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LVMH soars in H1 2019 thanks to Dior and robust investment strategy

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Nicola Mira
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today Jul 26, 2019
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On Thursday, the day after the publication of LVMH’s H1 results, the French luxury group surged on the Paris Stock Exchange, its share price up by more than 2.8% at midday, as the group climbed to the top of the euro zone in terms of market capitalisation. The world’s number one luxury group can’t be anything other than satisfied, having topped the €25 billion mark in revenue, its leading division, Fashion & Leather Goods, exceeding €10 billion. The latter’s sales skyrocketed in the first six months of the year, rising 21% (with organic growth at +18%) to €10.4 billion, driven by its star labels Dior and Louis Vuitton.


Christian Dior presented the 2020 cruise collection in Marrakesh, Morocco - PixelFormula


“Dior grew at a rate faster than the division’s,” said the chief financial officer of LVMH, Jean-Jacques Guiony, in a video conference with financial analysts, mentioning also “an improvement in margin” for the label which joined the group in 2017, and this despite “a highly significant level of marketing and commercial investment.” Guyoni added that “there is a clear willingness to invest in the label.” Dior notably opened a new store on the Champs-Elysées in Paris, taking over as the label's flagship in the French capital while the historic avenue Montaigne store is undergoing renovation work.

The collections designed by new menswear Creative Director Kim Jones have been a hit, while on the women’s side, the 30 Montaigne handbag line is an unmitigated success. In H1 2019, Christian Dior Couture, whose sales are estimated by analysts at €2.5 billion, “recorded exceptional growth in all product categories, owing to sustained demand by clients in all commercial regions,” said the director of financial communications, Chris Hollis.  

As for Louis Vuitton, the group's other driving force, in the first half of this year it “posted a remarkable performance in all its areas of expertise and all its commercial regions, maintaining an exceptional level of profitability while continuing in a policy of extensive investments,” said LVMH.

As Guiony put it, “global performance is very positive for most of [the group’s] brands, if not all of them, and for the majority of commercial regions. This is true not just for Louis Vuitton and Dior, but also for most of the other labels.” Among the other brands mentioned for their satisfactory results were Loewe, Rimowa, Berluti, Fendi and Loro Piana. Instead, Celine, Kenzo and Givenchy weren't included in the list.

The operating margin for LVMH’s Fashion & Leather Goods division as a whole lost 1.1 percentage points however, down to 31.2% compared to 32.3% a year earlier, with a current income of €3.2 billion, up 17% in comparison with H1 2018. According to LVMH’s management, this margin decrease is explained, as well as by exchange rates fluctuations, by the extremely robust investment strategy deployed by the group in this highly buoyant period, involving several brands, “not all of them at the same stage of development.”

According to Guiony, the group is “actively investing in all its brands. Marketing initiatives and spending are both up. It's not just a case of putting pressure on our brands during a positive spell. Of course we invest when business is going well, but the goal isn’t only to sustain the current trend, but also to strengthen our brands, making them more resilient in dealing with the global environment if and when the latter were to become tougher. It clearly is the right thing to do now, if we want to further boost the strategic worth of our portfolio.”

It is worth noting that Celine has absorbed a significant amount of resources, with the arrival of Hedi Slimane, the launch of menswear and the opening of new monobrand stores.

LVMH’s objective is to reinforce its brands as a whole since, as Guiony said, “the stronger they are, the stronger the group is.” The largest share of the costs generated by this energetic investment strategy is down to marketing. Above all, because marketing investment delivers short-term results. And also because, if the economic climate or the group’s overall growth were to cool down, marketing investment can be quickly downsized, unlike the costs relating to the development of a retail network, thus affording each label a greater flexibility.  

However, investing in new projects is considered essential to drive the group forward, according to Guiony: “We need to take the initiative, investing in activities whose worth may not necessarily appear obvious when we make the investment. I think this is one of the elements which help LVMH maintain its position as a group at the vanguard of the competitive field, not only in terms of brands, but also in strategic terms.” An example of this is LVHM’s newest label, Fenty, created from scratch with pop star Rihanna.

“The idea is clearly to invest in a variety of brands which aren’t necessarily similar to those we have had experience of in the past. Some of them enable us to acquire new knowledge, others generate added value. It's down to us to be clever enough to get the best out of them,” concluded Guiony.

Above all, LVMH is pragmatic, investing in new business when the time is right, yet proving to be flexible enough to tweak its strategies based on the global situation and on market requirements. Provided of course that the group carefully evaluates its investments and the risks it takes, and is able to maintain a certain balance.

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