LVMH Moët Hennessy - Louis Vuitton Société Européenne on April 16 reported a 15% year-over-year drop in revenue for the first quarter of 2020, reflecting the impact of the COVID-19 pandemic on its global operations, saying it would cut its 2019 dividend by 30%.
The owner of Louis Vuitton and Christian Dior noted that sales fell 15% to €10.6 billion and dropped 17% on an organic basis. The revenue hit was the result of stores and manufacturing sites closing and the suspension of global travel. A large quantity of luxury goods are purchased, especially by Chinese consumers, during trips abroad.
"The LVMH group maintains good resilience in the face of this worldwide challenge," said Bernard Arnault, chairman and CEO, in a statement released after the close of European markets. The company had previously said it expected first-quarter revenue to fall by 10%-20%.
On a reported basis, the fashion and leather goods business reported that revenue declined 9% to €4.64 billion, while the perfumes and cosmetics business declined by 18% to €1.38 billion. The watches and jewelry business dropped 24% to €792 million, while revenue from wines and spirits fell 13% to €1.18 billion. Revenue in its selective retailing business fell 25% to €2.63 billion.
LVMH suspended activity in mid-March at its manufacturing sites for the fashion and leather goods business but said they were now being prepared for reopening "with maximum safety conditions for employees." The business was particularly hit by store closures, although online sales grew rapidly.
The perfumes and cosmetics business suffered as retailers reduced their inventory with the spread of COVID-19. In watches and jewelry, Bulgari was particularly affected by store closures in Asia, while TAG Heuer and Hublot felt the impact of reduced orders from retailers.
In the selective retailing business, Sephora stores were closed in China for a major portion of the first quarter. Its stores in Europe and the U.S. have been closed since mid-March.
LVMH said it would propose a 30% cut to the 2019 dividend. The new proposed dividend will be €4.80 per share.
The company said store and factory closures would affect annual revenue and results. The impact, however, "cannot be precisely evaluated at this stage without knowing the timetable for a return to normal business in the different areas where the group operates. We can only hope that the recovery happens gradually from May or June after a second quarter which will still be very affected by the crisis, in particular in Europe and the U.S."
In the statement, LVMH said Arnault and the other executive board members were giving up their remuneration for April and May as well as all variable remuneration relating to 2020.