In The First Half Of 2021, The Recovery Of Luxury Goods "Accelerates" Industry Differentiation, Leading To M & A Wave

      The recovery of luxury goods industry is more and more strong. Recently, LVMH, kering, Prada and Hermes announced their sales results in the second quarter of 2021. Due to strong demand from Chinese and American consumers, the industry is rapidly warming up, even stronger than before the outbreak. But at the same time, the epidemic has intensified the differentiation between large and small luxury groups, and it is expected that the "M & a wave" will continue in the future.

LVMH stable faucet

According to the financial report of LVMH group, which owns the brands Louis Vuitton, Christian Dior and Tiffany, the company's total revenue in the second quarter was 14.7 billion euro, which was about 14% higher than that in the same period in 2019 before the outbreak, and 84% higher than that in 2020, exceeding the 69% growth expected by UBS analysts. Bernard Arnault, chief executive of LVMH group, said: "the creativity, high quality and durability of our products, as well as the sense of responsibility that drives us forward, are critical to our success in fighting the impact of a pandemic."

In terms of category, LVMH's fashion and leather goods division rose 74% to 13.863 billion euros, an increase of about 40% compared with the second quarter of 2019. Thanks to the sales and profitability of its two core brands, Louis Vuitton and Dior, as well as Fendi, Loewe and Celine, which have reached record high sales and profitability, this category has become the biggest driving force for the group's performance growth. Mo Yue champagne was particularly popular with consumers from Europe and the United States, which also led to a 10% increase in sales of the category. Compared with 2019, the watch and jewelry division grew by 9% (excluding Tiffany sales) in the second quarter, a "further acceleration" on the basis of 1% growth in the first quarter.

With strong consumer demand in China and the United States, the luxury industry is rapidly picking up. Visual China

Overall, LVMH group's total revenue in the first half of the year amounted to 28.67 billion euro, a year-on-year increase of 56% and an increase of 14% compared with that in 2019. Operating profit in the first six months of this year more than quadrupled from a year ago, also exceeding analysts' expectations in the refinitiv survey. LVMH said the group plans to increase the number of flash stores in different resorts and is renovating some of its existing stores as "tourists are returning to physical stores.". Jean Jacques guiony, financial director of LVMH, admitted that as the group still had a lot of "room for maneuver" in its profit margin, it could make more investment in the second half of the year without affecting its profitability.

Luca Solca, an analyst at Bernstein, a private wealth management consultancy, said in a research report on the strength of luxury goods that LVMH has ever seen in the first half of the year, he said: "this quarter's financial update confirms that the luxury industry has experienced an inflection point from falling to rising."

Brilliant achievements of multiple brands

Although Kaiyun group, which owns Gucci, Saint Laurent and Bottega Veneta, is slightly milder than LVMH group in terms of sales rebound, its performance also exceeds previous expectations. As of June 30, thanks to Gucci's strong sales performance, Kaiyun group's revenue in the second quarter of this year increased by 95% compared with the same period in 2020 to 4.16 billion euros, almost doubling, and 11.2% higher than the level in the second quarter of 2019.

According to brand segmentation, Gucci, a classic Star brand, has been "stumbling" since the end of last year. By raising commodity prices and increasing high-priced products, gucci has launched marketing activities with the theme of the brand's 100th anniversary, finally breaking through the clouds and turning losses into profits. According to the data, Gucci's sales in the second quarter increased 86.1% year-on-year, and the overall sales in the first half of the year increased by 45.8% to 4.479 billion euro, which has returned to the pre epidemic level.

