Image: Louis Vuitton

LVMH Moët Hennessy Louis Vuitton had an “excellent start” to the year despite an “uncertain” geopolitical and economic environment, reporting 21 billion euros ($23.32 billion) for the first three months, up 17 percent compared to the same period in 2022. The luxury goods titan highlighted Europe and Japan as enjoying “strong growth momentum” in Q1 and benefitting from “robust demand from local customers and international travelers.” Meanwhile, the United States, “a market which continues to grow,” had a “steady performance” during the quarter, and “Asia experienced a significant rebound following the lifting of health restrictions.” The group’s prized Fashion & Leather Goods division, alone, generated 10.7 billion euros ($11.88 billion), up 18 percent YoY, driven by success at Louis Vuitton, Dior, Celine, Loewe, Loro Piana, Rimowa, and Berluti.

In a corresponding conference call this week, LVMH management stated that it is “extremely optimistic for China in 2023,” as “numbers in the first quarter bode well for the rest of the year.” The U.S., on the other hand, is seeing a slowdown in demand for luxury goods, with LVMH Chief Financial Officer Jean-Jacques Guiony says that LVMH had seen a “little bit of slowdown there for its fashion and leather goods, as well as jewelry and watches.”

Another interesting takeaway: LVMH management spoke to the rise of “quiet luxury” in the call on Wednesday, saying that it does not see this trending in branding – or better yet, lack thereof – to be a problem since most consumers will continue to favor products with logos. “Nevertheless, LVMH has seen this no-logo luxury trend before and is prepared to accommodate all customers’ preferences,” Bernstein analyst Luca Solca stated in a corresponding note. “The company is ready to offer products tailored to clients’ needs, whether they prefer quiet luxury or more overtly branded items.” 

On the trademark/parallel market front, LVMH is “cautious” about business on China’s duty-free island of Hainan “due to concerns about grey market Daigou/parallel trading activities.” However, they are interested in the second phase of Hainan development, per Solca, “where Hainan is expected to become a tax-free region similar to Hong Kong.” This is expected to result in significant price differentials between the Chinese mainland and Hainan, which management expects will see 40 to 50 million tourists per year. 

As for Korea, “which is becoming an important market due to its growth and size, Chinese tourists, and Koreans shopping at home,” LVMH management says that it is satisfied with their performance in the local market, with Korean tourists, and controlling the grey market business there. (This is something that Chanel has similarly been working on, with the brand making headlines in 2021 and 2022 for putting quotas in place, including in the Korean market, to limit on the number of products that consumers can buy from Chanel each year to “protect customers and curb bulk buying,”)

At the same time, Solca states that the Chinese cosmetics market is “heavily disrupted by the grey/parallel market, which puts pressure on prices and margin,” including for LVMH. Management says the group has stayed away from discounting to protect the equity of its brands. This is point that they have previously made, including in the group’s 2020 annual report, in which management revealed that “in a sector suffering from the decline in international traveler spend and makeup, LVMH’s major brands chose to be selective in their distribution and, unlike certain competitors, limited promotions and refused to sell indirectly to the Chinese parallel market, which presents major risks to the medium term desirability for brands that follow that route.”