Luxury group LVMH exceeds expectations despite slowing sales in China

A logo of LVMH is seen in its exhibition space, during the Viva Technology conference dedicated to innovation and startups at the Porte de Versailles exhibition center in Paris, France June 15, 2022. REUTERS/Benoit Tessier

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PARIS, July 26 (Reuters) – Luxury goods group LVMH (LVMH.PA) is optimistic about high-end spending in the United States, but has taken a cautious note about the pace of recovery in the key market Chinese.

LVMH reported better-than-expected second-quarter sales, with robust growth in the United States and a recovery in Europe offsetting lower revenue in Asia, where shutdowns in China disrupted business.

The French company, which owns dozens of high-end brands ranging from Tiffany to Moet & Chandon, has tapped into strong post-pandemic demand for its designer brands as socializing resumes and shoppers spend savings accumulated during the pandemic. , sweeping away worries about turbulent stock markets and rising prices.

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LVMH sales rose 19% year-on-year to 18.73 billion euros ($18.95 billion) in the three months to June 30, beating analysts’ expectations of 17.13 billion. euros in a Visible Alpha consensus quoted by UBS.

But revenues fell by a “heavy double-digit” in China, the group’s chief financial officer, Jean Jacques Guiony, told analysts following COVID-19 restrictions imposed from mid-March.

He reported some improvement in the Chinese market towards the end of the quarter, but said it was “nothing very significant”, adding that store traffic in the country was still “much below” l last year.

Guiony said some luxury spending shifted to Europe as traveling U.S. tourists took advantage of the strengthening dollar and were more optimistic than some rivals about a potential U.S. recession affecting demand for high-end goods.

“We’re very optimistic on the US and a little ‘wait and see’ on China,” Guiony said, adding that it was too early to tell how strongly the Chinese market would rebound.

The group saw no pushback from consumers after most labels hiked prices by 3% to 8%, Guiony said, adding that he didn’t expect the group to make any moves. major changes on the price front in the second half.

The operating margin of the fashion and leather goods division, led by Louis Vuitton and Dior, improved further during the quarter to reach 41.4%. Guiony said this type of level, one of the highest in the industry, was “here to stay”.

Sales in the wine and spirits division rebounded strongly following logistical and supply constraints at the start of the year, growing by 30%, while selective distribution, which includes the Sephora cosmetics brand, increased by 20%.

The company’s strong second quarter sets a benchmark for rivals. Gucci owner Kering (PRTP.PA) releases first-half results on July 27, Hermes (HRMS.PA) on July 29.

($1 = 0.9882 euros)

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Editing by Silvia Aloisi, David Goodman and Jane Merriman

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