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Business of Fashion
3 days ago
- Business
- Business of Fashion
LVMH Slide Signals No Quick End to Big Luxury's Malaise
Amid a slew of bad news headlines at its top brands, from data leaks to labour exploitation, luxury giant LVMH tried hard to tell a good news story when it published its latest earnings report this week. Yes, sales were down 4 percent in the second quarter — with a 9 percent slide in the group's core fashion and leather goods division weighing heavily on overall performance — but that's not so bad in the current economic context, the group suggested. Sure, profits slid 15 percent in the first half, but the group has made significant steps to preserve margin by reigning in costs; even fashion show budgets are under the microscope, chief financial officer Cécile Cabanis told analysts. 'LVMH showed good resilience and maintained its powerful innovative momentum despite a disrupted geopolitical and economic environment,' the group said in a statement. ADVERTISEMENT Luxury analysts have grasped on to glimmers of hope. 'Boy it's rough… but won't get rougher' was the headline takeaway from HSBC's earnings rundown. The silver lining is that the latest quarter could prove a trough for luxury's bellwether stock and many of its peers in the space, the bank's note went on to say. But the path to recovery from luxury's bruising slump is still likely to be a long slog. HSBC isn't expecting a proper sales pick up until 2026. In other words, the big luxury downturn isn't over yet. A pandemic boom in luxury spending has given way to more cautious consumption amid a gloomy economic climate, particularly in the key China market, weighing heavily on sales at many brands. And the macroeconomic outlook for the rest of the year remains uncertain at best. In its latest results, LVMH flagged ongoing pressure on sales in Asia, a one-time driver of staggering luxury growth. In the US, President Trump's trade war remains an unpredictable headwind. At present, higher duties (which could come in as high as 30 percent for European-made luxury goods) are set to come into effect from Aug. 1. Trade negotiations to try and bring that number down are ongoing. But many of the industry's woes are self-inflicted and LVMH is no exception. 'I don't buy the explanation that this is just a macro issue,' said Bernstein analyst Luca Solca. Fashion's own goals include whopping price increases without corresponding product innovation, leading aspirational customers in particular to pull back. To be sure, not all luxury labels are suffering equally. LVMH arch-rival Hermès has proved solidly resilient, leading a cohort of businesses that appear to be beating the slump. Earlier this year, it supplanted LVMH as luxury's most valuable company. ADVERTISEMENT Top-end brands like Hermès and Brunello Cuccinelli, which reported sales up by 10.7 percent in the first-half, are less exposed to aspirational clients, but they have also taken a more cautious approach to price hikes, retaining a sense of trust in their value propositions. Other outperformers include Prada's trendy outlier Miu Miu. Clearer signs of the growing gap between luxury's winners and losers are set to emerge next week, when a flurry of luxury heavyweights, including Gucci-owner Kering, Hermès and Prada, are due to report. Analysts are anticipating a wide range of results.
