LVMH outshines in Q2 as European recovery offsets sales drop in China

Luxury good group LVMH Moët Hennessy Louis Vuitton reported second-quarter revenues beyond analysts’ expectations, with extensive progress in the United States and retrieval in Europe which helped mitigate the dwindling sales in Asian businesses primarily affected by the Chinese lockdown.

The corporation is upbeat about premium spending in the United States while at the same time being wary about the speed of the pivotal Chinese market’s recovery.

The French firm, which holds numerous deluxe labels spanning from Tiffany & Co. to Moet & Chandon, has plugged into fierce post-COVID-19 demand for its designer brands with the resumption in socializing and shoppers splurging their racked-up savings from the pandemic, dismissing apprehensions about volatile stock markets and price inflation.

In the three months to June 30, LVMH's sales boosted 19 % year-on-year to USD 18.95 billion, exceeding market predictions of USD 17.47 billion. 

This was also driven by some high-end discretionary spending making its way to Europe as visiting Americans took advantage of the stronger currency, indicating that a potential U.S. recession might not severely impact the consumption of luxury goods.

However, analysts claim that as a direct consequence of COVID-19 restrictions, earnings in China fell by an intense double-digit.

Notably, the fashion and leather goods branch, led by Louis Vuitton and Dior, increased its operating profits to 41.4 % in the third quarter. Despite logistics and supply constraints earlier in the year, wine and spirits revenues rose by 30%, whereas selective retailing, which consists of cosmetics brand Sephora, grew by 20%.

It is worth mentioning that while the group might not make noticeable price adjustments in the latter part of the year, they received no consumer backlash after most labels raised prices by 3% to 8%. This suggests that the French luxury conglomerate is likely to weather any economic downturn while serving as a model for competitors.

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