LVMH lifts dividend as record profits defy downturn

The world’s biggest luxury group LVMH raised its annual dividend by 20 per cent after delivering a second straight year of record sales and profits driven by its main brands Louis Vuitton and Dior.

Owner Bernard Arnault said in a statement on Thursday that LVMH was “going into this year with confidence” despite the uncertainties weighing on the global economy, and added that he believed LVMH could continue growing as it did in 2022.

Whether that prediction proves accurate will depend largely on how quickly China, luxury’s second-biggest market after the US, emerges from a spike in Covid-19 infections that began in December when the government lifted its restrictive policies.

Since then luxury brands have had to temporarily close stores and warehouses because of sick employees, which hit fourth-quarter results at LVMH, Burberry and Cartier-owner Richemont.

Once the Covid-19 crisis eases, analysts expect the Chinese consumer to resume shopping for high-end goods. LVMH said on Thursday that it had seen signs of improvement in China this month.

LVMH finance director Jean Jacques Guiony said the economic outlook was hard to predict, but the group’s long-term strategy remained the same. “We work on our brands’ desirability so they can resist in downturns, and have learned to be flexible in a crisis if one materialises,” he said.

“Last year’s strong results, despite the war in Ukraine and challenges in China, show the resilience and permanence of luxury consumers and the strength of our brands.”

Nevertheless, analysts are predicting a slowdown in luxury demand after two years of strong growth in which affluent American and Chinese consumers drove sales to new heights. Amid rising inflation and a risk of recession in the US and Europe, UBS estimates that luxury goods sales will rise by 9 per cent this year after expanding by 16 per cent on a like-for-like basis in 2022. The Swiss bank sees margins as remaining flat.

China’s Covid-19 spike dented the fourth quarter at LVMH with sales rising to €22.7bn, just shy of analysts’ consensus of €22.4bn. That represented a rise of 9 per cent on a like-for-like basis in the quarter compared to the same period last year, and a marked slowdown from 20 per cent in the first nine months.

Nevertheless, annual sales were up 23 per cent to €79.2bn, largely in line with analysts’ expectations, while net profit grew 17 per cent to €14bn.

The fashion and leather goods division, which houses Louis Vuitton and Dior, reported sales of €38.6bn and organic growth of 20 per cent. Although it does not usually break out sales by brand, LVMH said Louis Vuitton crossed the €20bn mark in terms of revenue last year and had doubled in size in four years.

In another sign of confidence, LVMH said it would propose a 2022 dividend of 12 euro per share, up from 10 euro for 2021, and 4.80 per share in 2019 before the pandemic.

The two-year luxury boom has made LVMH the biggest listed company in Europe by market capitalisation, and turned Arnault into the richest person in the world ahead of Tesla’s Elon Musk and Amazon’s Jeff Bezos, according to Forbes.

The 73-year-old built LVMH into a powerhouse through decades of acquisitions, including of US jeweller Tiffany in 2020. The group spans dozens of brands, from Moët champagne to Cheval Blanc hotels.

His five children work in the group, and he and the family own 48 per cent of the share capital.

A management reshuffle was recently announced when Dior chief executive Pietro Beccari was promoted to run Louis Vuitton. Arnault named his daughter Delphine Arnault to be the new CEO of Dior, the group’s second-biggest brand.

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