CNBC
4 days ago
- Business
- CNBC
Luxury shopper recovery faces four key headwinds
High-end spenders are painting a mixed picture when it comes to the luxury market's long-awaited recovery, with softer sales still weighing on company forecasts. But better-than-feared results from bellwether fashion house LVMH moved luxury stocks higher Friday, as investors bet on the emergence of green shoots of recovery. LVMH posted a 4% year-on-year drop in second quarter sales to 19.5 billion euros after the market close Thursday, slightly below a consensus forecast for a 3% decline. "This was not a stellar quarter for LVMH," Deutsche Bank's Adam Cochrane, a luxury equity research analyst, wrote in a Friday note. "However, we see some glimmers of hope with a sequential improvement in cFX [constant currency] sales expected from 3Q onwards and most of the sales weakness related to weaker tourism." Here's a look at four key trends to look out for as earnings season rolls on, with fresh numbers due next week from Kering, Hermes and Prada. Foreign exchange fluctuations are a perennial concern for luxury firms, but that's even more the case this quarter as they face high comparable sales from last year. A sharp decline in the Japanese yen sparked a surge in tourist flows and luxury shopping in the country in 2024. But now brands are battling a rebalancing. Richemont saw sales in Japan drop 15% year-on-year in the three months to June, following a 59% jump over the same period the year prior. Burberry also cited a "challenging performance" in Japan in the second quarter, and Moncler said Japan was its only negative-performing Asia market — both without providing specific figures. Some firms noted, however, that a downturn in tourism to Japan — and to a lesser extent Europe — has resulted in an uptick in domestic spending in certain other markets. "[In China] we have seen tangible improvement locally," said LVMH's Chief Financial Officer Cécile Cabanis during an earnings call Thursday, citing a "repatriation from the big drop we've seen in tourism to Japan." Several luxury firms have also pointed to a strengthening of U.S. sales in the second quarter, even as consumers wait with bated breath for the impact of tariffs. Burberry, Richemont, Moncler and Brunello Cucinelli all reported increased sales in their American markets over the second quarter, while LVMH noted that American demand was "broadly unchanged." Still, the extent to which that uptick is driven by U.S. customers frontloading purchases ahead of the full onset of tariffs is not yet clear, according to the firms. "To tell you that this was driven by an anticipation of buying links to the tariffs? Honestly, I cannot tell you," Roberto Eggs, Moncler's chief business strategy and global market officer, said on an earnings call Wednesday. Luxury companies have also been honing in on the U.S. market in recent quarters in a bid to compensate for continued soft demand in the key Chinese market. Burberry CEO Joshua Schulman said the company's recent U.S. growth indicated the "diversity of the luxury consumer that exists in that market," from elite, high-spenders to high-traffic mall shoppers. U.S. tariffs are nonetheless weighing on the outlook for most European luxury houses, who rely heavily on localized production as part of their cache. As such, many have suggested that they will need to raise prices in the coming quarters to offset added costs. Brunello Cucinelli flagged price hikes of 3% to 4% in the U.S. while Moncler said it was implementing "mid-single-digit" percentage increases for the coming 12 months. Burberry, meanwhile, said it began adjusting prices last year as part of broader overhaul plans. LVMH, on the other hand, said Thursday that prices rises would need to come with an "improvement in the product" or modest rebalancing around inflation. However, the French luxury conglomerate then went on to cite price hikes among "several levers" at its disposal to counter the impact of tariffs. It comes as the cost of luxury goods has risen by an average of 3% so far this year — the slowest pace since 2019 — according to UBS' evidence lab, as brands have sought to reconcile consumer retention with higher input costs following a Covid-era surge in prices. Finally, category mix remains a fundamental factor in the divided luxury picture, with brand appeal playing as much of a role as the product type itself. Jewelry remains a winning play for Cartier-owner Richemont, even as high-end watches — both its own and those of other luxury watchmakers — remain a weak point. Tiffany-owner LVMH, however, continues to battle softness in its jewelry and fashion and leather goods maisons, despite leather handbags going from strength to strength for ultra-luxe brand Hermes. Carole Madjo, Barclays' head of European luxury goods research, told CNBC that she expects leather goods dominance to continue to play out when Hermes reports on Wednesday. "[Hermes] is always very good, thanks to leather goods mostly," she told "Squawk Box Europe" on Tuesday. Meanwhile, investors will be eagerly awaiting more color on Tuesday from Gucci-owner Kering on its product overhaul under artistic director Demna Gvasalia and incoming CEO Luca de Meo. "Bringing newness, something fresh which has not been seen before, is I think what could make Gucci great again," Madjo said.
