Louis Vuitton's Owner Shows Wear And Tear
27 Luglio 2020 - 11:15PM
Dow Jones News
By Carol Ryan
In one of the stranger trends of the global pandemic, top luxury
brands have been treated as safe haven stocks. LVMH's first-half
profit plunge is a reminder that an industry that relies on
international travel and the feel-good factor won't get off
lightly.
After the Paris market close Monday, LVMH Moët Hennessy Louis
Vuitton, the bellwether luxury company controlled by Europe's
richest man, Bernard Arnault, said that operating profit fell 68%
year over year in the six months through June. That was steeper
than the 59% drop that analysts were expecting, although sales
growth was in line. Operating margins fell to 9%, compared with 21%
for the same period of last year.
Luxury brands have high fixed costs, so any slowdown in sales
has a big impact on their bottom line. At its fashion and
leather-goods division, for instance -- home to particularly
lucrative brands like Christian Dior and Louis Vuitton -- a 24%
fall in sales almost halved the division's operating profit over
the six months through June.
Some of the bad news will be temporary. Despite keeping its
spring-summer collection in stores longer than usual, LVMH still
had to slash the value of stock that couldn't be sold. Unless a
second wave of infections shuts down boutiques globally again, the
worst of the write-downs should now be behind it.
But the company's reliance on travel spending makes a quick
recovery later in the year unlikely. Duty-free retailer DFS won't
rebound until consumers feel safe to take long-haul flights again.
Sales of the company's jewelry and watch brands fell 52% in the
second quarter, in part because of their dependence on travel
spending. Bookings at the Belmond chain of luxury hotels, bought in
2018 for an all-in price of $3.2 billion, are also likely to remain
weak.
LVMH has been one of Europe's best performing luxury stocks this
year. As a multiple of projected earnings, its shares are trading
68% above a 10-year average of 19 times. Investors see a diverse
portfolio of over 70 brands as defensive. That may be true
long-term, but for now LVMH's breadth is just exposing the company
to a wider range of problems.
Write to Carol Ryan at carol.ryan@wsj.com
(END) Dow Jones Newswires
July 27, 2020 17:00 ET (21:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Grafico Azioni Lvmh Moet Hennessy Louis... (EU:MC)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Lvmh Moet Hennessy Louis... (EU:MC)
Storico
Da Apr 2023 a Apr 2024