LVMH reports slower growth for Louis Vuitton in 2012

After years of constant double digit growth, the leatherwear division of LVMH, of which the Louis Vuitton brand makes up to 75%, has registered a 7% sales increase in 2012, compared to 16% in 2011. Analysts indicate that Vuitton’s slowing performance is due to its huge visibility, with too many stores and a total sales estimated at over 7,3 billion euros. Louis Vuitton has been opening shops in the past decade in places as remote as Mongolia. It is now in 50 countries with more than 460 shops.

Bernard Arnault, CEO of LVMH said he was satisfied with results and that the company would not push for further growth at Vuitton, to avoid banalization. ”We shall no longer develop products which push demand, as we want to avoid being vulgar” said Arnault. As for expansion in China, Arnault said  Vuitton was not planning to open boutiques in second and third-tier cities in China to “avoid becoming too commonplace.”  In 2012, the international retail expansion of Louis Vuitton was basically frozen, while direct competitors have been either expanding existing store surfaces (Gucci) and or opening aggressively large flagship stores (Prada).

LVMH’s net profit for 2012 jumped by 12%, reaching a total of 3,2 billion euros. For the fourth quarter 2012, organic growth accelerated to 8%, compared with 6% in the third quarter, thanks to the recovery of the Chinese economy observed at the end of the year, the resilience of consumption luxury goods in the United States and  the price increase (+8%) in Europe which was implemented in October at Louis Vuitton.

The profit margin for the overall group has decreased by 1 percentage point in 2012, to 21%, LVMH attributing this to increased advertising spending at Vuitton, investments at Berluti and the focus at Fendi towards directly operated stores by reducing wholesale.

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