LVMH signals ‘good start’ to year

LVMH, the world’s biggest luxury goods group, had what it termed a “good start” to the year with organic sales rising by 3% compared to the same period in 2023.

But the firm, which owns brands including Moët & Chandon, Krug, Veuve Clicquot, Hennessy and Château d’Yquem, saw actual sales fall by 2% to €20.7 billion. These figures mark the group’s weakest quarter since the surge of luxury spending at the end of 2021 as pandemic anxieties eased. The numbers were in line with analysts’ expectations.

Perfumes and cosmetics and selective retailing, notably the Sephora chain, was the best performing sector. But once again the Moet Hennessy wines and spirits division was the weakest link.

Lower sales

Its organic sales were 12% below those in the same quarter last year, and, at €1.42 billion, 16% lower in total terms.

That was due to what the company called “the normalisation of post-Covid demand” in the January to March quarter of 2023, when demand for Champagne was boosted by restocking by distributors.

Cognac continues to struggle due to a “cautious attitude among retailers” notably in America, which has been driven by an unwillingness to order while interest rates remain at their present levels and consumers swing away from the category in favour of beer and less expensive spirits.

The wine and spirit figures were also slightly skewed by results from the Minuty estate of Provencal roses being included in the first quarter accounts for the first time.

LVMH’s commentary on the figures was seized upon by analysts for its reference to “strong growth in spending by Chinese customers in Europe and Japan”, omitting any mention of trade in China itself.

Chinese market

Mainland China is regarded as a keystone market for growth in luxury goods sales, including wines and spirits.

Finance director Jaques Guiony said in an interview with the Financial Times that the main change in China compared with the final quarter of last year was partly because “the base of comparison is much tougher . . . and second is that growth is normalising overall” in Asia’s biggest market.

Last month Kering, whose biggest brand is Gucci, saw its first quarter sales fall by 20% because wealthy Chinese have reined in spending on luxury items due to the property market crisis which has hit consumer confidence.

Guiony, however, said he was “quite happy” with Chinese demand and that LVMH was hoping for a “very gradual improvement” in the US, but that it would take several quarters to achieve.