Call A Spade A Spade! Statement By LVMH Group Chairman Arnault At The Recent Conference Call

Recently, LVMH, the world's largest luxury goods group, released 2019 fiscal year data, and sales and business profits both achieved two digit growth, all of which hit a record high.

In January 29th, the LVMH Group Chairman and chief executive officer, Bernard Arnault, gave her unique insight into the two hot topics of "China epidemic" and "luxury business".

China is an important contributor to the luxury industry. The recent development of China's epidemic attracted worldwide attention to the prospect of luxury goods industry. Bernard Arnault responded: "every time we encounter an unexpected incident, our first response is: don't panic, calm down and analyze the situation. After that, we contacted the Chinese team to understand the situation. The two conclusion is: 1., the mortality rate of the new coronavirus is not high; 2., the Chinese government's response is fast, and its means are good. We further understand that the peak of the epidemic will occur in recent weeks, but the partial epidemic will be resolved in mid March or the end of March. I can not guarantee whether the information is correct or not. This is just what I heard or it might be wrong.

"On the other hand, do you know how many deaths from influenza in France every year? Close to ten thousand. It means that I am not an influenza expert, not a doctor, nor a comparison between the new coronavirus and the influenza virus, but I can not answer the impact of the epidemic on our performance, "Arnault said." if the epidemic lasted only a short period of time, it could not be solved in 2 to 2.5 months without going to it. If it lasted for two years, it would be completely different.

When it comes to online business, Arnault says, "when I see online sales of some large websites, I doubt it, probably because I am more traditional. But when I look at a business, I will see what they are doing through profit. All electricity providers are losing money, so the bigger the scale of business, the heavier the losses. People expect us to launch online business, but I have never been interested. We have an e-commerce website 24S, but it is not a special case because it is small, so it has not lost much money. Therefore, we carefully develop (online business), maybe we can find a way to make money. So far, we haven't found it yet.

Arnault continues to add: "(24S's losses) are insignificant to us, but we provide online services. Its online sales are very gratifying. Why? Because people visit websites and know what they want. But on most websites, consumers open it to see if there are any discounts. The reason why these websites can't make profits is because they have to offer low price goods, otherwise they will cause customers to run away.

Arnault also referred to Amazon, an e-commerce giant, who said: "Amazon is an outstanding company, but if you look at the data, they will lose money if they buy it in advance and sell it on the Internet. The real money they make is the so-called market place. So they have no stock and no stock. They use the database to provide customers with a commission for businesses. This is what we resist, because this is the way they sell counterfeit goods. This is related to criminal groups, because once a website sells counterfeit goods, it will necessarily involve providing funds for criminal groups or individuals or becoming pocketbooks for terrorist organizations. So big websites have to do with the crime syndicate in order to make money. Is that right? I don't know what you think. I was shocked when I knew it, and we had to do a lot of things to avoid counterfeit sales. We have luxury goods, but consumers also have high imitation drugs and other products. That's not right, because the money they sell will eventually be used to finance terrorist activities and crime syndicates. "

In the future, Arnault once again stressed his concern about the "financial crisis". "As in previous years, the market in 2020 was very active. But as I have said on many occasions, financial crisis is unavoidable at a node. Now that liquidity is increasing and asset prices continue to rise, interest rates are close to zero all year round, which is neither good news nor long term, and is bound to be callback. But I don't know when the callback will happen. Although there has been no large-scale global economic crisis in the past ten years, it will eventually come. As for 2020, combined with many factors such as the US general election, the European market is on the rise. I do not think this year there will be (economic crisis). So from a macroeconomic point of view, this year will be a good year.

Bernard Arnault also analyzed the various business of LVMH group in 2019. He stressed: "Louis Vuitton is a diversified brand from any angle, but its core business is leather goods." On the basis of leather products, we have launched a wider range of business, and the performance of perfume has increased significantly. "

Wine and spirits sector: sales grew 8% to 5 billion 576 million euros, and operating profit increased 6% to 1 billion 729 million euros.

Champagne grew steadily, especially high-end champagne, non mixed brewed wines, Dom P rignon (Tang Peili Nang champagne) and other high-end non mixed brewed wine, and the "insufficient production" restricted sales growth to a certain extent.

In terms of spirits, Hennessy (Hennessy) is still in short supply, and sales volume has reached a new high. "Once again, Hennessy became the world's top high-end liquor brand last year. Thank our chief executive, Bernard Peillon, for his contribution to the business and endorsing the Laurent Boillot, who is promoted from within. "

Jean-Jacques Guiony, chief financial officer of LVMH group, points out that the Asian market contributed 30% of the sales of wine and spirits in 2019.

Fashion and leather sector: sales grew 20% to 22 billion 237 million euros, and operating profit increased 24% to 7 billion 344 million euros.

