LVMH(US:LVMUY)2023-07-25 22:06Financial Data and Key Metrics Changes - Organic revenue increased by 17% in the first half of 2023, with profit from recurring operations up 13% and an operating margin of 27.4% [4][34] - Reported revenue rose by 15% to €42.2 billion, with a gross margin remaining at an all-time high of 69% [34][40] - Free cash flow amounted to €1.8 billion after €3.6 billion in operating investments, with a gearing ratio of 21% [4][48] Business Line Data and Key Metrics Changes - Wines & Spirits: Reported revenue decreased by 3% to €3.2 billion, with profit from recurring operations down 9% to €1.1 billion [5][34] - Fashion & Leather Goods: Organic revenue increased by 20% to €21.2 billion, with profit from recurring operations rising 14% to €8.6 billion [10][34] - Perfumes & Cosmetics: Organic revenue grew by 13% to €4 billion, with profit from recurring operations up 15% to €446 million [17][34] - Watches & Jewelry: Organic revenue increased by 13% to €5.4 billion, with profit from recurring operations rising 10% to €1.1 billion [23][34] - Selective Retailing: Organic revenue surged by 26% to €8.4 billion, with profit from recurring operations doubling to €734 million [28][34] Market Data and Key Metrics Changes - Asia's contribution to revenue increased by 2 percentage points, while the U.S. declined by 3 percentage points to 24% of sales [35] - U.S. organic growth was 3% in the first half, with a notable 8% in Q1 and a decline of 1% in Q2 [36] - Asia experienced a strong rebound with a 23% increase in the first half, including 34% in Q2 [36][37] Company Strategy and Development Direction - The company emphasizes a diverse and balanced portfolio of brands, which has proven to be a key asset in navigating external challenges [4][50] - Continued investment in brand desirability and creative momentum is a priority, with a focus on maintaining strong market positions [50][77] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by external economic conditions but expresses confidence in the company's ability to adapt and thrive [50] - The company is optimistic about the recovery in key markets, particularly in Asia, and is focused on leveraging its financial strength for future investments [50][86] Other Important Information - The interim dividend has been set at €5.5 per share, to be paid on December 6, 2023 [48] - The company is undergoing a leadership transition with new CEOs for Dior and Louis Vuitton, focusing on maintaining brand desirability [76][77] Q&A Session Summary Question: Performance of Fashion & Leather Goods and Chinese consumer - Management noted a 40% to 45% increase in business with Chinese clients compared to 2021, despite a slow start in early 2023 [55][56] Question: Profitability of Fashion & Leather Goods - Profitability erosion was attributed to increased advertising and promotional expenses, particularly for high-profile fashion shows [56][57] Question: Performance in Watches & Jewelry - Watches & Jewelry saw a 13% organic growth, with strong performance in Asia, particularly among Chinese customers [61] Question: Cognac outlook and U.S. market concerns - Management expressed cautious optimism for Cognac, noting recovery in China but challenges in the U.S. market due to inventory issues [78][82] Question: Cosmetics growth in Asia - The company is experiencing weakness in travel retail in Asia, while the Mainland China business is progressing [91][92] Question: Duty-free strategy changes - The company is shifting focus to airport duty-free due to improved rental negotiations, moving away from downtown duty-free locations [95] Question: General and administrative expenses increase - The increase in G&A expenses was attributed to one-off costs, impacting the overall financial performance [97][98]