PARIS – LVMH Moët Hennessy Louis Vuitton said revenue took a hit in the first quarter as the normalization of the luxury industry’s growth rates impacted its sales of high-end goods, including Champagne and jewelry.
Overall group sales were down 2 percent at actual exchange rates to 20.69 billion euros in the three months ended March 31, following a 5.5 percent increase in the previous three months.
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 segment reported a 2 percent decline in like-for-like sales, while the wines and spirits division saw a 12 percent drop. Bucking the overall trend were perfumes and cosmetics, up 7 percent, and selective retailing, with a sales rise of 11 percent.
“LVMH had a good start to the year despite a geopolitical and economic environment that remains uncertain,” the group said in a statement issued after the market close.
“In an uncertain geopolitical and economic environment, LVMH remains both vigilant and confident at the start of the year,” it added.
Earlier this year, LVMH chairman and chief executive officer Bernard Arnault sought to put a positive spin on the sector slowdown after three years of post-pandemic euphoria, 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 since the start of the year, but some analysts have downgraded the stock, noting that sluggish Chinese demand is likely to continue weighing on the industry for the foreseeable future.
“For shares to go higher still, we think upgrades are needed and that these are unlikely to materialize soon, especially knowing that the basis of comparison is even tougher in [the second quarter] for fashion and leather,” HSBC said in a recent report.
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 March retail sales came in below expectations, suggesting the outlook for consumer spending remains cloudy.
French luxury group Kering sent shudders through the market last month when it warned that it expects first-quarter revenues to fall 10 percent in like-for-like terms, with its star brand Gucci set to record a decline of nearly 20 percent year-on-year.
While Kering is clearly underperforming its industry peers, the rare profit warning underscored the challenges facing high-end brands as China struggles to bounce back after three years of restrictions designed to limit the spread of COVID-19.
The results come amid a senior management reshuffle 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.
