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Is the worst behind us? If LVMH’s Q3 earnings call is an indicator, we could perhaps begin to be cautiously optimistic. “We are encouraged by the pockets of improvements that we see in all businesses,” LVMH CFO Cécile Cabanis said during the earnings call on Tuesday.
Revenue from LVMH’s fashion and leather goods division fell 2 per cent to €8.5 billion — this marks a significant improvement compared to the second quarter, when fashion sales were down 9 per cent and a beat on the consensus expectations, which were -4 per cent. In Q3, Louis Vuitton was slightly above the division average, while Dior was slightly below. “We have seen improvement at Dior in all key nationalities and really great progress,” Cabanis said.
The group’s sales returned to growth in the third quarter. They were up 1 per cent to €18.28 billion, versus consensus expectations of -0.6 per cent. The group’s sales were down 4 per cent in Q2. “Q3 shows quite a few positives beyond the comparison base,” said Cabanis. “Q4 is going to be tougher when it comes to the comparison base, and we need to keep that in mind.”
LVMH is typically a bellwether for the luxury industry. Kering and Hermès are to report their Q3 earnings both on 22 October, while Richemont is to report its fiscal first half on 14 November. Kering is also expected to show significant improvement, and Hermès and Richemont to remain the best in class, with growth in line with Q2, meaning respective uplifts of 9 per cent and 6 per cent in Q3, per HSBC estimates.
By division, selective retailing, which includes beauty retailer Sephora, luxury travel retailer DFS and Paris department stores Le Bon Marché and La Samaritaine, was up 7 per cent. Perfumes and cosmetics were up 2 per cent, and watches and jewellery were also up 2 per cent, with both Tiffany and Bulgari outpacing the division average, while watches remained slightly negative. Wines and spirits were up 1 per cent.
By region, Asia (excluding Japan) was up 2 per cent, the US was up 3 per cent, Europe was down 2 per cent, and Japan was down 13 per cent year-on-year. “LVMH delivered a positive surprise in APAC excluding Japan. Performance in the US was likewise stronger than expected. However, organic growth in Japan and Europe was weaker than expected,” Bernstein managing director Luca Solca wrote in a note.
One key topic discussed during the call was the commercial impact of the designer debuts. A flurry of designers recently made their debuts at some of LVMH’s most significant houses: Jonathan Anderson at Dior, Michael Rider at Celine, Jack McCollough and Lazaro Hernandez at Loewe. Meanwhile, Maria Grazia Chiuri was today announced as Fendi’s new chief creative officer and is expected to present her first collection for the house in February.
So how much of a commercial impact can these new collections have? “ The timing of each one is very different,” Cabanis said. Rider’s first collection at Celine will be in stores in November, with new bags already in stores, she said. At Dior, the men’s collection will start to hit the stores in January. “Then it’ll be gradual with some capsules for women, but probably more towards the Q2 than the Q1. We have not waited for that. There’s a very nice campaign that just started to rejuvenate Lady Dior [starring Mia Goth, Greta Lee and Mikey Madison]. The commercial effort that we did has led the Lady Dior to find its natural floor, and we are very optimistic about the re-ignition of the growth of the Lady Dior. In addition, the Dior Toujours handbag continues to perform very well.”
Cabanis added, “The way you need to look at it is really around gradual and sequential improvement rather than a giant difference. But we are very confident with the [designer appointments] decisions that we made. We had great feedback from the different shows, so we are now making sure that all this will be executed, and we’ll see when they will materialise in terms of top line.”
When asked about M&A and whether LVMH will still have more or less 80 brands in its portfolio next year, Cabanis declined to comment. In his will, Giorgio Armani instructed his heirs to sell a stake in the business to LVMH, L’Oréal or EssilorLuxottica first. On LVMH being specifically mentioned, Cabanis said: “We were very honoured, obviously, to have been named as partners. Other than that, I have no comment to make.”
Thomas Chauvet, managing director of Citi, wrote in a note titled “A ray of hope” that LVMH’s organic growth beat in Q3 “will likely set a positive tone for the upcoming luxury reporting season”.
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