slowdown-in-luxury-sales-at-lvmh

Slowdown in luxury sales at LVMH

July 27, 2024

French luxury brand giant Bernard Arnault, who owns fashion, perfume, cosmetics and beauty brands such as Louis Vuitton and Dior, is often cited as "the flagship of luxury."

Company executives say consumers are not finding reasons to celebrate that would prompt them to open a bottle.

LVMH's Wines and Spirits division includes luxury brands such as Moët & Chandon and Krug as well as Hennessy and Château d'Yquem. Together, they will generate €6.6 billion in revenue by 2023.

The picture is less optimistic for 2024. First-half results released this week show organic revenue down 12% to €2.8 billion (around $3 billion).

The declines in the wine and spirits categories are similar. Champagne and Wines generated €1.4bn/€1.5bn1TP4Q on an organic basis (down €8bn1TP3Q) and Cognac and Spirits fell by €10bn1TP3Q to €1.4bn/€1.5bn1TP4Q.

Champagne is associated with celebration. Maybe people don't open champagne bottles because the global environment is so bad. …'

LVMH says much of the decline in wine and spirits sales can be attributed to the “continued normalization” of demand since 2023.

Wine and champagne performance was impacted by weak demand for champagne in key markets. This is particularly true in Europe.

Chief Financial Officer Jean-Jacques Guiony said on a conference call this week that this was not a problem limited to LVMH.

He said: "I think we have a serious problem with demand for champagne." Champagne is associated with happiness and celebration.

The current global situation, whether geopolitical, macroeconomic or both, may not encourage people to party and open bottles of champagne – but I am not sure.

The fact is that our volume has fallen by double digits. It is clear that we are not alone. "Far from it: the entire sector is facing strong pressures, especially in Europe where the majority of the volume is carried out.

Guiony expects some improvement in the second half of the year, but warns it will not be significant.

He also notes that the value of champagne is still “significantly higher” than pre-COVID levels.

Data from the Champagne Committee (CIVC) show that champagne shipments decreased by 15.2% compared to the same period in 2023. However, they are down. They are now back to the 2019 level.

Cognac is a hit in the United States

Cognac, a popular spirit in China, has been hit by falling demand. Rodolphe Ozun is the financial communications director. “The Chinese cognac market remains challenging, with falling demand and cautious retailers.”

The US market has some good news: cognac volumes returned to growth in the second quarter, Hennessy gained market share, although it remains a market. This remains to be watched.

Despite the prestige of its brands, LVMH's wine and spirits business represents a relatively small portion of its overall business. In the first half of 2024, the wine and spirits division is worth €2.8 billion, compared to €41 billion for the entire company, whose brands include Louis Vuitton Dior Givenchy Sephora.

Selective distribution, which includes Sephora, grew by 3% in reported terms and 8% in organic terms.

Overall company growth was down 11TP3Q, but organic growth increased 21TP3Q.

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