Luxury retailer LVMH, owner of some 70 prestige brands, has reported a 38% like-for-like fall in revenue for the period April to June. During the period LVMH temporarily closed stores and halted its manufacturing process as a result of the COVID-19 pandemic and government-mandated lockdown restrictions. Since the reopening of its stores in mid-June it has seen sales pick up.
LVMH is currently in the process of acquiring US jeweller Tiffany & Co for €14.7 billion (£13 billion).
“The luxury conglomerate has been severely disrupted by the closure of stores and production facilities in the first half of the 2020 financial year. The group delivered much weaker than expected profits, with jewellery & watches most severely hit. The group relies heavily on overseas tourists, not just because many tourists choose to come to European capital cities for luxury shopping, but also because of its DFS Galleria duty-free stores which are located in several major airports globally. Although high net worth individuals are unlikely to have stopped purchasing luxury goods due to the pandemic, the luxury sector also relies on aspirational customers who may have previously been tempted by an LVMH perfume or wallet. Instead, we imagine many customers will start to trade down as people are worried about their finances. However, what these results also show is that the brands that have fared best were the best-known ones such as Christian Dior. This matches our prediction that in a time of crisis consumers will choose to opt for brands that are well-known and seen as trustworthy, as was the case during the 2008 recession.”