LVMH market stalls in 2022, bets on recovery in China in 2023

Geopolitical tensions, war in Ukraine, inflation, high prices of energy and commodities, not to mention the consequences of the pandemic… Faced with uncertainties over the past year, LVMH has shown incredible resilience, reaching sales of nearly 80 billion euros by 2022. This is due to the careful distribution of the company’s operations around the world with the United States accounting for 27% of total sales. autumn, Europe 24% and Asia 30%. For 2023, its targets are set in China, where a strong recovery is expected this year.

The group’s chief financial officer, Jean-Jacques Guiony, summed up at the geo-sales presentation: “Balanced sales by geographical area is both frustrating and not annoying. Between Europe, Asia and the United States, we’ve struck a pretty interesting balance.” results on Thursday night in Paris. It should be noted that Japan remains at 7%, while specifically, France will increase the rate from 6% in 2021 to 8% a year later, just as Europe (without France) increases the rate from 15 16% in one year. year.

While sales in Japan jumped 31% last year, with the country “waking up quite spectacularly after a very slow recovery from Covid”, in Asia, excluding Japan, sales Sales numbers remained stable. According to the executive, the area is “a bit more complex, unstable and contrasting”. In particular, Q2 and Q4 saw sales decline by 8% quarter-on-quarter, due to the prolonged quarantine period in mainland China, with growth pressures remaining due to hygiene reasons across the region. area. Thus, by 2022, Asia’s market share will drop to 30% from 35% in 2021.

However, LVMH management is confident for 2023, betting on a recovery in China. Although it is difficult to make a forecast, CEO Bernard Arnault stressed that the country needs economic growth, believing that Chinese leaders “will definitely use the period ahead to revive China’s growth. If that is the case, we have every reason to be confident, even optimistic.” Chinese people can now travel without having to submit negative PCR test results or health QR codes,” the development is amazing. The stores are full. It’s back on track. ,” said Bernard Arnault, who believes that Chinese tourism is likely to resume in the second half of this year. Even if it takes a while before the pre-Covid momentum is restored.

However, Jean-Jacques Guiony warned. “It’s a bit early to change our budget outlook. We’re in for a few weeks of improvement, which leads us to believe that what happened in China in December is really just a blip and this page seems to be turning. That boosts our confidence, but it doesn’t change our short-term plans. For him, “Chinese customers will still find it difficult to leave China in the near future. some time”, due to flights, complicated visas with Korea and Japan, and less tests For example, 48 hours is required to travel to Hong Kong, which limits travel In any case, “traffic in China is not back to 2019 levels. In fact, we are still relatively far away from it. In December we were 85% below the 2019 level. In January, even if it has improved, we are still at -35-40%,” he stressed.

Meanwhile, the number one position in luxury goods can be attributed to the United States – its main market – continuing to gain ground, growing from 26% to 27% market share for the year, even as Since this summer, a large number of US customers have made their purchases in Europe. The first two quarters performed better with 26% and 22% gains, while the last two quarters actually showed a slowdown (+11% and +7%). This is because the basis of comparison in the first half of the year is very favorable, when in the same period in 2021 many stores are still closed due to the epidemic. In addition, the appreciation of the dollar in the second half of the year created an influx of tourists to Europe attracted by the opportunity to buy goods while benefiting from a strong dollar.

The fact is that sales in this country have grown by 15% in 2022. They are therefore in line with the 10% or more growth recorded each year by the company in this market since 2010. In any case, LVMH does not believe in the slowdown demanded by the Americans. “When you look at Sephorasales in the US, the best quarter of the year was the fourth quarter. Sephora remains a pretty interesting barometer of what’s going on in the luxury industry. So we’re not particularly worried,” said Jean-Jacques Guiony.

In Europe, the company’s revenue grew 35% by 2022. As the manager explains, “growth that we don’t have in the United States is found in Europe, with a very poor basis of comparison. at the beginning of the year, while maintaining extremely sustainable growth over the past two quarters, including the last quarter.” Finally, the share of other markets in the group’s total sales also increased, increasing from 11% to 12% between 2021 and 2022.