Luxury Makers Will Face A More Difficult Year

LVMH group's LV brand will face serious challenges in 2016.

The slow growth of the industry has worsened again. LVMH group said its portfolio includes LV, Dior, Givenchy, Celine and so on.

Fashion

Sector growth stagnated in the first quarter.

In the first three months ended March 31st, the group's turnover increased by 3.6% to 8 billion 620 million euros ($9 billion 510 million), excluding the effect of exchange rate, and the turnover increased by 4%, which was lower than analysts' expectations.

The group pointed out that the weak growth of performance was mainly affected by the European social instability and the negative impact of the Hongkong market's weakness. The group's fashion and leather products sector achieved zero growth in performance, far below the analyst's 2.5% revenue growth forecast, while the Department recorded an increase of about 3% in the first two quarters.

Some analysts pointed out that the luxury goods manufacturer will face a more difficult year.

Terrorist attacks in Paris and Brussels are affecting sales revenue in Europe. In addition, the group slowly expanded in mainland China and Hongkong, and began to close unreasonable stores.

The LVMH group described its performance in Asia as "changeable", while in France it was negatively affected by the decline in the number of tourists.

First quarter 2016 results report

Performance report for the first quarter of 2015

The organic revenue of wine and spirits sector increased by 6%.

Champagne products got a good start at the beginning of this year, especially in Europe.

Hennessy has maintained outstanding performance in the United States.

In China, since the dealer's inventory impact in 2015, the first quarter showed a good trend.

Other spirits such as Glenmorangie and Belvedere are growing steadily.

The growth of fashion and leather goods business is stagnant.

LV is undergoing massive innovations in various categories.

Fendi is driven by its leather and garment product line, and its overall performance is excellent.

Celine and Kenzo have made a good start this year.

Donna Karan and Marc Jacobs need to innovate the product line.

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In terms of perfume and cosmetics, the organic growth of revenue in the first quarter of 2016 was 9%.

Christian Dior benefited from the extraordinary success of Sauvage and logo perfume J'adore and Miss Dior, and gained strong growth data.

The launch of the new Poison Girl perfume series is also the biggest highlight of the first quarter.

On the basis of the success of perfume, Guerlain expands its La Petete Robe Noire product line and adds make-up products.

Benefit continues to make strong innovations in cosmetics.

Make Up For Ever and Kendo brand portfolio are also expanding rapidly.

In the watch and jewellery business, although China's market is weak, its clocks and jewellery sectors are eye-catching, compared with the 3% growth in the previous quarter, which has gained 7% in the current quarter.

This is mainly due to the success of the repositioning of the Heuer table and the strong demand for Bvlgari jewelry.

On the selected retail business, the organic growth of revenue in the first quarter of 2016 was 4%.

Seif continued to seize market share all over the world.

North America maintains its extraordinary growth rate.

DFS continues to face an uncertain economic environment in Asia.

This season, T Galleria, opened in Siem Reap, Kampuchea, is a highlight.

In the past month, LVMH group's share price has fallen by nearly 10%.

The market value is currently 74 billion 51 million euros.

Exane BNP Paribas analyst Luca Solca said LVMH's fashion and leather products accounted for so much in the industry. Zero growth in this quarter indicates that the luxury industry is regressive.

Last week, consulting firm Bain & Co predicted that this year's luxury growth will be at a low ebb, mainly due to the decline of European tourists, the sluggish Hongkong market and the weak mainland market. Last Friday, Italy luxury group Prada announced a 27% drop in profits last year.

Earlier, LV reported that it had quietly started its store closing plan in the mainland.

At the end of February, one of the shops in Shanghai and Taiyuan was closed at the same time, and LV began to reduce stores in Chengdu and Shenyang earlier.

People familiar with the matter say that LV has started an integrated branch store plan in China. Apart from three places in Beijing, Shanghai and Hangzhou, there will not be more than one branch in other cities.

For the downtrend of LV, LVMH group also began to change the brand image and positioning, including developing the new product line of LV, weakening the brand logo and exposing and attracting young consumers.

In the Chinese market, the group has begun to clearly control the pace of LV opening and expansion.

Earlier reports showed that 20% of China's LV stores will be closed before the middle of this year due to the deterioration of the luxury market in China. At that rate, an average store will be closed every month.

The LVMH did not disclose data outside the first quarter of turnover and profit, but said its goal is to increase its global luxury leadership strength, and earnings reports mentioned that Donna Karan and Marc Jacobs had IPO plans.

According to the latest financial data of LVMH, consumers' consumption of alcohol and cosmetics has increased, but it seems that they do not like shopping for bags.