LVMH reduces 2019 dividend by 20%, as sales plummet 15% in first quarter 2020
Jul 1, 2020
"Expect a slow recovery from the pandemic in 2020", warned Bernard Arnault, chairman and CEO of LVMH, whose giant group on Tuesday morning announced a 20% reduction dividend in 2019.
LVMH, the world’s largest luxury group, also said that first quarter sales had fallen by 15%, as the pandemic bit into revenues at the world’s largest luxury goods conglomerate.
“Our teams displayed great agility to confront the pandemic. However, from Q1 our stores unfortunately had to close, along with the closure of manufacturing too…. The long-term impact cannot be accessed precisely at this stage. As we don’t know when virus will disappear,” said Arnault, the controlling shareholder of LVMH, at the group’s AGM – held exceptionally behind closed doors.
‘The signs of recovery in June in some of core activities are quite vigorous. We remain focused on preserving the values of our brands, their image and their desirability That is our long term goal,” underlined Arnault, the chairman and CEO of LVMH.
“Faced with an unprecedented situation, the top priority was given to the health and safety of our employees and clients,” added Arnault, Europe’s richest man.
He stressed that LVMH had rallied to support the international collective effort, noting that it had converted plants to produce both hand sanitizers and face masks, and financially supported groups like the Chinese Red Cross and Paris hospitals.
There was however good news on the digital front, with many of the 70 brands in the giant group’s portfolio enjoying rapid online growth this year, in some cases over 100%.
The French entrepreneur stressed that the growing digitalization of his group’s brands will improve the customer experience. “Engagement is a core value that guides us and leads us to permanently progress. A sense of responsibility transmitted from generation to generation. It’s the secret of their longevity,” said the boss of LVMH, whose stable of brands includes Louis Vuitton, Christian Dior, Givenchy, Fendi, Kenzo, Bulgari; one quarter of the world’s champagne and, later this year, Tiffany, which the group agreed to acquire for €13 billion in late 2019.
Arnault did not directly speak about Tiffany, which has since been buffeted by sharp falls in sales due to the worldwide lockdown. However, his de facto prime minister, and board member, Antonio Belloni, in response to the write-in question of whether LVMH was still satisfied with the deal to acquire the US jeweler, responded: “We believe that Tiffany is one of the most iconic jewelry brands and in that respect, has a full place inside the LVMH portfolio.”
Arnault took pains to emphasize what he called LVMH’s “pioneering introduction of environmental responsibility back in 1992.” Noting that in support of biodiversity, LVMH had a key accord with UNESCO – and was working hard at preserving bees and beekeepers.
He said a sense of corporate responsibility had led LVMH to help in the fight against deforestation in the Amazon and the rebuilding of Notre-Dame here in Paris.
And he was keen to underline his luxury behemoth’s belief in creative talent.
“The importance of our talent is a unique asset. It’s a key competitive factor… Since the beginning, we have also condemned all forms of discrimination – and created a diversity and inclusion commission. We are strongly committed to supporting LGBT rights,” he concluded.
Due to the pandemic, the AGM was held inside LVMH’s headquarters in Paris. No admission card was issued for shareholders nor media for the event.
Back in January, LVMH announced a record level of sales - with a sturdy 15% rise in annual turnover to €53.7 billion for 2019. Buoyed by strong performances in its two key luxury marques – Dior and Vuitton – LVMH scored a net profit of €7.2 billion, up 13% from the previous year. The giant’s group key division – Fashion & Leather Goods – scored profit from recurring operations of €7.344 billion, or the majority of the group’s recurring profits.
However, DFS, its duty free shopping division, was badly hurt by events in Hong Kong. Moreover, despite the acquisition last year of luxury chain Belmond, the owner of such opulent hotels as the Cipriani in Venice and the Copacabana Palace in Rio, for $2.6 billion, LVMH’s debt-to-equity ratio is today only a modest 16%.
Belmond is expected to suffer heavily from the collapse in global travel this year. However, Belloni noted that LVMH’s “strategy remains to invest in its wonderful exciting properties and take advantage of coming recovery of tourism.”
Questioned by written queries by shareholders, the luxury group was careful to stress that it had given “clear instructions to respect contractual payment conditions – recognizing the difficulties faced by many suppliers.”
It also claimed that employees in France have significant access to profit sharing and indeed received 320 million euros from that in 2019.
However, the company refused to provide any information about the compensation package of Arnault and other senior executives. Or a highly unusual measure for a publically-quoted company with such a major public profile.
The group also claimed that it had not accepted “financial support from the French government” during the pandemic. Though it did reveal that outside of France, “some units accepted offers from local governments” – again without providing any more details.
In response to other questions, the company defended the lower dividend.
“This crisis requires a significant effort from everyone. So it’s quite logical that shareholders should contribute to that.”
In terms of layoffs, fewer than 20 employees lost their jobs in France, and only “a small number of people were laid off elsewhere.” Though again, no exact figures were given. LVMH employees are of some 145,000 worldwide.
Ending the online meeting, Arnault concluded: “I regret we had to hold this AGM in a closed set. Hopefully, that won’t happen next time, when the meeting is scheduled for April 15 2021.”
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