LVMH shares were up by 2.7% in early session trading on Wednesday, upon news that sales at the luxury goods giant had bounced back quicker than expected in 2021.
This share price boost not only shows the confidence that investors have in LVMH but also its resilience in periods of economic downturn, cementing it as the biggest and healthiest luxury goods company in the world. In fact, the rise also lifted the shares of rivals Kering and Hermes.
LVMH has made a positive start to the year, despite strong headwinds
Late on Tuesday, the company posted its first-quarter 2021 revenues, which drew favourable comparisons to Q1 2020 and exceeded 2019 levels, with all business groups contributing to organic revenue growth except Selective Retailing. LVMH recorded revenue of EUR14bn ($15.9bn) for the first quarter, up 32% compared to the same period in 2020 and up 30% on an organic basis.
The fashion and leather goods segment is LVMH’s jewel in the crown and continues to deliver an exceptional performance. The segment achieved organic revenue growth of 52% in the first quarter of 2021 compared to the same period of 2020 and 37% compared to that of 2019. As always, the Louis Vuitton brand enjoyed a strong performance.
The company’s strong performance has been attributed to a strong performance in the United States and Asia, where demand has bounced. Furthermore, the continued strong momentum of online revenue has partly offset the impact of store closures in Europe.
Sales at the company fell 17% to EUR44.7bn ($50.9bn) during 2020, with profit down 28%, as the pandemic hit demand for perfume and high-end jewelry. Its ability to start the year on a positive note reinforces its position as the leading luxury goods company in the world.
Company has undertaken a number of initiatives to ride out the pandemic
The group tried to navigate the crisis primarily by cost control measures and the adoption of digital technologies. LVMH announced the trimming of its previously declared dividend by 30% and is also taking measures to cut down operational costs.
In September 2020, LVMH pulled out of its $16bn takeover of Tiffany & Co. The Board formed to review the deal suggested deferment of the deal until January 2021 because of the threat of taxes on French products by the US. The deal was completed on January 7, 2021 and in its first quarter review, LVMH identified a positive perimeter effect related to first consolidation of Tiffany & Co more than offset negative currency impact.
It has also tested various digital platforms to reach out to its customers. For instance, the company held its first live stream on a mobile app in China, to increase its customer reach and boost sales during the crisis. Initiatives such as this have been crucial in boosting online sales for the brand.
LVMH teamed up with OneStock, a unified inventory software suite for omnichannel retailers, in January 2020 with one of its brands, leveraging the agile order management technology solution to optimize US-based cross channel operations and improve the customer shopping experience. LVMH has since extended the One Stock partnership to other leading brands to help meet the demand for digital channel growth post COVID-19.