The wine and spirits arm of LVMH saw organic sales decline by 14% during the first quarter of 2020, impacted by China’s fall in demand during the covid-19 pandemic.
Total LVMH Moët Hennessy Louis Vuitton group revenues were valued at €10.6 billion (US$11.4bn) over the period – a decrease of 15%.
For the group’s wine and spirits unit, revenue fell on a reported basis by 13% to €1.175bn (US$1.272bn). LVMH said the “positive currency effect and the firm price increase policy partially offset the decline in volumes”.
The US market witnessed “good resilience” during Q1, supported by advance orders from distributors ahead of lockdown orders.
Hennessy Cognac, which surpassed eight million cases in 2019, saw volumes fall by 13% during the first quarter due to its VSOP and XO variants.
The group said China demand was hit by both the covid-19 crisis and the timing of Chinese New Year.
However, LVMH said Glenmorangie Scotch whisky and Belvedere vodka experienced volume growth.
LVMH said it had “proven its ability to be resilient in an economic environment disrupted by a serious health crisis” as stores and manufacturing sites in most countries were closed in recent weeks due to the coronavirus pandemic.
The group said the closure of these sites will affect annual revenue and results, however the impact “cannot be precisely evaluated” due to uncertainty around the return to normal business.
LVMH hopes for a gradual recovery to happen from May or June “after a second quarter, which will still be very affected by the crisis, in particular in Europe and the US”.
Furthermore, the group said it “will maintain a strategy focused on preserving the value of its brands, based on the exceptional quality of its products and the responsiveness of its teams”. Due to the pandemic, LVMH “will further strengthen its policy of controlling costs and being selective in its investment”.
In addition, LVMH has also proposed a 30% reduction in the dividend announced on 28 January, which is subject to shareholders’ approval at the annual general meeting (AGM) on 30 June 2020.
The dividend for 2019 will therefore be €4.80 (US$5.20) per share and, given the interim dividend paid on 10 December 2019, the balance of €2.60 (US$2.80) per share will be paid on 9 July 2020.
Bernard Arnault, chairman and CEO of LVMH, and each of the other executive board members, have also given up their salaries for the months of April and May 2020, in addition to all the variable remuneration relating to 2020.
Earlier this month, Arnault overtook business magnate Warren Buffett to take third place for the first time in Forbes’ World’s Billionaires list.
The company’s board members have also decided to reduce their attendance fees by 30% for 2020.
LVMH has also rolled out a number of initiatives to help combat covid-19, including the production of hand sanitiser.
“In this unprecedented context, I would first like to thank our teams around the world, who have mobilised to help caregivers and participate in the collective effort by making hydroalcoholic gel for hand sanitisers, by facilitating the movement or by producing medical masks or even by sourcing critical equipment for hospitals,” said Arnault.
“For several weeks, our teams have once again demonstrated that excellence, creativity and responsiveness will allow us not only to overcome this crisis but, above all, to emerge even stronger when it fades.”
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