Luxury Brand LVMH Shows 84% Decline in Net Profit

French luxury brand, LVMH Moët Hennessy (LVMH) closed the first half of 2020 with a net profit of 522 million euros. This figure is 84% lower than the first half of 2019.

LVMH and the Coronavirus Pandemic

As proven by even the biggest of brands, no company has been immune from the effects of the coronavirus pandemic. LVMH is no exception. The group, run by French billionaire Bernard Arnault, is a French conglomerate. It features designer brands Dior, Fendi, Sephora, Louis Vuitton and Givenchy, among others. Their turnover between January and June of 2020 was 18,393 million euros. This is a 27% decrease. Analyst forecasts predicted a profit of €2.7 billion for the first half of the year. 

Preventative Measures

These drops in revenue happen in spite of cutting costs. LVMH reduced operational costs in the wake of the pandemic. They slashed spending on store leases, ceased hiring, and paused advertising all in an effort to curb spending. 

Travel Restrictions

Travel restrictions were the main reason for the epic drop in revenues. LVMH is heavily reliant on shoppers from the US and China shopping in their shops based in the European fashion capitals. Of course, with the travel bans in place this year, revenues have plummeted. In 2019, Chinese shoppers made up 40% of global sales and drove 80% of the growth.

Fashion and Leather 

Logically, fashion and retail experienced a huge drop. With worldwide shop closures and people staying at home, these figures are unsurprising. The patterns shown by LVMH fashion and retail division mimic those of other fashion brands. Within the total revenue, 7,989 million euros came from the fashion and leather division. This is a 23.4% drop from 2019. The retail area fell by 31.8% to 4,844 million euros. Within this, the watches and jewellery segment also dropped by 38.2%, to 1,319 million euros.

Cosmetics and Perfumes

The cosmetics and perfumes division billed 2,304 million between January and March 2020, a 28.8% fall from 2019.

Wines and Alcoholic Beverages

Perhaps surprisingly, LVMH sales of wines and alcoholic beverages fell by 20.2% to 1,985 million euros. This is interesting given that people were reportedly consuming more alcohol during the lockdown period.