Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lvmh Moet Hennessy Louis Vuitton SE (LVMHF, Financial) reported EUR41.7 billion in revenues for the first half of 2024, up 2% year on year on an organic basis.
- Operating margin reached 25.6%, significantly exceeding pre-COVID levels.
- Free cash flow bounced back 74% to EUR3 billion, indicating strong cash generation.
- Fashion and leather goods division showed good results with operating margins remaining at an exceptional level of 38.8%.
- Sephora achieved double-digit revenue growth and significant market share gains, notably in the US, Canada, France, and the Middle East.
Negative Points
- Profit from recurring operations decreased by 8% year on year, impacted by a 5% negative currency effect.
- Wines and spirits division saw a 9% decrease in revenue on an organic basis, with weak demand for champagne in key markets.
- The Chinese market for cognac remains challenging with soft demand and cautious retailer inventory management.
- Watches and jewelry division experienced a 3% organic decline in revenue, with a significant negative currency impact.
- DFS continued to be affected by the uneven recovery of global travel, with revenue still below 2019 levels in Europe, Hong Kong, and Macau.
Q & A Highlights
Q: Can you provide insights on demand growth trends by nationality, especially in the fashion and leather goods division?
A: Jean-Jacques Guiony, CFO: The US and European customers are doing slightly better, while the Chinese customer is holding up well but at a slightly lower rate than in Q1. The Japanese customer is somewhat penalized by recent price increases.
Q: How do you view the moderation scenario with American consumers facing price increases?
A: Jean-Jacques Guiony, CFO: We do not plan to adjust the price mix significantly. Our long-term strategy focuses on boosting mix through marketing and distribution strategies, despite current pressures on aspirational customers in the US and Europe.
Q: What is your update on sourcing practices in Italy, especially regarding recent headlines involving Dior?
A: Jean-Jacques Guiony, CFO: We accept full responsibility for the issues with a supplier of a supplier. We are intensifying audits and controls and accelerating vertical integration, particularly at Dior, to prevent such issues in the future.
Q: Can you comment on the consumer sentiment in China and the outlook for the second half?
A: Jean-Jacques Guiony, CFO: The Chinese market remains challenging with mixed performance. Fashion and leather goods are holding up well, but watches and jewelry are suffering. We are cautious about the outlook due to the complex tax system and potential reforms.
Q: What are your plans for marketing and general administrative expenses in the second half?
A: Jean-Jacques Guiony, CFO: We will continue to control marketing expenses while maintaining necessary investments. General and administrative expenses have increased due to the need to adjust to the business growth since 2019, but we aim for a lower growth rate in the second half.
Q: Can you provide an update on the performance of Louis Vuitton and other brands within fashion and leather goods?
A: Jean-Jacques Guiony, CFO: All brands are performing closely around the average, with slight variations. Louis Vuitton remains in positive territory, and the overall performance is grouped around the reported figures.
Q: What are the trends in the US market by geography and nationality?
A: Jean-Jacques Guiony, CFO: The US market is stable with slight improvements in fashion and leather goods and wines and spirits. However, selective retailing has slowed down slightly. US nationals' performance in fashion and leather goods has improved from mid-single-digit negative to low-single-digit negative.
Q: Can you elaborate on the strategic focus and challenges for Tiffany in North America?
A: Jean-Jacques Guiony, CFO: Tiffany faces pressure due to the aspirational customer segment, bridal category, and the focus on iconic collections. The strategy is to elevate the brand and increase the share of iconic collections, which takes time and investment.
Q: How do you plan to manage the price resistance and trading down in the champagne market?
A: Jean-Jacques Guiony, CFO: We will manage through brand investment, promotions, and maintaining prices. We do not intend to lower prices but will use promotions to support volumes.
Q: What are the trends in the beauty market, particularly for Sephora in the US and China?
A: Jean-Jacques Guiony, CFO: Sephora continues to perform well across all categories, including makeup and fragrances. We do not see a major slowdown and are not significantly impacted by competitors like Amazon.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
