[Overseas Stocks Spotlight] “LVMH, Fashion Segment Sales Recovery... Interest Remains Valid from Consumption Recovery Perspective”

[Asia Economy Reporter Eunmo Koo] LVMH Mo?t Hennessy Louis Vuitton (LVMH·MC FP) announced its third-quarter results for the 2020 fiscal year. Amid signs of a recovery in sales within the fashion sector, there is analysis suggesting that interest in consumer recovery remains valid.

LVMH reported third-quarter sales of 11.4 billion euros for the 2020 fiscal year, a 7% decrease compared to the same period last year, meeting market expectations. On the 18th, Eunhye Lim, a researcher at Samsung Securities, stated in a report, “After experiencing double-digit sales declines in the first half of the year, a trend of sales recovery was observed. Not only did the core fashion sector show strong performance, but sales in the alcoholic beverages sector also showed some normalization.”

By business division, the fashion and leather goods division grew 12% year-on-year to 5.9 billion euros, while the wines and spirits division decreased by 3% to 1.4 billion euros. Researcher Lim explained, “The fashion and leather goods division saw strong sales from Louis Vuitton and Christian Dior. In the wines and spirits division, champagne showed signs of recovery mainly in Europe and the United States, and cognac benefited from U.S. consumer stimulus measures.”

Meanwhile, the perfumes and cosmetics division recorded a 16% decline to 1.4 billion euros, and the watches and jewelry division shrank by 14% to 900 million euros. Lim noted, “Perfumes and cosmetics saw sales recovery centered on skincare products, but the impact of reduced travel demand remained. The watches and jewelry division showed signs of sales recovery in China.” Lastly, the selective retailing division posted 2.3 billion euros, down 29% year-on-year, as positive online sales at Sephora were offset by continued declines in duty-free sales.

Due to ongoing uncertainties, no guidance was provided. However, as mentioned in the half-year results, the company reaffirmed its focus on cost and investment efficiency in the second half, as well as on redefining existing brands and strengthening market share.

Meanwhile, LVMH is currently involved in litigation with Tiffany. Regarding the merger, nine out of ten regulatory approvals have been obtained so far, and approval from the European Commission is expected by the end of this month. The trial is scheduled for January 5 next year, making the merger effectively uncertain.

Although the prolonged COVID-19 pandemic has dampened expectations for recovery in the consumer goods sector, interest remains valid in leading stocks from the perspective of consumer recovery expectations. Researcher Lim said, “Sales normalization centered on key fashion companies is being observed rapidly, and LVMH is also showing remarkable sales normalization within the luxury sector. The fact that the fashion division, which accounts for the majority of sales, has shifted from negative to positive growth proves this.”