France’s LVMH has delivered forecast-beating first-quarter sales driven by US and Chinese consumers putting the pandemic behind them and flocking to its biggest brands such as Louis Vuitton and Dior.
If trends seen in the first quarter continue, the world’s biggest luxury group, which is controlled by billionaire Bernard Arnault, is on track for its annual revenue to exceed pre-pandemic levels this year, according to analyst forecasts compiled by Thomson Reuters.
The group has also been boosted by the addition in January of US jewellery Tiffany to its roughly 70 brands. It has dispatched top executives to New York to integrate the $15.8bn acquisition and develop a strategy to rejuvenate a brand best known for its robin’s egg blue gift boxes.
LVMH reported sales of €13.96bn in the first quarter, up 30 per cent on an organic basis from the same period a year ago when coronavirus triggered the first lockdowns and store closures. Analysts had expected sales of €12.6bn, according to FactSet data.
Sales were also 8 per cent higher than in the first quarter of 2019 before the pandemic hit, also on an organic basis that strips out the effect of acquisitions and currency movements.
The group’s all-important fashion and leather goods division reported revenue of €6.74bn in the first quarter, 52 per cent higher than the same period last year and 37 per cent higher than the same quarter before the pandemic.
The quarter continues trends that have taken hold in the luxury sector since last summer with China and the US leading the recovery, while Europe remains mired in crisis.
With international travel still at a near-standstill, free-spending Chinese shoppers cannot travel to the fashion capitals of Europe to shop as they usually do. That has left luxury companies scrambling to meet growing Chinese demand at home, while also trying to attract more local clients in Europe.
Nevertheless, the strong demand for Louis Vuitton handbags and Moët & Chandon champagne shows that the affluent are still treating themselves to luxury goods while other types of spending, such as travel and restaurants, remain largely off limits. That tailwind may fade as countries that have vaccinated their populations en masse reopen their economies and people have more options on how to spend their cash, analysts have warned.
LVMH does not provide any financial guidance, nor do its smaller rivals such as Kering and Richemont. But the sector endured a difficult 2020, with sales contracting roughly a fifth to reach €217bn globally, according to consultancy Bain, which has forecast that a recovery could take two to three years.
Analysts have said the biggest companies in the sector are likely to bounce back sooner than smaller rivals. Investors have piled in and pushed up LVMH shares 52 per cent since the end of the second quarter, Richemont’s by 54 per cent, while Gucci-owner Kering is up 30 per cent.