In case you’re wondering, that’s a lot better that LVMH’s watches and jewelry business, which plunged 39% in the half. LVMH’s wines and spirits business saw its profit from recurring operations fall 29%, which was a lot better that its fashion and leather goods business, down 46%. Net profit for the group as a whole plunged 84% and net cash from operations was off 80%.
In its earnings report, LVMH said wines and spirits demonstrated “good resilience in the U.S. and encouraging recovery in China. Despite recent improvement, the decline in volumes was noticeable in the second quarter, particularly for the Champagne business.
“After a start to the year supported by advance orders from distributors, the United States showed good resilience in the second quarter thanks to Hennessy cognac, which saw a strong rebound in June in this market as well as in China. The Château d’Esclans and Château du Galoupet acquisitions, made in 2019, were integrated in the first half of the year, strengthening Moët Hennessy’s position in the growing market for high-end rosé wines.”
Bernard Arnault, chairman/CEO of LVMH, said: “Thanks to the strength of our brands and the responsiveness of our organization, we are confident that LVMH is in an excellent position to take advantage of the recovery, which we hope will be confirmed in the second half of the year, and to strengthen our lead in the global luxury market in 2020.
”LVMH showed exceptional resilience to the serious health crisis the world experienced in the first half of 2020. Our Maisons have shown remarkable agility in implementing measures to adapt their costs and accelerate the growth of online sales. While we have observed strong signs of an upturn in activity since June, we remain very vigilant for the rest of the year.
“We continue to be driven by a long-term vision, a deep sense of responsibility and a strong commitment to environmental protection, inclusion and solidarity. In the current context, we remain even more firmly dedicated to showing continuous progress in these areas.”
As to the outlook for the remainder of 2020, all the group could say is that “the impact of the epidemic on revenue and annual results cannot be precisely assessed at this stage without knowing the timetable for the return to normal business in the different areas where the Group operates. After a second quarter severely affected by the crisis, we can hope that the recovery will materialize gradually in the second half.”
Comment: LVMH’s results demonstrate two things. First, they give the lie to the comment often tossed off casually by people not in the business that bev/al is a good business because “people will always have to drink.” That may be so, but in tough times they either don’t drink as much or they go down in price point. Second, the results also demonstrate that the bev/al business is better than some others, such as fashion and leather goods or watches and jewelry.