Yahoo
5 days ago
- Business
- Yahoo
LVMH Fashion Division Misses Forecasts as Japan Sales Plummet
Updated 5:30 p.m. ET on July 23 PARIS — LVMH Moët Hennessy Louis Vuitton said net profit fell 22 percent in the first half as its key fashion and leather goods division missed expectations, underscoring the pressures faced by a host of incoming designers at the group's key branch, home to brands including Louis Vuitton, Dior and Celine, recorded a 9 percent drop in organic sales in the second quarter, below the Visible Alpha consensus forecast for a 7 percent Vuitton continues to outperform other brands, while Dior remained below the division average, chief financial officer Cécile Cabanis told analysts and journalists on a webcast on she said the decline was due almost entirely to weakness in Asia, where there was a reversal of the yen weakness that significantly boosted tourist business in Japan at the same time last year. More from WWD All Change as Paris Fashion Week Prepares for Record Number of Designer Debuts Marc Jacobs Offering Hand-painted Pet Portraits in the Hamptons In an Unlikely Collaboration, Stephen Jones Designs Wacky Hats for British Insurer Hiscox Organic sales in Japan fell 28 percent year-on-year in the second saw flickers of improvement locally in China and touted an easier comparison basis for the coming quarter, though she conceded the Chinese economy is 'probably not out of the woods yet.'Operating profit for the fashion and leather goods division fell 18 percent in the first half, but the executive said the operating margin remained healthy at 34.7 percent. While LVMH continues to cap costs, it remains committed to investing in its brands, as evidenced by recent flagship openings for Louis Vuitton in Shanghai and Tiffany & Co. in Japan, and plans to open Dior boutiques in New York City and Beverly Hills in the second half. The group is searching for efficiencies in areas like point of sale marketing for perfume and cosmetics, and fashion shows, where it is reviewing its contracts with external agencies, she said. It's also closing underperforming doors.'Our philosophy is very clear. We need to ensure that we invest what we need to invest behind growth, and we need to make sure that we are able to mitigate and maintain a high level of margins,' Cabanis said. Group net profit totaled 5.70 billion euros in the first six months of 2025, while profit from recurring operations was down 15 percent to 9.01 billion euros, equating to an operating margin of 22.6 percent. Overall revenues fell 7 percent to 19.50 billion euros in the three months to June 30, representing a decline of 4 percent in organic terms.'This was definitely not a good set of results, but not disastrous either,' said Luca Solca, analyst at Bernstein.A Perfect StormIn terms of revenues, watches and jewelry performed slightly better than expected, with organic sales flat in the second quarter. Perfumes and cosmetics were in line with forecasts, rising 1 percent. Wines and spirits beat consensus estimates with a 4 percent decline, while selective retailing also exceeded expectations, up 4 percent. Analysts had hoped that fashion and leather goods would deliver a beat after encouraging results at sector peer Compagnie Financière Richemont, which reported a 6 percent rise in overall sales in the three months to June contrast, LVMH is facing a perfect storm, with anemic demand for luxury goods, a strengthening euro and looming U.S. trade tariffs causing its share price to drop around 26 percent so far this macroeconomic issues have been compounded by a series of internal problems, including data breaches at Vuitton and Dior, and legal proceedings against Loro Piana over alleged worker exploitation in the industry bellwether expressed confidence in its prospects.'LVMH showed solidity in the current context,' Bernard Arnault, chairman and chief executive officer of LVMH, said in a statement.'Beyond the prevailing uncertainties, we remain focused thanks to the long-term vision that has always guided our family group,' he added. 'We head into the second half of the year with great vigilance, and I am confident in LVMH's tremendous long-term potential and the commitment of our teams to further reinforce the group's leadership position in luxury goods.'LVMH described Jonathan Anderson's debut menswear collection for Dior, unveiled in June, as an 'immense success,' with Cabanis noting the show garnered 1.1 billion views on social media. Bernstein's Solca has partly attributed LVMH's woes to a series of price increases in the wake of the coronavirus pandemic, and called on the group to address 'off-kilter pricing' at Dior. Cabanis said the brand continues to see good traction on its D-Journey and Dior Toujours bags, and is riding the momentum leading up to Anderson's first collections landing in stores next year.'We are very confident both in terms of product [and] communication,' she said, noting that Anderson's role as director of both women's and men's collections will ensure 'full consistency on the brand vision.'Meanwhile, the debut collections by Sarah Burton at Givenchy in March and Michael Rider at Celine earlier this month were 'particularly well received,' the luxury group AheadLVMH is gearing up for more debuts, with Anderson set to show his first women's collection for Dior on Oct. 1, and Jack McCollough and Lazaro Hernandez presenting their debut line for Loewe on Oct. 3, according to the preliminary calendar released by the Fédération de la Haute Couture et de la Mode on Thursday. Cabanis said Vuitton continues to lead in many markets thanks to its innovative store concepts, like the Shanghai flagship, which is shaped like a life-size cruise ship. 