Challenging Environment for LVMH Watches; Outlook Still Murky as Consumer Demand Remains Uncertain and Retail De-Stocking Continues

LVMH, a world leader in luxury goods, recently reported its results for the first half of 2009.  In keeping our savvy readers here at First In Watches informed on all things watches (leading luxury and/or high-end watches, that is), we offer here our quick review and analysis of  LVMH’s watch division performance.

As a quick refresher, LVMH is owner of the following watch brands:  Tag Heuer, Hublot, and Zenith.  It also received very limited watch revenue contribution from its jewelry brands, Dior and Chaumet.

First let’s allow the figures to speak for themselves:

LVMH  ”Watches and Jewelery” Division Results

Ouch! LVMH attributes the sales decline primarily to destocking across the retail sector – which is not surprising as all retail has experienced this.  Softer demand is also a factor – remember, Swiss watch exports were -37% in the 1H, with the U.S. market down 57%.  Profit margins are also (and not surprisingly) being crunched.  According to Jean-Jacques Guiony, LVMH  CFO, this was in part a result of order cancellations.  Double ouch!

A closer examination of the figures indicates that some of LVMH’s brands are faring better than others.  LVMH reports (and we read between the lines):

• Market share gain at TAG Heuer – “successful Aquaracer 500 launch; success of 40th Anniversary Monaco” (read:  although our sales are down we are doing better than our competitors)
• Good resilience at Hublot – “success of Big Bang line; new manufacture in Nyon”  (read:  Hublot is faring much better than most in this environment; there are high hopes on Hublot’s new movement coming in 2010 (as JC Biver revealed to us in our Baselworld Interview))
• Zenith – refocus on classic lines (read:  Zenith has completely lost its way and it’s time to get back to basics)

 The outlook for the remainder of 2009 was also very cautious – consumer deman is uncertain, and inventory de-stocking at the retail level is still stabilizing. 

If you have any thoughts of your own on LVMH watch brands, feel free to leave a comment.