Spectacular sales growth for LVMH
World’s leading luxury group reported a massive 64% jump in annual profits, thanks to a healthy demand for their high-end goods from buyers in the United States and Europe. The group’s profits reached €5.65 billion euros from €3.4 billion in 2013.
LVMH’s success is 2014 stands as a bit of an anomaly. Growth in the luxury goods market has cooled off in 2014, up just 5% in 2014 compared to a 7% jump in 2013. Europe’s other grand luxury houses like Richemont of Switzerland and Kering, whose brands include Gucci, Bottega Veneta, and Yves Saint Laurent were hurt by slower sales in 2014. LVMH’s sales increases were felt most strongly in the United States and Japan, where sales saw and 8% increase over the past year. Growth in Europe was slower at 3% thanks to a weakening Euro. Sales in China fell by 1%.
Smart branding moves by LVMH’s most valuable brand, Louis Vuitton, could be a huge reason the Luxury house is seeing such a huge surge in profits. After opening up the Louis Vuitton brand to more consumers diminished the label’s perceived exclusivity, LVMH has worked hard to shift its focus from lower to higher end luxury. They’ve eschewed their lower-priced offerings in favor of higher-end handbags and limited edition items. Louis Vuitton has also cut down on the use of their famous “LV” monogram, since heavy, obvious branding has fallen out of fashion with high-end consumers. More subtle statements of wealth are definitely the name of the game in luxury fashion these days.
Vuitton Many of these winning branding decisions are the brainchild of Nicolas Ghesquière, who has livened up Louis Vuitton with new ideas to win back luxury consumers. His “Petite Malle,” a luxury clutch shaped like a travel trunk, wowed customers and gained a heavy following with the red carpet elite. Vuitton also scored a hit with a limited edition line of accessories featuring the classic monogram, which the company has attempted to use more sparingly to retain the symbol’s air of exclusivity. The limited edition line was created by a series of artists that include the likes of Karl Lagerfeld, Christian Louboutin, and even architect Frank Gehry.
Besides the surge in business from rebranding it’s Louis Vuitton line, LVMH’s profit margins also benefited from the company selling its shares of the French handbag company Hermès. LVMH is expected to reinvest those funds into smaller fashion labels, hoping to extend its winning streak further.