'It's unexpected. It's something only Vuitton can do,' she said. 'We are not going to do 400 of those, but there might be a few down the road.'She added that the brand is sticking to its pricing strategy, which consists of delivering sophisticated products for its high-end clientele and introducing more accessible categories aimed as aspirational customers, such as a new cosmetics line developed by Pat McGrath, set to bow this fall. 'We don't work on price segmentation — we are not Coca-Cola — but we are working on bringing the best product, and with that, making sure that the value that is in the product is recognized by our clients,' Cabanis said. Regarding Loro Piana, she reiterated that the brand was unaware of the problems in its supply chain and was working to rectify the situation.'This topic is beyond Loro Piana. It's a topic that the full industry in Italy is facing, and it's something that we will have all to manage collectively,' she said. 'It shouldn't create an impact on the [brand's] image.'Amid flat demand from the U.S. in the second quarter, LVMH is preparing to weather the impact of U.S. President Donald Trump's threatened trade tariffs in a variety of ways, though Cabanis said its wines and spirits division had less leeway than fashion and leather goods. The ongoing restructuring of Moët Hennessy is not expected to deliver results until the second half of 2026, she added. 'We don't expect any significant impact this year on that front, but we are very confident that the team has got the plan under control and is delivering,' Cabanis said. 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Times
5 days ago
- Business
- Times
LVMH suffers steep drop in fashion sales as the rich cut spending
LVMH's core fashion and leather goods division suffered a steep slowdown in quarterly sales, a fresh warning sign for the wider luxury sector as even affluent shoppers cut their spending amid the global uncertainty. Shares in the world's largest luxury group fell 2 per cent after the division behind Louis Vuitton, Dior and Givenchy reported a 9 per cent drop in organic sales over the past three months to €9 billion. That compared with a 5 per cent decline in the previous quarter and marked the sharpest fall among LVMH's business lines, which span alcohol, watches and jewellery. For the first half, sales in the fashion and leather goods division were down 7 per cent on an organic basis to €20.7 billion, while profit from recurring operations fell 18 per cent to €6.6 billion. The Paris-listed group said tough comparatives had contributed to the decline, noting the first half of 2024 had been boosted by strong tourist spending, particularly in Japan. Group-wide sales fell 4 per cent on an organic basis to €19.5 billion in the second quarter, in line with analyst forecasts. First-half sales declined 3 per cent to €39.8 billion, also in line with consensus. Operating income before non-recurring items dropped to €9 billion, from €10.65 billion a year earlier. The wine and spirits division, home to Moët and Hennessy, also posted a fall in revenue and profit, citing the impact of trade tensions on customers in key markets such as the United States and China. • How will LVMH and its luxury competitors cope with tariffs? LVMH, led by the billionaire Bernard Arnault, noted continued weak demand for cognac, although it said trends for champagne had improved in the second quarter. Revenue in the division fell 4 per cent over the three months, bringing the first-half decline to 7 per cent. The French group, which owns 75 luxury brands and has a market capitalisation of €233 billion, has faced challenges across the board this year. A broader slowdown in the US and in China, where a property crisis continues to weigh on consumer sentiment, has hit revenues in its main divisions. This mirrors broader weakness across the luxury sector. Its Swiss rival Richemont has also struggled, although a stronger performance in luxury jewellery helped offset softer sales in watches and fashion during the second quarter. At LVMH, the jewellery arm recorded flat sales over the same period. Cécile Cabanis, LVMH's chief financial officer, acknowledged the macroeconomic environment was 'full of uncertainty' but said she remained 'rather confident' about the rest of the year. She pointed to potential good news from trade talks between the European Union and the Trump administration. Asked how LVMH would respond to a possible 15 per cent general tariff on US-bound exports, Cabanis said such a move would be 'an overall good outcome for the general mood of our clients'. She added that, with the exception of wines and spirits, several LVMH labels still had pricing power to help offset any impact from tariffs. The company announced plans to open a factory in Texas by 2027 in light of President Trump's tariff regime. Separately, Cabanis said the company would not keep any brands in its portfolio that were unprofitable, citing recent stake disposals of Off-White and Stella McCartney. Shares in LVMH, down 28 per cent over the past year, closed 9.7 cents, or 2 per cent, lower at €470.25.
