FRENCH consumer giants LVMH and L’Oreal SA said a recovery could start soon after the coronavirus caused sales to plunge in the first quarter, as revenue in China is already bouncing back.
Shares of both companies rose Friday after they gave signs of green shoots in that market, the biggest for luxury goods. LVMH was up as much as 5.9%, while L’Oreal gained as much as 5%.
Sales in Louis Vuitton stores on the mainland are up about 50% in the past three weeks over the same period a year ago, according to a person familiar with the matter who asked not to be identified discussing internal figures.
L’Oreal Chief Executive Officer Jean-Paul Agon also said late Thursday that sales in China turned positive in March and are on track for a gain of 5% to 10% this month.
"Our experience in China is very interesting and very telling for other parts of the world,” Agon said.
"What we’ve seen in China is a pretty quick bounce back for the consumption of beauty products.”
The pandemic has shut down luxury boutiques around the world. While much of Europe and the U.S. remain in lockdown, shops have been reopening in China, where the outbreak was first identified.
The Louis Vuitton owner’s comparable sales fell 17%, in line with previous guidance for a 10% to 20% drop. Cosmetics maker L’Oreal said sales declined 4.8% in the period on that basis.
May, June? The second quarter will be "very affected” by the crisis, LVMH said, though online sales are making up for some of the shortfall from closed stores. The company said it’s hopeful that a recovery will begin in May or June.
L’Oreal has been slightly more resilient because it sells more products like shampoo that are available in supermarkets or skin-care products in drug stores, which mostly remain open.
LVMH plans to cut its dividend for last year by 30% as a result of the pandemic. French distiller Remy Cointreau SA said it will cut its annual payout by about 60%.
LVMH said it’s preparing to reopen some manufacturing sites, without providing details. CEO Bernard Arnault will surrender his April and May salary as well as variable compensation for 2020.
"The crisis is extremely violent,” LVMH Chief Financial Officer Jean-Jacques Guiony said on a call. "It has a deep impact on our business.” - Bloomberg
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