Even LVMH Moet Hennessy Louis Vuitton SE, the world’s most resilient luxury conglomerate, is feeling the chill. And as so often, the wind is blowing from the East.
The Paris-headquartered owner of Louis Vuitton and Dior reported a 1% increase in sales in the second quarter which, except for the early days of the pandemic, is the lowest level of growth since the depths of the Global Financial Crisis in 2009. Its operating margin fell.
A yen so weak that even a nominal end to negative rates hadn’t stopped its slide was the reason cited as the main culprit. Wealthy Chinese, the mainstay of luxury fashion, have been on a shopping spree in Japan to take advantage of the favorable currency exchange and lifted sales there by 57%, while creating a slump at home. Other luxury firms, such as Swiss-based Compagnie Financiere Richemont, whose stable includes Cartier and Van Cleef & Arpels, also reported abnormal growth there. For European fashion, strong sales in Japan are not a blessing: Yen-denominated revenue erodes their top line as well as profitability because their cost base is in European currencies.
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