Miami Herald
02-07-2025
- Business
- Miami Herald
Sephora makes bold move to reverse concerning customer behavior
LVMH (LVMHF) , which owns beauty retail giant Sephora, recently suffered from an unexpected shift in customer behavior. In LVMH's first-quarter earnings report for 2025, it revealed that its U.S. sales "saw a slight decline" during the quarter, while the company's overall sales in perfumes and cosmetics remained flat. Don't miss the move: Subscribe to TheStreet's free daily newsletter During an earnings call in April, LVMH Chief Financial Officer Cécile Cabanis said that Sephora was one of the main reasons for the decrease in U.S. sales. Related: Ulta Beauty makes drastic decision on Target partnership "Sephora, on the other hand, faced very challenging comps after growing double-digit last year, and this explained the sequential deceleration of the U.S. market at group level," said Cabanis. She said that Amazon (AMZN) has been "very aggressive" about lowering prices, which contributed to Sephora's lower-than-expected U.S. sales. "In the U.S., we have a bit less momentum when it comes to e-commerce, especially because Amazon is being very aggressive, and being aggressive is mostly regarding price, and we try to avoid this technique," said Cabanis. She also warned that Sephora is suffering from an overall "softer demand in beauty," which may be partially due to consumers being concerned about tariffs and the U.S. economy. As Amazon prepares its big Prime Day sales event, Sephora has just made a huge effort to push more customers into its stores and away from online shopping. Sephora recently announced in a new press release that it has partnered with Lyft to offer customers $20 off rides to select Sephora stores in New York City, Seattle, Los Angeles, San Francisco, and Chicago. Related: Kohl's makes major store changes to win back customers Select Lyft vehicles involved in the partnership will even be "custom wrapped with Sephora branding." In addition, Sephora is offering customers who visit stores $10 off any order over $50 at checkout, a free personalized "skin scan," and exclusive product sampling. These promotions will last between July 7 and July 10. "We know that people today highly value in-person experiences when they're shopping for prestige beauty," said Sephora U.S. Chief Marketing Officer Zena Arnold in the press release. "They're looking for human connection and an expert-guided shopping journey, unique to their needs and goals." The move from Sephora comes ahead of Amazon Prime Day, which will offer significant discounts on a wide range of products between July 8th and July 11th. It is no surprise that Sephora is stepping up its game to win over customers during Amazon's big sales event, since the online retailer is offering bold deals on beauty products. More Retail: Costco quietly plans to offer a convenient service for customersT-Mobile pulls the plug on generous offer, angering customersAT&T makes generous offer to older customers For example, Amazon is offering Prime members savings of up to 35% on fan-favorite Korean beauty products, up to 30% on select luxury fragrances, and up to 40% on select cosmetics such as "Tarte, Urban Decay, and IT Cosmetics," according to a recent press release. Sephora isn't the only beauty retailer that recently noticed a pullback in consumer spending as Amazon continues to target more beauty consumers. During an earnings call in May, Ulta (ULTA) CEO Kecia Steelman said that hair care sales remained flat during the first quarter of 2025, while makeup sales "decreased slightly." "Consumer engagement with beauty remains healthy, and our insights indicate beauty and wellness remain a top priority for beauty enthusiasts who tell us that they're more willing to make tradeoffs in other discretionary areas to maintain their beauty regimens," said Steelman during the call. "At the same time, they are cautious, and value is an increasingly important priority as they navigate ongoing wallet pressures." Related: Temu suffers major loss as consumers change their tune The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
