(AOF) – LVMH revealed a turnover of 19.964 billion euros in the third quarter, organic growth of 9%. The latter is lower than the Visible Alpha consensus cited by Reuters of 11.5%. Internal growth stood at 17% in the first half. The Fashion & Leather Goods activity, which is the group’s largest and most profitable, recorded organic growth of 9% in sales to 9.75 billion euros. The market expected an increase of 10% on a like-for-like basis.
Over this period, Selective Distribution posted internal growth of 26% to 4.076 billion euros.
Wines and Spirits saw a drop of 14% on a comparable basis to 1.5 billion euros.
The Perfumes and Cosmetics business recorded organic growth of 9% to €1.99 billion.
Finally, the Watches and Jewelry activity generated $2.52 billion in revenue, organic growth of 3%.
“In an uncertain economic and geopolitical context, the group is confident in its continued growth,” said the world number one luxury goods company regarding its prospects.
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Key points
– World leader in luxury born in 1987, bringing together 75 luxury houses, including 25 centenarians (Louis Vuitton, Moët Hennessy, world leaders, Dior, Céline, Givenchy, Guerlain, Kenzo, Bulgari, TagHeuer, Tiffany, etc.);
– Revenues of €79 billion generated between France for 8%, the rest of Europe for 16%, the United States for 27%, Japan for 7% and the rest of Asia for 30%;
– Distribution of activities between the two historic businesses – fashion & leather goods for 42%, wines & spirits for 9% – and selective distribution for 19%, watches & jewelry for 14% then perfumes and cosmetics;
– Operating model based on 6 pillars: decentralized organization, vertical integration of supply into distribution channels (DFS in Asia, Miami Cruise, Sephora and Le Bon Marché), sustainability of know-how, balance of activities and locations, synergies and selectivity of external growth;
– Capital locked by the Arnault family group (47.8% of the capital, directly and indirectly and 2/3 of the voting rights), Bernard Arnault being chairman and CEO of the board of 16 directors;
– Healthy balance sheet with a net debt of €9.2 billion compared to €56.6 billion in equity and €10 billion in free self-financing.
Challenges
– Innovation strategy serving 3 challenges:
– attraction of talents: Institute of professions of excellence in fashion, “inside LVMH” program for students, DARE program for internal innovations, reception of 50 start-ups in the “LVMH Luxury Lab” incubator,
– R&D in cosmetics (200 patents and “research centers”),
– digitalization of distribution networks and customer experience;
– “LIFE 360” environmental strategy:
– climate commitment (100% renewable energy for boutique sites in 2030),
– creative circularity: 100% eco-design of products and 70% recycling of raw materials in 2030 (39% in 2022),
– traceability of all supply chains in 2030,
– biodiversity: certification of the preservation of ecosystems (2026) and regeneration of flora and fauna on 5 Mhas in 2030 (1.4 in 2022);
– Careful rotation of the portfolio with sales of small brands and the acquisition of the Italian luxury eyewear manufacturer Marcolin and the jeweler Pedemonte.
Challenges
– Always a strong sensitivity of the result to fashion & leather goods;
– Impact of inflation offset by the ability to increase prices and by a favorable exchange rate effect;
– After the end of 2022 marked by confinements, expectation of a resumption of sales in China;
– After a record 2022 financial year in terms of sales and profits, 2023 expectations: further increase global leadership;
– 2022 dividend of €12 including a deposit of €5 paid in December and share buybacks.
Learn more about the luxury sector
Market boom for several more years
According to Bain & Company, the global luxury market (fashion, cars, hotels, wines and spirits, cruises, etc.) will have recorded a 21% jump in sales in 2022, to 1,384 billion euros. The luxury personal products segment (jewelry, clothing, watches, leather goods, etc.) is expected to grow by 22% and again grow by 3% to 8% in 2023 despite the expected economic slowdown. Growth is expected to continue in the following years, with an increase expected to reach 60% by 2030! According to Bain, American spending in Europe more than doubled between 2019 and 2022. This development is largely explained by a strong dollar. The Chinese market, on the other hand, is at half mast due to the “zero Covid” policy and strict confinements.