The sales volume of Yves Saint Laurent in the second quarter increased by 118.5% year-on-year, and that in the first half of the year increased by 53.5% to 1.046 billion euro; Bottega Veneta's sales in the second quarter even reached a record 379.4 million euro, up 69% year-on-year. In the first half of the year, the sales volume increased by 40.6% to 707.6 million euro. "All of our brands together contributed to a significant rebound in the group's total revenue and easily exceeded the level in 2019, showing a significant acceleration in the second quarter," said Fran ó OIS Henri Pinault, chairman and CEO of Kaiyun group

According to the financial report, the total revenue of Kaiyun group in the first half of 2021 is 8.05 billion euro, with a year-on-year increase of 54.1% and an increase of 8.4% over the same period of 2019. Jean Marc duplaix, chief financial officer of Kaiyun, believes that the flow, sales volume, price increase and product portfolio jointly determine whether the overall revenue can grow. He said, for example, that handbag goods were struggling because of a lack of international tourists. But despite this, dupalix saw the "strong appeal" of handbags, vigorously increased the category of "handbags" and launched new products such as "Gucci Diana bag". "As you can imagine, the lack of tourist flow has increased the proportion of handbags sold, so we need to work hard on the market share of leather products and regain some points," duplaix told vogue business, a fashion media Mario ortelli, managing director of ortelli & Co., a luxury consulting firm, believes that Gucci's turnaround this year is mainly due to its "always online" marketing strategy: telling product stories with digital advertising, holding large-scale events, jointly launching new products or Flash stores, and relying on various measures to "brush off the existence", It has captured the attention and favor of many young consumers.

Also noteworthy is Prada group, which recently released important financial data. In the second quarter, the sales volume of Prada group was 1.264 billion euro, which increased by 63% compared with the same period last year, almost equal to the same level in the same period in 2019. In the first half of 2021, overall revenue rose 60% year-on-year to 1.501 billion euros, still lower than the same period in 2019, but higher than analysts expected. Herm è s, which has already performed well in the first quarter of this year, continued its good momentum in the second quarter. It not only increased the quarterly growth rate to a higher level, but also increased its total sales volume by 70% to 4.235 billion euro in the first half of this year, becoming a luxury goods enterprise LVMH (56%) and LVMH (56%) Kaiyun (54.1%) and Prada (60%) were the best performing luxury companies.

No big M & A

In this quarter's financial report conference call, LVMH and Kaiyun all mentioned one word: Merger and acquisition. The epidemic has led to the expansion of the division of luxury goods industry. With the recovery of international travel and the acceleration of re opening of Europe, LVMH group is expected to continue to perform strongly in the second half of the year. "The LVMH group is in a strong position to continue to grow in 2021 and further consolidate our leading position in the global luxury market," Arnault said Seeing that these well funded giants have their own ways to get rid of the problems brought by the epidemic, small luxury enterprises can only continue to struggle or choose to "sell themselves" to people. As a result, it has also brought about a period of active M & A for luxury companies, which is expected to continue for some time. Kaiyun group also said in its financial report: "with the occurrence of M & A, the polarization that has occurred in the market is very likely to intensify in the next few years."

LVMH's share price has soared more than 70% since June, making it the largest European company by market value. Jean Jacques guiony, LVMH's chief financial officer, said after the US jewelry brand Tiffany was acquired for us $15.8 billion in January, although there are no more large-scale acquisition plans, he hinted that "LVMH is still interested in small-scale acquisitions and transactions exploring new markets, new technologies or new products", and some small-scale additional acquisitions are still under way.

On July 20, LVMH announced that it had acquired 60% of off white, a street brand founded by Virgin abloh, the former creative director of Louis Vuitton men's wear. It also owns a minority stake in a new personal brand launched by former celene designer Phoebe Philo and has raised its stake in TOD's, an Italian shoe maker, to 10%. In addition to fashion, LVMH cooperated with Campari group in Italy and invested in some wine and spirits e-commerce companies to help itself become one of the important participants in the field of European wine and beverage e-commerce.

At the same time, Kaiyun group has just acquired a 100% stake in Lindberg, a Danish luxury eyewear brand. According to the analysis of insiders, the scale of the recent acquisition of Lindberg, a glasses brand, is not entirely a core business. In terms of external growth trend, fashion and leather categories are still important directions for future acquisitions. Jean Francois palus, managing director of Kaiyun group, said: "there are few targets [that can be acquired], but we are very active in observing the market and, as always, strive to find the best target under the best conditions. That's what we've been doing for the past few years, and that's what we're going to do in the future. "