Consistent with what we reported upon last week with Richemont’s results, LVMH’s U.S. business slowed in Q2 2023. The geographic segment had a -1% decline in revenue versus growth of +8% in Q1 2023. However, unlike Richemont the drop at LVMH was more due to base period effects as the trend versus 2019 remained consistent Q1 to Q2 at just over +70% growth. Moreover, LVMH's U.S. region is also being pulled down by the large Hennessy hangover from the binging that took place during the pandemic (a binge that was fueled by fiscal stimulus). Champagne has largely worn off its hangover.
On the U.S., the company noted that, “We continue to see softer demand from American consumers compared to other Western clientele and continued growth in American purchases out of the U.S.” The company had also flagged a slowdown in April and so the softness seems to have been throughout the quarter, with a weaker exit rate management noted in its Fashion & Leather segment with the American consumer (both at home and abroad), “We were slightly positive in the first quarter of the year. We are slightly negative in the second quarter of the year but very close to zero...We experienced a little bit of pressure with the American customer to varying degrees amongst brands. Some are more subject to this than others. But all in all, we have a situation where, by and large, the aspirational customer is suffering a bit. We are experiencing drops with wholesale with online sales with second-tier cities, which is a clear sign that the aspirational customer is not shopping as much as they used to.” (These characterizations are very similar to what Macy’s Inc. shared about Bloomingdale’s and Macy’s and Nordstrom said when they reported Q1 results in May.)
Beauty, this year’s champion category, again delivered for LVMH in both its Perfumes & Cosmetics and Selective Retailing (i.e., Sephora) segments with respective Q2 growth of +16% and +25%. Management called out Sephora's “outstanding” performance in from in North America this past quarter. One can see that that choice of word is on the mark when we look at Sephora’s 198 locations in Placer. (We are not measuring results for indoor or dense-urban multistory locations.)
Clearly, perfumes and cosmetics are what people are using a lot of as they head back to the office and out on the town. This consumer preference/trend was also confirmed by L'Oréal’s strong Q2 2023 results where the North American segment produced +10% growth with contributions from all product divisions. In describing the market, the company noted that, “L'Oréal showed another remarkable performance in the first half on top of a high 2022 base of comparison in a globally buoyant beauty market.” The U.S. was the largest contributor to growth and its CEO shared, “We have seen no slowdown in North America.” He also stated, “We had a great Prime Day recently in North America.”
