How LVMH Thrives on Selling Frenchness to Americans
27 July 2016 - 10:55PM
Dow Jones News
By Stephen Wilmot
Few brands are as exposed to European tourism as Louis Vuitton.
Given the recent slew of terrorist outbursts on the continent,
which have made wealthy Asians and Americans more reluctant to
travel there, parent group LVMH Moët Hennessy Louis Vuitton is
showing surprising resilience.
Two reasons stand out. First, Louis Vuitton accounts for only
half of LVMH's operating profit, and other brands are booming.
Hennessy cognac volumes rose 13% year over year in the first half,
as U.S. consumers remained thirsty for brown spirits and the
Chinese market stabilized. Cosmetics retailer Sephora is also
growing at a double-digit clip.
Second, luxury consumers on their own turf, particularly
Americans, are still spending on LVMH's flagship brand. Strip out
tourists and Louis Vuitton's U.S. growth was in the high single
digits, said Chief Financial Officer Jean-Jacques Guiony. That is
all the more impressive because the country's embattled department
stores are cutting inventory, weighing on growth for rivals such as
Burberry.
Louis Vuitton's strength helped offset the weakness of the
group's American labels. Both Marc Jacobs and Donna Karan shrank
and lost money in the first half. The company finally admitted
defeat on the latter, agreeing Monday to sell it to G-III for $650
million. Mr. Guiony insisted Marc Jacobs was different and wasn't
for sale.
With spending among Chinese customers at best flat, and
deteriorating conditions in Europe, the strength of the U.S.
business--up 7% like for like in the first half--is keeping LVMH
going. The company is much better at selling Frenchness to
Americans than nurturing American brands.
Write to Stephen Wilmot at stephen.wilmot@wsj.com
(END) Dow Jones Newswires
July 27, 2016 08:40 ET (12:40 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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