LVMH 1st quarter results

Jean-Jacques Guiony, chief financial officer of LVMH Moët Hennessy Louis Vuitton, elaborated on first-quarter revenues that reflected weak demand for luxury in Hong Kong and Macau.

PARIS — “The Eastern part of the world is under pressure, while the Western part of the world is doing very well.”

This story first appeared in the April 15, 2015 issue of WWD. Subscribe Today.

That’s how Jean-Jacques Guiony, chief financial officer of LVMH Moët Hennessy Louis Vuitton, characterized the luxury market on Tuesday, elaborating on first-quarter revenues that reflected weak demand for luxury in Hong Kong and Macau amidst an anti-extravagance crackdown, and a shift in Asian consumption to Europe driven by a weak euro and widening price gaps.

He specified that DFS locations in Hong Kong and Macau are tracking double-digit declines.

Still, Guiony noted that the customer base from mainland China grew in excess of 5 percent in the first three months of the year, a good harbinger for growth.

Addressing analysts after the French group on Monday reported a 16 percent lift in first-quarter revenues to 8.32 billion euros, or $9.39 billion, Guiony also spelled out how much a sharp drop in Japan purchases weighed on the numbers.

While the first-quarter increase in organic terms stood at 3 percent, it would have been 4 percent stripping out the impact of Japan, where LVMH faced tough comps given a rush on luxury purchases ahead of a sales-tax increase in the island nation on April 1.

The impact was more dramatic in the fashion and leather goods division, where organic sales rose 4 percent excluding Japan — on par with the pace in the fourth quarter — instead of the 1 percent reported Monday.

Overall, organic revenues declined 10 percent in Japan and 6 percent in Asia in the first quarter, while advancing 9 percent in the U.S., excluding Hawaii, and 10 percent in Europe, the latter region’s sales padded by the attractiveness of prices, LVMH noted.

Questioned about its pricing policy in the wake of Chanel’s recent move to harmonize prices of its bags, Guiony said LVMH would not “act in an emergency” given a climate of exchange-rate volatility.

“We do not think a unified pricing structure makes any sense for luxury brands,” he said. “It doesn’t allow enough flexibility to allow for currency fluctuations.”

In Russia, for example, LVMH raised some prices in recent months to account for a sharp decline in the ruble, only to find it rebound, making luxury goods “very expensive.”

“If you act too quickly, you can end up in a situation you can’t control,” he explained. “It’s too early. We have had four or five months (of big currency swings.) It’s not enough in our view to assess a new pricing situation.”

Asked if Louis Vuitton might expand offerings of entry-price handbags, as competitors Gucci and Prada have announced, Guiony countered that its flagship leather goods house already has relevant products in all price categories, despite an overriding brand elevation strategy. “We think that we were the first to recognize a need for comprehensive coverage of the full price spectrum,” he told analysts.

The executive also cited gradual improvements among local customers in Europe, particularly in France and Germany, plus Italy and Spain.

Continued destocking of cognac in China continued to weigh on first-quarter tallies, but Guiony held out hope the worst is behind it, and that sell-in numbers would improve for the rest of the year.

As for watches, they remained under pressure in the first quarter, with the exception of Japan, “which is still doing OK,” he noted.

Separately on Tuesday, Christian Dior Couture said sales in its third quarter ended March 31 gained 21 percent to 433 million euros, or $461 million, versus 357 million euros, or $380 million, in the year-ago period. Stripping out strong currency tailwinds, the increase stood at 9 percent.

For the nine-month period ended March 31, sales at the French fashion house advanced 16 percent, with the organic increase amounting to 10 percent.

Christian Dior SA is the holding company for Dior and LVMH.

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