Louis Vuitton, Dior Cushioned LVMH Sales in Luxury Slump -- Update
15 Ottobre 2020 - 10:23PM
Dow Jones News
By Matthew Dalton
LVMH Moët Hennessy Louis Vuitton SE said strong growth at its
biggest fashion brands buoyed revenue in the third quarter, partly
offsetting steep declines in other segments of the conglomerate's
luxury empire that have been slammed by the coronavirus
pandemic.
Revenue at the French conglomerate's fashion and leather-goods
division, which includes Louis Vuitton and Dior, rose 12% compared
with a year ago. Sales of Hennessy cognac held steady, driven by
strong consumption in the U.S.
But LVMH's other business fared badly, pulling down overall
revenue 7% to EUR11.96 billion, equivalent to $13.99 billion. A
dearth of festive occasions hurt the conglomerate's champagne
business, which includes Dom Pérignon and Moët & Chandon. A
sharp drop in air travel slammed DFS, LVMH's travel retail
division.
And revenue at its watch and jewelry brands such as Bulgari and
Tag Heuer was down 14%, hit by the absence of tourist shoppers from
Asia. That division is under scrutiny in the legal battle that LVMH
is waging with Tiffany & Co. over its soured deal to buy the
U.S. jeweler. LVMH in court filings has argued that the pandemic
has been particularly harmful for Tiffany, causing a material
adverse change in the business that would allow the French
conglomerate to back out of the merger agreement.
Tiffany, in an unexpected announcement Thursday before LVMH's
results, gave an upbeat report on its recent performance. The
company said its revenue fell slightly in August and September
compared with a year ago, and operating earnings rose 25%.
Tiffany's disclosure was meant to refute LVMH's argument that the
pandemic has fundamentally damaged Tiffany's business, a person
close to Tiffany said. The jeweler's sales drop was in the low
single digits by percentage points, the person said, suggesting
that Tiffany has performed better than LVMH's comparable business
division.
"We are very pleased with the way the business has rebounded
following the first quarter and continues to rebound in the third
quarter, especially in Mainland China, and to recover in the United
States," Tiffany Chief Executive Alessandro Bogliolo said.
LVMH's results highlight the challenge facing luxury brands at a
time when international, long-haul travel has plummeted. The
industry relies heavily on spending by shoppers on trips abroad,
particularly Chinese consumers who spend heavily on trips to luxury
shopping destinations such as Paris, London and New York. Without
them, brands are looking to encourage customers to spend where they
live and cultivate new clientele, particularly in the West.
Jean Jacques Guiony, LVMH's chief financial officer, said the
conglomerate's watch and jewelry brands suffered from Chinese and
other Asian travelers being stuck at home, where they are less
likely to splurge than when on trips abroad. Those brands aren't as
strong among Western clients as LVMH's big fashion brands, Mr.
Guiony said.
"We lost a big chunk of the touristic business," he said. "We
didn't have the boost of the local client bases, which are less
well-developed than they are at Louis Vuitton and Dior."
Bulgari has been so successful in Asia, the Middle East and
Russia that the brand has focused less on cultivating clients in
Western Europe, Mr. Guiony said. "It's clear the current situation
means we need to do that as well," he said.
LVMH and Tiffany have sued each other in Delaware Chancery
Court, after LVMH said last month that it was pulling out of the
$16 billion deal, the largest takeover ever in the luxury industry.
In court filings, LVMH has been withering about the state of
Tiffany, calling it "a mismanaged business that over the first half
of 2020 hemorrhaged cash for the first time in a quarter century,
with no end to its problems in sight."
Yet on Thursday, Mr. Guiony struck a different tone when asked
what LVMH would do if it were forced by the court to buy Tiffany.
Tiffany has asked the Delaware court to require LVMH to complete
the deal, or award Tiffany damages.
"We still believe that Tiffany is a great brand," he said.
Write to Matthew Dalton at Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
October 15, 2020 16:08 ET (20:08 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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