LVMH Moet Hennessy Louis Vuitton Earnings Call Nuggets: Watches and Jewelry, Non-LV Brand Growth

On Tuesday, LVMH Moet Hennessy Louis Vuitton SA reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Watches and Jewelry

David Wu – Telsey: I have three questions. First in Watches & Jewelry could you provide the growth rates for Asia, ex Japan, and how much of the slowdown would you say was driven by destocking, especially in China and where you think we are in the destocking process and what you’re seeing in terms of the sell-through trends in China, Europe and the U.S.? And secondly on Vuitton, can you talk about the performance in the quarter on a constant currency basis? And as we look out sort of longer term could you talk about where you see the most compelling growth opportunity for Vuitton across the product categories and regions and what you think could be more of a normalized growth rate going forward? And just lastly, Selective Retailing obviously remained very solid. I was wondering how much of the growth was driven by DFS versus Sephora and could you provide the Sephora comps in the U.S., Europe and China for the third quarter?

Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.

Jean-Jacques Guiony – Finances: Fairly long list of questions, particularly the second one. I will start with Watches & Jewelry in Asia, which figures if you take out the high-end jewelry sales that Chris mentioned in his comments, which took place in Q3 last year in Asia, so you have to take them out to have a fair comparison base, we are virtually flat, I mean slightly down but virtually flat in Asia for the whole division. Destocking is still having some impact. We started the year with a high level of stock, both ourselves and the retailers anticipated strong level of sell-out this year. Sell-out was decent but probably not as good as we had thought, so there was some destocking and consistently since the beginning of the year sell-out has been higher than sell-in, so this destocking is still taking its toll when it comes to analyzing the Asian figures of the Watches & Jewelry division but to a lesser extent probably than in Q2, for instance. As far as LV is concerned, so Q3, your first question is on Q3 constant currency analysis. What I would say there is that our figures for Vuitton are pretty comparable to Q2 figures. We have some slowdown here and there, but all in all, Europe is a bit higher than what it was in Q2. The U.S. is a bit lower. We are talking in both case about high or very high single-digit figures. The Chinese figures are very close to what they’ve been since the beginning of the year, so low single-digit figures. Asia is a bit slowing down. We will probably come back on this particular point, but the touristic flows in Q3 were much lower than in Q1 and Q2 and Asia was affected by that. And Japan was in line, a bit lower than Q2. So all in all, our figures do not differ materially from what they were in the preceding quarter. As far as long-term growth opportunities, I will not elaborate a lot on this on such conference call. The only think I would say that obviously the main avenue for growth in the future at Vuitton is soft leather product. We mentioned that many times. We are developing very seriously this segment at Vuitton, which growth rate is extremely high and very promising in the long term. Finally, your third question on Selective Distribution, DFS versus Sephora, we saw in Q3, a steady marked slowdown of DFS again connected with a slowdown of tourism in Asia. DFS was mid-single digit growth as opposed to very strong double-digit in the preceding quarters. As far as Sephora is concerned, we saw a very consistent performance from the first half of the year into Q3 of this year. It’s exactly the same gross level, so very consistent.

Chris Hollis – Financial Communications Department: Like-for-like.

Non-LV Brand Growth

Antoine Belge – HSBC: Three questions. First of all, to come back on your comment about the fact that Louis Vuitton was not that different in Q3 versus Q2, and the division was 5% versus 8%. So does it mean that the other brands slowed more than Louis Vuitton in the quarter? And also could you comment if which brands were still growing double digit organically in Q1? Second question, I mean, still on Louis Vuitton, in the first half, you said that selling surfaces increased by roughly 6% or 7%. Is it still the same run rate of selling surface increases? And finally, when you look at the performance of Vuitton, do you think that the slowdown is entirely macro related or is there anything that do you think could be done in terms of merchandising or maybe marketing or any other initiatives to sustain the growth, especially ahead of the fourth quarter. And also have you adjusted your cost and CapEx given the slowdown we’ve seen since July?

Jean-Jacques Guiony – Finances: Okay. Well, thanks Antoine. So on the non-LV brands on your first question, yes, we feel slowdown, but mostly – well let’s say entirely on the wholesale side of the business which is roughly one-half of the non-Vuitton sales of the division. The retail portion of the non-Vuitton sales in the division were growing exactly or more or less exactly in the same way as they were in H1, and as far as wholesale is concerned, it’s partly probably due to some slowdown in department stores but also due to the fact that we are much more selective in terms of choosing our business partners in this segment as we don’t want to nourish parallel trades and some of our brands including Celine and Fendi have been extremely selective in pushing their products into wholesale. So this (augmented) the growth rate in wholesale, and therefore in the rest of non-Vuitton division. The selling surface of Vuitton, 6%, 7%, yes, that’s exactly the same figure for Q3. The slowdown at LV, well, as I said, I mean, there is no major slowdown in Q3 compared to Q2. Macro related, I would say that it’s mostly tourist related. I mean, if you look at the slowdown that we have in the growth rate of Vuitton, it’s mostly with the two big main tourist pool, the Japanese mostly and to a lesser extent the Chinese tourists. The reason is probably not the real weakness this year but a very, very high comparison base in last year we had Chinese (toys) growing 30% and Japanese (toys) probably at 20% or a bit less than that. The anniversary of such a very high figures is not a strategy and therefore it has some impact on growth in the (indiscernible) business in Q3, but that’s really the main reasons for the different figures and they mostly affect the Asian part of the business, Europe is hardly affected by that.

Antoine Belge – HSBC: Just on terms of cost and maybe needing to adjust some costs?

Jean-Jacques Guiony – Finances: You know that we are not very keen on commenting that type of things. We adapt ourselves to the environment and we take the necessary measures and we do what we think we have to do, but I will not elaborate on that.

More Articles About:   , , , , ,  

More from The Cheat Sheet