Is Dior a Drag on LVMH? LVMH Fashion Grew Only 2%
LVMH's performance has also failed to instil confidence in the industry during the luxury winter period.
According to Fashion Business Alert, in the three months ended 31 March, the world's largest luxury goods group LVMH sales fell 2% year-on-year to 20.7 billion euros. Organic growth was 3%, which was below the 21.1 billion euros expected by Visible Alpha general analysts. Operating profit data is not disclosed.
By sector, revenue from LV and Dior, which represent the LVMH fashion leather goods division, fell 2% to 10.49 billion euros. Organic growth narrowed to 2% from 9% in the previous quarter, below analysts' forecasts of 10.66 billion euros, representing the worst performance in nearly two years. In the same period a year earlier, the division's revenue increased by 18% year-on-year to more than €10.7 billion, reaching a new milestone of exceeding €10 billion in a single quarter for the first time in its history.
Although the group does not publish sales figures for individual brands, LVMH Chief Financial Officer Jean-Jacques Guiony revealed that LV's sales growth was slightly higher than the division's average, and the performance remained solid. However, LVMH's other core brand, Dior, has experienced a period of slower growth, with Jean-Jacques Guiony admitting that it performed slightly below the divisional average in the first quarter of the period.
Luxury brands such as Celine and Fendi have also made a strong start to the year with their Arc de Triomphe and Selleria leather goods collections, respectively. Loewe is enjoying a bumper year under creative director JW Anderson, and is currently hosting a global exhibition in Shanghai called "Artisanal Worlds" to pay tribute to its heritage of craftsmanship based in Spain. The brand is currently hosting a global exhibition in Shanghai called "The World of Craftsmanship", which pays homage to its DNA, which is centred around traditional Spanish craftsmanship.
Organic revenue at the jewellery and watches division, where Tiffany and Bulgari are based, fell 2% to €2.47bn, while organic revenue at the liquor business fell 12%, with sales of just €1.42bn in the first quarter, the worst performance of any division. It is notable that, in the context of the lipstick effect and the rebound in travel retail, LVMH's perfume and beauty business, as well as the selective retail divisions in which DFS and Sephora are located, demonstrated market performance that was contrary to the overall trend. The former posted a 3% increase in sales to €2.18bn, representing an organic growth of 7%. The latter achieved a 5% rise in sales to €4.16bn, representing an organic growth of 11%.
The continued low performance of the US region is primarily due to high inflation, which has led to a polarised market. Affluent consumers, who are less affected by economic fluctuations, continue to purchase luxury goods. In contrast, the middle-income group has seen a significant drop in willingness to buy.
In a report examining the luxury market up to 2024, Federica Levato observed that while the robust foundations of the luxury goods industry provide luxury brands with "unrivalled resilience", consumers are already purchasing fewer or non-essential items. The only way to drive long-term growth is to push for a greater integration of the product and the user experience.
In light of the inevitable market volatility, LVMH is seeking to diversify its strategy in order to mitigate risk. The prevalence of quiet luxury style has enabled LVMH's luxury cashmere brand Loro Piana to perform well in the first quarter. While the group anticipates that this trend will continue for the foreseeable future, LVMH has no intention of allowing all its brands to cater exclusively to this market. Instead, it aims to appeal to different consumer segments through a diverse range of styles.
Some industry sources believe that LVMH's extensive brand portfolio allows it to mitigate market risk by diversifying its consumer base and product offerings across different price points and styles. This strategy helps to minimise the company's exposure to any single consumer group, which could be affected by external market conditions.
