LVMH Sales Drop 15% in Q1, In Line With Forecasts

LVMH Moët Hennessy Louis Vuitton said revenues fell 15% in the first quarter as the coronavirus pandemic forced the closure of many of its stores and factories, though fashion and leather goods performed better than expected thanks to a strong rise in online sales.

Group sales were down 17% in organic terms, broadly in line with a Bloomberg consensus estimate of a 17.8% drop, indicating the owner of brands including Louis Vuitton, Dior and Fendi will likely rank among the more resilient players in the COVID-19 crisis.

LVMH said it was too early to evaluate the impact of store and factory closures on its annual sales and results. “We can only hope that the recovery happens gradually from May or June after a second quarter that will still be very affected by the crisis, in particular in Europe and the U.S.,” it said.

The luxury conglomerate will propose cutting its dividend by 30% to 4.80 euros a share. Bernard Arnault, chairman and CEO of LVMH, and the members of its executive committee have decided to forgo their salaries for the months of April and May, in addition to their variable compensation for 2020.

Watch on FN

The group’s revenues totaled 10.6 billion euros in the three months ended March 31.

The key fashion and leather goods segment posted sales of 4.64 billion euros, down 10% in like-for-like terms, versus a consensus forecast of a 15.8% decline. The division was powered by star brands Louis Vuitton and Dior, while other brands “continued the efforts to strengthen their resilience,” LVMH said.

Arnault praised the group’s employees for producing masks and hand sanitizer, and procuring medical equipment. “Thanks to everyone’s commitment and the strength of its brands, the LVMH group maintains good resilience in the face of this worldwide challenge,” he said in a statement.

“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 added.

LVMH unusually issued guidance last month, saying it expected overall first-quarter revenues to fall 10% to 20% as a result of the widespread lockdowns to contain the spread of COVID-19.

The luxury giant had posted organic growth of 11% in the same period a year ago, and recorded an 8% rise in like-for-like sales in the fourth quarter of 2019.

The industry bellwether’s quarterly sales figures come before other luxury rivals Kering, due to publish figures on April 21, and Hermès on April 23. Compagnie Financière Richemont reports annual results on May 15.

The luxury market is expected to contract by 25% to 30% in the first quarter, according to Bain & Co., which also modeled three scenarios for the whole of 2020 — with the worst forecasting a drop of up to 35% in sales this year.

But with marquee brands like Louis Vuitton, a diversified portfolio and deep cash reserves, LVMH is expected to weather the storm better than most.

Exane BNP Paribas said that in light of the International Monetary Fund’s forecast of a 3% contraction in the global economy, it now expects the luxury market to shrink by 20% in 2020, versus a forecast of 4% growth at the beginning of the year.

“LVMH has a significant scale advantage in an industry where fixed costs prevail, and it is the most diversified of all luxury companies,” analysts Melania Grippo and Guido Lucarelli said in a report this week.

“LVMH is strong in accessible product categories — Champagne, fragrances and cosmetics — where barriers to entry are high, making it one of the best positioned to tap into global middle class development,” they added.

Amid heightened uncertainty, recession-hit consumers are expected to seek refuge in heritage brands.

“Stronger brands that enjoy ‘must have’ status in consumers’ minds will stand tall,” Luca Solca, analyst at Bernstein, said in a report titled “Global Luxury Goods – COVID-19: What comes next?” published on Thursday.

“The good news is that investors agree that the long-term prospects for the luxury sector remain strong, and that the current predicament — as serious as it is — will be temporary,” he added.

This story first appeared on WWD.

Access exclusive content