Having reported exceptional financials for the Q1 first quarter, luxury giant LVMH would appear well positioned to consider further acquisitions such as Armani or brands of Compagnie Financière Richemont – even if none of these firms are officially for sale. But having completed its $15.8 billion purchase of Tiffany & Co. in January, the largest acquisition in the history of the luxury industry – the French conglomerate said it was content to sit out any new round of market consolidation.
“We have other fish to fry,” Jean-Jacques Guiony, LMVH’s chief financial officer, bluntly stated on Tuesday. He explained that LVMH was taking a long-term view of the Tiffany turnaround, and needed all hands on deck to successfully complete the mission. “It’s really the number-one priority. It’s a big acquisition for us,” Guiony said.
“It’s a challenge for us, particularly at a time when integrating a company where most of the people, like it is the case everywhere else, are working from home,” he added. “We think we have to devote all our resources there, so we don’t want to dilute resources to other acquisitions.”
LVMH’s performance in the first quarter was boosted by the addition of Tiffany, which more than doubled the revenues of the group’s watches and jewelry division to 1.88 billion euros. Reflecting investor confidence, LVMH’s market capitalization on Tuesday crossed the threshold of 300 billion euros for the first time, having tripled since 2017. Overall revenues jumped 32 percent in the first quarter, as strong sales in Asia and the U.S. compensated for weakness in Europe, where many countries implemented renewed lockdown measures during the period.
Sales rose 30 percent in organic terms in the three months to March 31, versus a rise of 3 percent in the fourth quarter of 2020, and a 17 percent drop during the same period last year, when the coronavirus pandemic hit, closing stores and factories, and grounding international travel.
Organic sales in LVMH’s key fashion and leather goods division rose 52 percent year-over-year, reflecting the resilience of star brands Louis Vuitton and Dior. Compared with 2019, the division’s revenues were up 37 percent, a figure the financial community is likely to focus on as evidence of the segment’s strength. Dior outperformed the group’s other fashion brands, while Vuitton’s revenues rose in line with the division average. Celine, Loewe, Fendi and Marc Jacobs all recorded strong performances during the quarter.
After falling across the board in the last three months of 2020, sales in other divisions showed signs of recovery, with the exception of selective retailing, which includes Sephora and DFS, LVMH’s travel-retail business. The wines and spirits segment saw comparable revenues rise 36 percent year-over-year, perfumes and cosmetics were up 18 percent, and watches and jewelry gained 35 percent. Selective retailing reported a 5 percent drop in revenues.
Globally, jewelry did “significantly” better than watches, although high jewelry underperformed more accessible offerings, Guiony said. LVMH owns Bulgari, which it bought in 2011, along with Chaumet, Fred and luxury watch brands Tag Heuer, Hublot and Zenith.
Retail sales at Bulgari grew close to double digits, while Tiffany, which increased the prices on some of its silver products, saw an “excellent” start to the year, according to LVMH.
While declining to provide organic sales data for the U.S. jeweler, Guiony said its revenues calculated in dollars were up by 8 percent to 9 percent in reported terms in the first quarter of 2021, compared to the same period in 2019.
“As far as the brand is concerned, we were convinced that it was a very, very strong brand, and nothing in what we’ve discovered there makes us change our mind,” he said.“The potential is tremendous, and we have no doubt whatsoever on this particular front. With regards to what has to be done in terms of executing the appropriate strategy, we are not surprised either,” Guiony added.
LVMH has said several times that being quoted on the stock market was putting Tiffany under pressure to deliver short-term results, preventing it from implementing the necessary overhaul of its operations. Comparing the process with LVMH’s gradual restructuring of Bulgari, Guiony said it could not be measured in quarters.
“It will take years to do what we want to do with this brand from a distribution, merchandising and marketing viewpoint,” he said. “It’s a lot of work. We are committed to doing it. We are very hopeful that with the strength of the brand, we can achieve our objectives, and we will report them as they unfold.”
Earlier this month, Alexandre Arnault, executive vice president, product and communications at Tiffany, said collaborations would be part of the new strategy. Arnault made the statement on his personal Instagram account after asking his followers what they would like to see from one of America’s most iconic names, synonymous with diamonds, blue gift boxes and Audrey Hepburn.
For 2021, consultancy Bain forecasts growth that ranges from 10 percent to 12 percent, or 17 percent to 19 percent, depending on macroeconomic conditions, the evolution of COVID-19 and the speed of return to travel globally, as well as the resilience and confidence of local customers.
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