LVMH, the world’s largest luxury goods group, has announced that its sales have started to recover in June, particularly in China, after a decline in the second quarter due to the Covid-19 pandemic. The company, like many other luxury brands, temporarily closed stores and halted production as the virus spread globally.

Jean-Jacques Guiony, LVMH’s financial chief, acknowledged that the company had experienced an unprecedented negative impact due to the pandemic. However, he expressed optimism about a rebound in countries like China as lockdown measures ease.

While LVMH’s rivals, such as Kering (owner of Gucci) and Hermes, are also expected to report lower earnings, LVMH’s business is more diversified due to its involvement in champagne and wine production. As a result, its share price has fared better than its competitors during the crisis.

LVMH’s second-quarter results revealed an improvement in sales momentum in Asia excluding Japan, with a 13% decline in comparable revenue compared to a 32% slump in the previous quarter. However, travel restrictions continue to impact the company’s duty-free stores at airports. Moreover, the reduced number of tourists in cities like Milan and Paris has significantly affected LVMH’s target market.

Guiony explained that LVMH’s travel retail business is expected to experience ongoing challenges for several more quarters. He also cautioned that domestic shopping by Chinese consumers alone would not be enough to offset the absence of purchases by Chinese tourists traveling abroad.

Overall, LVMH reported €7.8 billion ($9.2 billion) in revenues for the second quarter, representing a 38% decline on a like-for-like basis. Although this result was slightly better than analysts’ expectations, the company announced its plan to control costs and be more selective in its investments. Additionally, it implemented a 5% price increase for the third time since March at its most resilient brand, Louis Vuitton.

During the pandemic, LVMH was in the midst of acquiring US jeweler Tiffany for $16.2 billion. However, the company has put negotiations on hold as it explores potential ways to lower the deal price due to the impact of the pandemic. Guiony mentioned that antitrust approvals for the deal have been delayed, and LVMH currently has little visibility on when they might be granted. Despite facing a significant sales decline in its watches and jewelry division during the second quarter, LVMH remains committed to the Tiffany acquisition.

In the first half of 2020, LVMH’s profit from recurring operations reached €1.67 billion, marking a 68% decrease compared to the previous year.

Useful links:
Business of Fashion – LVMH Weathers the Storm of Covid-19
Reuters – LVMH Shares Gain as Ultra-Luxury Sales Stay Strong