Sales drop at Vuitton owner LVMH as virus forces store closures

PARIS/MILAN (Reuters) - Louis Vuitton owner LVMH on Thursday posted a 17% drop in comparable sales in the first quarter due to the coronavirus pandemic, as government-imposed lockdowns in China and Europe forced it to close stores and production sites.

LVMH, like rivals such as Gucci-owner Kering, has had to temporarily shut shops in key markets after the novel coronavirus first emerged in China late last year and later spread to Europe and the United States.

The world's biggest luxury goods group also halted production at key sites including in France, where it manufactures the bulk of its pricey Vuitton handbags for instance, though it has used some of its sites to produce face masks and hand gels.

LVMH had warned in late March that first-quarter sales would fall by between 10 and 20% compared to a year ago. It said on Thursday that revenues stood at 10.6 billion euros ($11.48 billion) in the January to March period, down 15% on a reported basis.

That marked a 17% fall on a like-for-like basis, which strips out foreign exchange swings and acquisitions.

In its key fashion and leather goods division, home to other brands like Christian Dior, sales resisted slightly better than some analysts had expected, falling 10% on a like-for-like basis compared to a year earlier. The group said online sales had surged.

"Thanks to everyone’s commitment and the strength of its brands, the LVMH group maintains good resilience in the face of this worldwide challenge," said Chairman and CEO Bernard Arnault in a statement.

"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," he added.

LVMH said that Arnault, France's richest man, would forego his full pay in April and May, and give up his variable remuneration for the whole of 2020. Several other senior executives including daughter Delphine Arnault, who works at Vuitton, will do the same.

The group also said it would trim its proposed dividend against 2019 results by 30%, to 4.80 euros per share, and tighten its control of costs.

LOCKDOWN

While business in China has started to pick up again, other countries, like Italy and France, are set to be under lockdown until early May at least. Chinese consumers account for over a third of all luxury goods purchases, although many often shop on overseas trips.

That has led most analysts to forecast an even greater sales decline for luxury groups in the second quarter of 2020, while consultancy Bain sees sales falling by between 15 and 35% this year, bringing a decade of spectacular growth to a crushing halt.

LVMH is generally expected to weather the crisis better than others thanks to its diversified model, which includes a wine and spirits business, and the strong performance of its Louis Vuitton and Dior brands.

The group said its the second quarter would still be very much affected by the coronavirus crisis, particularly in Europe and the U.S. but it could not precisely evaluate the impact without knowing when business would return to normal.

Chief Financial Officer Jean Jacques Guiony, saying he did not expect the pandemic to have a lasting impact on group business, told analysts on a call that LVMH had obtained rent reductions in mainland China but negotiations with landlords were proving more difficult in Europe and the U.S..

Its acquisition of U.S. jeweller Tiffany, which is expected to close later this year, is also regarded by most analysts as a boost for LVMH's earnings in the longer term.

($1 = 0.9232 euros)

(Reporting by Silvia Aloisi and Sarah White, Editing by Benoit Van Overstraeten, Kirsten Donovan)