The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.
LVMH delivered double-digit growth in 2019, though worries about the coronavirus hovers over the group’s projected performance for 2020. The company’s stock price rose by 2.74% to €412 a share at yesterday’s market close in Paris.
Moreover, China’s financial performance for the world’s largest luxury group was not reported separately in yesterday’s full-year financial report call, but it was mentioned 18 times in the report. Analysts and the press, however, raised questions about the escalating impact of China’s coronavirus outbreak replacing Hong Kong protests as their top concern for the region.
With that, here are the top four things you need to know from LVMH’s 2019 financial results:
- Excluding Japan, the Asia market’s contribution to LVMH’s revenue continues to grow. It now accounts for 30% of the group’s revenue of €53.7 billion in 2019, which rose by 1% compared to the 2018 fiscal year. It was also up by 1% from 2017 to 2018.
- China has become Guerlain’s number one market, while other houses in the perfume and cosmetic sector are also doing well in the region. Overall, the sector produced €6,835 million in revenue, with 40% coming from Asia.
- Duty Free Stores (DFS) in Hong Kong experienced a major slowdown given the on-going protests. LVMH's selection retailing sector that includes department-store-like-shops like DFS and Sephora, was saved by the latter. The whole sector delivered 5% organic revenue growth.
- Analysts were concerned about LVMH facing the impact of the coronavirus in China, but LVMH CEO, Bernard Arnault, said he couldn’t answer questions about the potential impact because, at this time, no one knows the extent of the outbreak or how long it will last, stating: “If it dies out in two months and a half, it's not terrible. If it takes two years, it will be a totally different matter.”
The Jing Take
As the numbers show, Asia, and particularly China, continues to play an increasingly important role for LVMH — no matter the crises in the region. In the report, LVMH countered the continuing Hong Kong situation “by drawing on momentum at other destinations,” but can the whole group afford to do that? Also, as the trade war and Hong Kong protests linger on, the addition of the coronavirus outbreak sets yet another test for the luxury group.
And Arnault is right about the uncertainty. As fears over the coronavirus intensifies, the Dow and the Samp;P 500 have both dipped. On Monday, China announced that the Lunar New Year holiday was extended to February 2 as one measure to keep citizens home and minimize the risks of spreading the virus further.
Still, LVMH is doing well in Asia, and considering that a host of LVMH brands, including Bvlgari, Hublot, Fendi, Loro Piana, and Sephora, have either opened stores in China in 2019 or are planning to reinforce their influence there in 2020, it’s important to keep an eye on their progress as they — and so many other luxury groups and brands — try to navigate a region that is currently struggling with so many obstacles.