Louis Vuitton (LV) in 2019 was "quite successful, a lot of new and successful joint names". Nicolas Ghesqui re, the creative director of branded women's wear, has organized several fashion shows, including exhibitions in New York. The Virgil Abloh led men's wear series has been sold in stores throughout the year and has been quite successful.

In 2019, Louis Vuitton opened several new stores. "For example, the flagship store in Seoul has a stunning architectural appearance. Since the end of last year, the sales volume has increased significantly."

Through a series of big show, the brand launched the Arnault's eldest daughter Delphine under the supervision of the complete set of new leather goods, products and accessories, are good performance. "I still want to say that Vuitton is by far the world's first luxury brand. We have some production problems, but there's nothing to panic about, because we have opened a new workshop in France and the United States respectively, and the capacity of these two plants can not meet the market demand. None of this is a problem. After all, we have a good growth and will focus on new products in the future. "

He pointed out in particular that the special series with many designers was popular, and the supply was in short supply.

Christian Dior (Dior) is quite successful. The merits of the brand need not be repeated. What we care about is data. They are excellent. In view of the steady growth of the established series of works, supporting products and distribution channels of the brand, we believe that the brand will continue to achieve good results. "

Fendi continues to grow. Loewe, led by J.W. Anderson, has begun to expand its store network worldwide, and its performance has increased significantly. With high quality men's products, Berluti has grown rapidly, and so has Loro Piana. Since its acquisition, Rimowa has grown significantly.

Regarding the new brand that is working with Rihanna, Arnault said, "good start. Please look forward to our future actions. Rihanna has many ideas. I promise we will do something very interesting. "

"As for the Galliano brand, we have this brand, the brand itself is no problem, no loss of money, or wait and see how to develop, we will think of a way." Arnault added, "as for Pucci, it's still a small brand. I am not saying that this brand will not grow, but small brands are also very good at hand. Maybe one day, we will find a good designer. He has great ideas for this brand, so we will cooperate. "

Perfume and cosmetics department: sales grew 12% to 6 billion 835 million euros, and business profits continued to grow 1% to 683 million euros.

Christian Dior has excellent brand performance. "Eau Sauvage perfume" has become the world's leading men's perfume. Dior Rouge lipstick is also the world's first lipstick, and every second we sell a lipstick around the world. Don't mention the new products we just launched, such as rose essential oil, which are the essence nursing products for women. I suggest you try it. It's amazing. I've tried it. "

Guerlain (Guerlain) has excellent skin care and care series, especially Abeille Royale, which is popular in developed countries. Over the years, Guerlain has focused on sustainable development and actively participates in the protection of insects and bees.

Jean-Jacques Guiony said that if the brand decline and other assets were removed, the operating profit of perfume and cosmetics department increased by nearly 10%.

Watches and jewelry sectors: sales grew 7% to 4 billion 405 million euros, and operating profit increased 5% to 736 million euros.

Both new and old product lines have promoted Bulgari (Bvlgari) performance. "Since we bought Bvlgari, the sales of our brands have doubled, and our operating profit has increased five times. Soon we will buy Tifany, which is the goal we set for Tiffany. Of course, this is the goal of ten years, and cannot be achieved overnight. Our goal is to represent (buy Tiffany) is a good deal.

Watch business is progressing smoothly, Hublot (Yu shipping table) grew strongly, and launched many new products. TAG Heuer (Tiger Hauja) reshaped the distribution network in 2019, reducing inventory. "We ended up working with some retailers who did not listen to the proposal, and we tried to reduce inventory levels. This is also why (Tiger Hauja) the reasons for the weakness of the brand data, but this situation will be improved after the launch of smart watches. Chaumet's performance was strong, Bee My Love was a great success and its products were sold out.

In January 22nd, Louis Vuitton purchased 1758 diamonds from the world's second largest diamond raw stone, weighing 1758 carats, from Canada's mineral company Lucara Diamond Corporation (Lucara).

Arnault pointed out that jewelry is a promising area. At present, Sewel is on display at Place Vend me, Paris. It will be transported to Taiwan, China for the next 2~3 weeks.

Special retail sector: sales grew 8% to 14 billion 791 million euros, and operating profit increased 1% to 1 billion 395 million euros.

Sephora is excellent. "I will not give data, but they are really amazing. When we bought it last 20 years ago, its annual sales volume was about 100 million euros, and now we may have to add a few zeroes.

Because DFS relies heavily on the Hongkong market, it is difficult. "We have cut costs, business is also keeping profits, but profit margins have declined. Despite the difficulties of the market, we will improve profitability as soon as possible. After all, a new problem will arise in the past.

"The center of our retail business is the excellent department store Le Bon March" (lopung Marshall) and the integration of hotel group Belmond, which we are implementing, which is also conducive to expanding the group business to more experiential areas. This will have a lot of synergy with our products, but I will not elaborate on it now. "

Arnault revealed that the group's new plant will be put into operation this year to further compensate for the imbalance between supply and demand. "But growth for sales growth is not our goal. What we want is continuous production of high quality products to satisfy our customers.