LVMH (Louis Vuitton, Fendi, Dior, Givenchy, Guerlain, Hennessy and Sephora), the world number one in luxury and the leading French market capitalization, announced a net profit divided by six in the first half. Its operating margin, an indicator of its profitability, sagged to 9% – against 21% a year earlier. The fall was severe for all the big luxury houses, subscribing to good growth quarter after quarter. But in the space of a few months, the forced closure of most stores and production sites around the world cost them billions of euros in sales.
“Make the back round”
The giants of the sector Kering and Richemont thus saw their turnover plummet by 43% and 47% respectively between April and June over one year, while that of the saddler-leatherworker Hermès plunged by 41%. As for Italian houses, it is not better: the half-year sales of Salvatore Ferragamo were almost halved, and those of Prada collapsed by 40%.
Apart from reducing their spending or boosting online sales as much as possible (read elsewhere) – which take advantage of confinement and traffic restrictions – luxury groups have few levers of action in the face of a health crisis that simultaneously affects l all of their markets around the world. “We must take shelter: reduce costs, reduce capex (investment expenses, Editor’s note), protect key assets”, highlights Luca Solca, Luxury analyst at Bernstein. For him, the Covid-19 will be clearly “An accelerator for digital development, as well as for integration” within large groups, small suppliers or subcontractors in order to better secure production and supplies in the future. “The short term remains very uncertain. The groups do their rounds and wait for the momentum to resume ”, summarizes Arnaud Cadart for Flornoy & Associés. And even if there is “Positive signals from China, in all the other consumption areas such as Japan, Europe, the United States and the oil-producing countries, there is a huge wait-and-see attitude”, he warns.
It is at this beginning of the recovery observed in the Chinese market that all the brands are hanging on to envision a slightly brighter future, Asia (excluding Japan) representing on average a third of their worldwide sales. (
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