As COVID-19 shook the world in 2020, businesses across the globe faced a downward spiral. As expected, luxury brands were no different. Read: The World of Luxury – Post Coronavirus. Chanel Foresees Tougher Times Ahead
However, with the year now in the books, we can see just how bad (or not so bad) it was. Based on recently reported 2020 financial results for LVMH, parent company to Louis Vuitton, Dior, Fendi, Celine and many more, the conglomerate faced an overall decline.
However, the news isn’t all bad. Indeed, the results come with a silver lining:
- LVMH reported a global annual sales decline of 17% for the year ended 2021.
- However, Q4 sales were down only 3%.
- The performance of the last quarter was buoyed by the group’s fashion and leather business that was up a heartening 18%.
- Louis Vuitton and Dior were the primary contributors to the fashion and leather business’s performance.
Sealing of international borders brought tourism to a screeching halt early in 2020! Domestic lockdowns and the fear of the virus ensured people stay within the periphery of their homes.
How then did this happen?
Blue Chip Value of the Brands
One theory lends support to the fact that people leaned on renowned and recognisable brands, if any, during the pandemic. Resulting in marquee brands like LV and Dior doing better than smaller ones under the conglomerate.
There is another school of thought that believes that the lack of travel, dining experiences and other expenses that add up, resulted in some savings for Americans which got diverted towards buying ‘that something special’. Purchases from brands like LV and Dior ruled the roost in these circumstances. This is likely to come back to normal in a post Covid 2021.
LVMH’s Chief Financial Officer Jean-Jacques Guiony gave credit to some of the cost control actions taken at Louis Vuitton. This strategy got aided by the multiple price increases as well. Louis Vuitton increased its prices not once, but twice during the pandemic!
“After several years of flat prices, I think 2020 was the year to do that,” he said, during a call with analysts.
Innovation via New Releases and Digital Events
Further cushioning the financial blow was Dior’s successful launch of the ‘Bobby’ handbag and it’s fashion show last July in Lecce, Italy. “We did it when nobody else was talking,” Mr. Guiony said. “It was really Dior and Vuitton taking the bulk of the customers’ attention.” He believes that it was the launch of successful products by both fashion houses and the sustainable digital fashion show formats that provided the much needed uplift to the parent company’s revenue charts.
Online sales accounted 9% to the group’s revenue in 2019.
LVMH, reportedly refused to release the corresponding figure for 2020. Citing unusual circumstances that resulted in higher than average figures that are unsustainable and would set unfair expectations for the future, as the reasons for the secrecy . Leading us to believe that it was one of the saving graces for the conglomerate in the year gone by.
The Asia Factor
The global sales report for LVMH reveals a rise in revenue of 21% in Asia! Despite not being able to travel, Asians took to shopping locally. Read: Louis Vuitton Hits Record High Sales of $22M in Shanghai. Europe, on the other hand, reported a 28% decline! However, officials are hopeful of a revival in sales, slowly but surely in the European market, as travel is sure to gradually open up and reboot dwindling figures.
The news of LVMH’s results comes in against the backdrop of a reported decline of 21% in the personal luxury goods market in 2020 (as reported by Euromonitor). Resulting in LVMH stock soaring to reach an all-time high, making LVMH owner Bernard Arnault one of the wealthiest men on the planet!
Finally, what the world will face in 2021 as the aftermath of the pandemic, is yet to be seen. But analysts remain optimistic based on these encouraging reports and the invention of the vaccine; and envision growth and sustenance of luxury fashion brands.
What do you make of these results? Does it provide that much needed ray of hope for you?