LVMH has reported a sales decline of 15 per cent for the first quarter of this year, a staggering achievement given its most lucrative market, China, was shut down for most of the period.
“Thanks to everyone’s commitment and the strength of its brands, the LVMH group maintains good resilience in the face of this worldwide challenge,” said Bernard Arnault, chairman and CEO.
Nevertheless, the company has trimmed its previously announced dividend and Arnault and other executives will work for free during April and May as the company works through the next stage of the coronavirus crisis.
“For several weeks, our teams have once again demonstrated that excellence, creativity and responsiveness will allow us not only to overcome this crisis but, above all, to emerge even stronger when it fades,” he said.
Group-wide revenue reached €10.6 billion for the quarter, with all divisions in the group recording sales declines.
Worst hit were the watches and jewellery business and selective retailing (including Sephora and DFS) which both fell by 26 per cent, largely linked to enforced store closures in Greater China.
Bvlgari, Tag Heuer and Hublot were particularly hit by store closures in Asia and while all Sephora beauty stores were closed in China for a major part of the quarter, those located in Europe and the US have been closed since mid-March. However, online sales rose “significantly” over the quarter and shopping in stores has gradually picked up in China since the end of the quarter, the company said.
DFS experienced “a significant decline” in activity in most destinations as a result of the suspension of international travel.
A positive currency effect and a policy of firm increases in prices partially offset a decline in volume sold, resulting in a 14-per-cent year-on-year decline in sales for the liquor business group. “The US market demonstrated its good resilience over the period, supported by advance orders from distributors,” the company said. Sales of Hennessy cognac slowed in China due to lower demand linked to the coronavirus pandemic, and the timing of Lunar New Year.
Sales by LVMH’s perfumes & cosmetics division fell by 19 per cent as retailers reduced their inventory levels, however online sales grew rapidly.
And the fashion & leather goods business group recorded a 10-per-cent decline in sales, again impacted by store closures, but mitigated in part by strong online growth.
“LVMH has proven its ability to be resilient in an economic environment disrupted by a serious health crisis that has led to the closure of stores and manufacturing sites in most countries in recent weeks, as well as the suspension of international travel,” the company said in a statement.
“In a very turbulent context, the group will maintain a strategy focused on preserving the value of its brands, based on the exceptional quality of its products and the responsiveness of its teams. In the current situation, the group will further strengthen its policy of controlling costs and being selective in its investments. The closures of the group’s manufacturing sites and stores in most of the world’s countries in the first half will have an impact on the annual revenue and results. This impact cannot be precisely evaluated at this stage without knowing the timetable for a return to normal business in the different areas where the group operates.
“We can only hope that the recovery happens gradually from May or June after a second quarter which will still be very affected by the crisis, in particular in Europe and the US.”