On July 25, global luxury goods giant LVMH announced its second-quarter and first-half earnings for this year.
The financial report indicated that LVMH's revenue for Q2 reached €21.21 billion ($25.03 billion), exceeding analysts' expectations of €21.02 billion ($24.80 billion).
In terms of regions, Q2 witnessed a double-digit year-on-year growth in revenue across all regions except the US: organic revenue decreased by 1% in the US, while Japan saw a 29% increase, Asia (excluding Japan) posted a 34% rise, and Europe's organic revenue grew by 19%. Sequentially, Asia (excluding Japan) was the only region where Q2 revenue growth outpaced that of Q1.
In the second quarter, all LVMH's business groups achieved double-digit organic revenue growth during the first half of the year, except for the Wine and Spirits division which was affected by a high base factor. The Wine and Spirits division's operating revenue declined 8% organically year-on-year; the company's largest division, Fashion and Leather Goods, saw a substantial organic increase of 21%, aligning with market expectations; the Perfumes and Cosmetics division posted an organic revenue increase of 16%; the Watches and Jewelry division's operating revenue rose 14% organically; and Selective Retailing's operating revenue increased 25% organically.
Following the announcement of the financial results, LVMH shares opened higher on Tuesday but fell by the end of trading, closing down 0.42% at €854 ($1,007). The decline in LVMH's ADR expanded to 3.7% after the earnings release, hitting a two-week intraday low.
In the first half of 2023, LVMH's revenue reached €42.2 billion ($49.77 billion), a year-on-year increase of 15%; organic revenue grew 17% year-on-year, broadly in line with Q1 growth.
In H1 2023, due to the sluggish US economy, the Wine and Spirits division's revenue amounted to €3.181 billion ($3.75 billion), a 3% organic year-on-year decline. Organic revenue from the Fashion and Leather Goods division significantly increased 20% year-on-year to €21.162 billion ($24.96 billion). The Perfumes and Cosmetics division and the Watches and Jewelry division both saw an organic year-on-year growth of 13%, reaching €4.028 billion ($4.75 billion) and €5.427 billion ($6.40 billion), respectively. Selective Retailing's revenue increased 26% year-on-year to €8.355 billion ($9.85 billion).
LVMH's recurring business profit in H1 2023 grew by 13% to €11.574 billion ($13.66 billion), slightly lower than the market's expectation of €11.8 billion ($13.93 billion). The operating profit margin reached 27.4% of revenue. The group's net profit rose by 30% to €8.481 billion ($10 billion).
The company's CFO, Jean-Jacques Guiony, said that due to high-profile fashion shows (especially Christian Dior and Louis Vuitton) and Pharrell Williams' men's debut last month in Paris, the luxury conglomerate had larger marketing expenditures than usual in the first half of the year. However, the company's marketing expenditures are expected to decrease in the second half.
Guiony stated that in early July, the Dior brand raised prices by an average of 4% across all markets. Speaking about the underperforming Wine and Spirits division, he suggested that the global demand for brandy was not strong in the first half of the year, but he felt that the US market's demand for brandy may have bottomed out.
LVMH Chairman and CEO Bernard Arnault declared that despite ongoing economic and geopolitical uncertainties, LVMH achieved outstanding results in the first half of the year. Their strong creative power and excellent layout of their brands continued to inspire dreams. They made constant progress in environmental, social, and societal commitments, most notably, the recently announced ambitious water-saving plan aiming to reduce their overall water consumption footprint by 30% by 2030. Looking at their brands, they remain confident and optimistic about the second half of the year, yet will stay vigilant in the current environment. They will rely on the agility and talent of their teams to further consolidate their global leadership in the luxury goods sector in 2023.
So far this year, LVMH shares have risen by over 20%, making the company the highest-valued in Europe. Thanks to the rise in the company's stock price, Bernard Arnault even briefly surpassed Elon Musk to become the world's richest person.
