Little Sign of Slowdown for Luxury's Big Three


Sophie Doran | August 06, 2012

Strong earnings reports from LVMH, PPR and Richemont demonstrate little sign of the predicted slowdown in China, and confirm an increased consumer interest in hard luxury

Profits at Bottega Veneta increased by 58% in the first half of 2012 (Image: PPR)

Strong earnings reports from LVMH, PPR and Richemont demonstrate little sign of the predicted slowdown in China, and confirm an increased consumer interest in hard luxury

Earlier in July, brands such as Burberry and Cartier had the industry shook, as the former reported sales that missed analysts’ estimates, and the latter confirmed that sales in Mainland China were increasing, but not at the same rate as 2011. As two of the strongest performing brands of recent times, analysts immediately raised concerns that Europe’s debt crisis and slowing growth in China may be hurting demand for high-end goods.

Yet the most recent results postings by LVMH, PPR & Richemont – luxury’s biggest three conglomerates – paint a far less pessimistic picture. Both PPR and LVMH reported strong first-half profit growth, driven by sales in ‘hard’ luxury goods such as watches and jewellery, whilst Richemont confirmed a sales increase of 24% for four months ended this July.

Perhaps most importantly, growth continued to be evident in emerging markets such as China, where neither company reported a slowdown despite concerns that the world’s second-largest economy may be cooling.

“In a world where companies are struggling with diving European demand and media are awash with bad news, luxury-goods companies like LVMH and PPR seem to be coming from another planet,” explained Luca Solca, global head of European equities at CA Cheuvreux to Bloomberg. “The revenue and profit performance of PPR and LVMH are very satisfying.”

“ In a world where companies are struggling with diving European demand, LVMH and PPR seem to be coming from another planet ”


LVMH, by far the biggest largest luxury conglomerate in the world, reported a rise in first-half revenue by 12% to €12.97 billion, driven by strong growth in selective retailing and a surge in sales in the wines & spirits division. Profit from recurring operations increased by 20%, again fuelled by strength in its selective retailing business, alongside a well performing watches & jewellery division.

Analysts were somewhat disappointed by a more modest revenue rise of 10% in the fashion & leather goods division, which includes brands such as Louis Vuitton, Givenchy & Celine. LVMH noted that marketing costs had pulled down the margin of Louis Vuitton, but remained confident that brand’s profits will recover in the second half.

Results: LVMH


Earlier this May, the world’s second largest luxury goods group Compagnie Fianciere Richemont, posted record sales and profits in fiscal year 2012. Overall sales increased by 29% year-on-year to €8,867 million, while the company’s profit increased by 43% to €1,540 million, attributed in part to aggressive retail expansion in Mainland China and the re-invigoration of boutiques in Europe and China.

Most recently, Richemont executives explained to Reuters that operating and net profit were likely to increase by between 20% and 40% in the first half of 2012 as sales surged. The Swiss maker of IWC watches and Cartier jewellery said trading for the four months ended July 2012 showed sales rising 24% on a reported basis from a year earlier.

“ We are confident that PPR’s full-year financial performance will outstrip that of 2011 – François-Henri Pinault ”


“PPR delivered a highly satisfactory performance in the first half of 2012,” noted chairman and CEO François-Henri Pinault, going on to report revenue growth of 17% in a “lacklustre economic climate.” Luxury and Sport & Lifestyle Divisions recorded a combined revenue increase of more than 25%, propelled by the sales momentum of all Luxury brands, across all regions.

PPR’s luxury division profit growth was up 30% for the half, with profits at Yves Saint Laurent rising more than threefold and profits at Bottega Veneta up 58%. “We are confident that we will be able to continue growing our revenue in the second half of 2012 and that our full-year financial performance will outstrip that of 2011,” expressed CEO Francois-Henri Pinault in a statement.

Results: PPR

Hermès, Remy Cointreau & L’Oreal

Hermès recently reported a 13.4% rise in Q2 2012 sales, led by a 26.9 percent sales increase in the Asia-Pacific region, where the largest source of growth (53.1%) came from the small and relatively new line of Hermes homewear and jewellery.

Though such results demonstrated a slight slowdown in the face of increasing economic turbulence, it stuck to its full-year target as emerging-market customers continue to flock to the iconic French brand.

Fellow French conglomerate Remy Cointreau saw a 24.4% increase in revenue, driven by cognac demand in Asia and the United States, as L’Oreal reiterated that it was on track to outperform its market in 2012. The world’s biggest cosmetics maker cited strong luxury sales and a recovering North American market as key in offsetting stagnation in Western Europe.

To further investigate the economics of luxury on Luxury Society, we invite your to explore the related materials as follows:

- Pessimism: The New Must Have Luxury Accessory in China?
- Luxury Brands Advance with Cautious Optimism
- For and Against: Consumption Slowdown, Luxury Goods

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