference call with analysts, CEO Jean-Jacques Guiony welcomed the significant recovery in China, which he described as "a good omen for the rest of the year". The observation is that a return to normalcy is taking place with the return of customers to the shops. The group's managers are optimistic about strong sales growth in China for 2023. In particular for fashion & leather goods and jewellery, while the beauty sector remains under pressure in this country, affected by the activity of a parallel market with cosmetics sold at much lower prices.
"The end of compulsory quarantines for travellers in China has allowed the return of domestic tourists, increasing traffic in DFS shops in Hong Kong and Macau," points out Louise Deglise-Favre, analyst for GlobalData. Spending in these destinations has increased more strongly, but their contribution remains much lower than spending in mainland China, Bernstein said.
Beyond China, South Korea continues to grow with strong demand for luxury goods from Koreans, but also from Chinese tourists. In Japan too, LVMH has seen its sales explode, driven by tourists and local customers. They jumped by 34% year-on year at comparable exchange rates over the first three months of the year.
The results recorded in Europe over the same period were equally satisfactory for Bernard Arnault's group, with an organic increase of 24%. "Europe's impressive performance is a testament to the wealth of local luxury buyers, which protects them from economic challenges, allowing them to continue to spend on luxury goods, even though the region is suffering from extremely high inflation rates and threats of imminent recession," commented Louise Deglise-Favre.
These good results in Asia and Europe have enabled LVMH to compensate for the slowdown that began in the United States last winter. Between January and March, its sales there grew by 8% (in organic terms) compared to the same period a year earlier, which is almost comparable to the 7% growth recorded in the last quarter of 2022, when its turnover climbed by 15% on the American market over the whole of last year.
American tourists continued to make their luxury purchases in Europe at the beginning of the year, benefiting from a more favourable exchange rate. At the same time, local demand declined. It was above all Sephora, which shone in the United States, contributing to the increase in the group's sales in this market in the first quarter, as well as perfumes and watches, much more than fashion and leather goods, whose sales slowed down.
This is not a cause for concern for LVMH, whose executives have acknowledged, however, that it is difficult to make forecasts for the US luxury goods market.
Copyright © 2024 FashionNetwork.com All rights reserved.
