LVMH reveals drop in earnings amid economic uncertainty, slowing Chinese market

(MENAFN) LVMH, the world's foremost luxury goods conglomerate, has announced a 14 percent decrease in net profits for the first half of the year, amounting to €7.26 billion. This decline is attributed to an "economic and geopolitical uncertainty" coupled with a noticeable slowdown in the Chinese market. Following a period of robust growth post-Covid pandemic, the group, led by Bernard Arnault, experienced a 1 percent drop in sales, totaling €41.677 billion.

This figure falls short of the projections made by analysts (€42.13 billion) and (€42.3 billion). Luca Solca of Bernstein commented on the situation, noting that "LVMH is slowing down amid moderating luxury demand." The group's primary division, encompassing fashion and leather goods, which includes iconic brands like Louis Vuitton, Dior, and Berluti, was particularly impacted. Sales in this division decreased by 2 percent to €20.77 billion, and operating profits fell by 6 percent, although the division remains highly profitable with a margin of 38.8 percent. Across the entire group, the operating margin for the first half of the year stood at 25.5 percent, a decline from 27.4 percent in the same period in 2023.

In addition to the challenges in fashion and leather goods, sales in the watches and jewelry sector, which features brands such as Hublot, TAG Heuer, and Chaumet, declined by 5 percent, reaching €5.15 billion. LVMH also highlighted its recent acquisition of Swiss luxury watchmaker L'Epee 1839. Just a week before the release of these results, the company announced leadership changes at Hublot and TAG Heuer, a division managed by Frédéric Arnault, one of Bernard Arnault's sons, since January.

Conversely, the perfumes and cosmetics division, including renowned products like Sauvage, Miss Dior, and J'adore, experienced a 3 percent increase in sales, surpassing the €4 billion mark. Sephora, LVMH's beauty retail chain, also contributed positively with a 3 percent rise in sales within its "selective distribution" division, reaching €8.6 billion, although DFS airport shopping centers have yet to return to their pre-Covid performance levels. Despite these varied results across different sectors, LVMH continues to navigate through a challenging economic landscape, seeking to maintain its leading position in the luxury market. 

MENAFN24072024000045015682ID1108476102