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Wednesday 1 October 2014

LVMH profits hit by China slump

29th July, 2014 by Lauren Eads

Destocking in China continued to impact Moët Hennessy Louis Vuitton (LVMH) in the second half of 2014, which has posted a 15% drop in profits in its wine and spirits portfolio.

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Bernard Arnault, chairman and CEO of LVMH

Overall, the company reported an increase of 3% to its revenue in the first half of 2014, recording revenue of $14 billion with organic revenue growth increasing by 5% in comparison to the same period in 2013, with continued growth in in the US and Asia and “good resilience” in Europe despite a “challenging economic environment.”

However the company’s wines and spirits performance was impacted by continued de-stocking by distributors in China due to continued austerity measures.

With the company’s wine and spirits portfolio, organic revenue declined by 1% in the first half of 2014, compared to the same period last year, while profits dropped by 15%.

In a statement released today, LVMH  said: “This trend essentially reflects the performance of Cognac in China, linked to de-stocking by distributors, which continued in the second quarter.

“The Champagne business, with its fast growing prestige vintages, experienced a good start to the year. In an environment characterized by persistent uncertainty in Europe, the US market continued to enjoy good dynamics. The business group remained focused on its value strategy: firm pricing policy and strong innovation accompanied by sustained investments in brand communications and in developing its production capacity.”

Overall, across all of its business groups, the company reported an organic growth of 3%.

Bernard Arnault, chairman and CEO of LVMH, said: “The results of the first half demonstrate LVMH’s excellent resilience, thanks to the strength of its brands and the responsiveness of its organization in a climate of economic and financial uncertainties.

“The first half of the year also witnessed the smooth integration of Loro Piana into the Group. Following the first half’s good resilience, it is with confidence that we approach the second half of the year and rely on the creativity and quality of our products, and the effectiveness of our teams, to pursue further market share gains in our traditional markets, as well as in high potential emerging territories.”

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