LVMH Boss in Wait-and-See Mode on Metaverse – WWD

PARIS – Bernard Arnault was in no hurry to rush in reverse – his brands are doing well in the real world.

Speaking after his luxury conglomerate LVMH Moët Hennessy Louis Vuitton Reported record full year revenue and profit On Thursday night, Arnault said that while he was curious to explore the opportunities of the hotly hyped digital environment, he was also wary of a repeat of the dot-com bubble (LVMH nonetheless. was also a major investor in the ill-fated Boo .com in the late 90s).

“Let me start by saying that it is purely a virtual world and as of now, we are in the real world and we sell real products. To be sure, it’s engaging, interesting, maybe even quite enjoyable. We have to see what are the applications of this reverse and these NFTs,” he said in a videoconference with analysts and reporters.

“If it’s done well, it can have a positive impact on the performance of brands. But we are not interested in selling virtual sneakers for 10 euros,” added LVMH chairman and chief executive officer.

“In short, I’m just saying, be careful with bubbles. I remember this from the early days of the Internet, in the early 2000s,” continued Arnault, noting that there were countless companies building the metaverse. “There were a lot of Facebooks wanting back at that time, and in the end, only one of them succeeded. So let’s be cautious.”

The luxury tycoon can afford to take his time. LVMH’s revenue totals 64.2 billion euros in 2021, up 14% organically compared to 2019, with sales increasing rapidly in the fourth quarter, driven by the leather and fashion divisions. their key.

The group owns 75 brands including Louis VuittonDior, Tiffany & Co. and Sephora, reported a net profit of 12 billion euros, up 68% from 2019, beating FactSet’s consensus estimate of 10.9 billion euros.

Profit from recurring operations at 17.1 billion euros, up 49% from 2019, is considered a more reliable benchmark given the disruption caused by the coronavirus pandemic in 2020.

The group’s revenue for the three months to December 31 totaled 20 billion euros, an increase of 22% compared to 2019. The FLG division posted 51% organic growth during the period, marking the accelerated strongly compared to previous quarters, fueled by handbag brands Louis Vuitton and Dior, a record year at Celine and Fendi, and a strong showing at Loewe and Loro Piana.

Wine and spirits increased by 4%; perfumes and cosmetics by 1%; watches and jewelry rose 18%, helped by strong business in Bulgari, and select retail down 5%, as the DFS travel retail division continued to suffer a sharp decline in international tourism activity. economic.

Praising Vuitton’s “stellar” performance and a “record” year at Tiffany’s, Arnault said the outlook for 2022 is positive, despite the shadow of inflation. “January’s numbers show the same growth rate as late last year, so this is a very good start to the year,” he said.

While he doesn’t expect travel flows to return to normal before 2023 or 2024, Arnault noted that the group’s European activity surged in the fourth quarter, as brands worked to grow their local customer base. their.

“I think things will continue to improve, but we have an advantage over many other companies and other corporations, that is we can have a certain amount of flexibility in pricing. So in the face of inflation, we have the means to react and I think demand for our products will continue to be strong,” he added.

He cites an example of a Patek Philippe Nautilus steel sports watch produced in collaboration with Tiffany, one of 170 limited editions with a retail price of around $50,000, that went up for auction in December for a hammer price of $5.35 million, with proceeds. to an environmental nonprofit.

“When it comes to price, everything is relative. The most important thing is the quality of the product,” said the executive.

However, Arnault warned of excessive price increases, which seemed like a deep dive on Chanel. That brand has raised the price of its bags four times since the beginning of 2021, citing production costs, although the move is understood as a strategy to align its prices with rival Hermès in order to burn ignite the exclusive aura of its products.

“Like some brands, we didn’t want to give the impression of moving towards a price point that no longer aligns with the economic realities of product pricing. You have to be reasonable. We make reasonable efforts to make our customers feel that they are dealing with brands that offer them something real and not something that is artificially hyped, even if the product is great. beautiful,” he said.

Arnault credits LVMH’s exceptional performance to the desirability of its brands and its increasingly sophisticated products.

“We sell more than fashion,” he argues, citing the example of Louis Vuitton show in Paris last week launched the final collection designed by Virgil Abloh, the menswear collection’s artistic director, who died in November at the age of 41 from a rare form of cancer.

The display, devised by Abloh before his death, features a soundtrack by Tyler, the Creator, played by an orchestra led by Gustavo Dudamel, musical director of the Paris Opera, and choreographed by Yoann Bourgeois.

“It’s a show, and that’s the spirit of Louis Vuitton. It’s not just a fashion brand. It’s a cultural brand with a global audience,” said Arnault.

He paid tribute to Abloh, who last year assigned greater responsibilities at LVMHin a deal whereby the group gave him time to launch the brand and seal the partnership across its entire operations.

“We are deeply saddened. No one expected him to go so fast. It was a tragedy. He is an exceptionally powerful creator. He’s not just a fashion designer, he’s a man of culture,” says Arnault. “We are still mourning and I will talk about what happens next when this period of mourning is over.”

Meanwhile, the group is focusing on the early-March opening of Dior’s refurbished headquarters on Avenue Montaigne, which is said to include a restaurant, a museum and at least one suite. . “I think it will be an absolutely unforgettable event,” Arnault said.

And it will continue to invest in Tiffany’s turnaround, having completed its $15.8 billion acquisition of the US jeweler a year ago. LVMH has ramped up production of the T and HardWear series; build stores including storefront in Le Bon Marché department store in Paris and roll out globally ad campaign featuring Beyoncé and Jay-Z.

“We made a great acquisition for the group,” he said, noting that sales at Tiffany grew strongly despite losing “several hundred million in revenue” due to its flagship closure in the US. New York City, which is undergoing a complete remodel and will reopen later this year.

CFO Jean-Jacques Guiony noted that with free cash flow of €13.53 billion in 2021, up 119% from 2019, LVMH has mostly covered the cost of buying Tiffany. LVMH plans to pay shareholders a dividend of 10 euros, up from 6 euros in 2020.

The strong results came after Compagnie Financière Richemont reported that revenue for the three months to December 31 had grown 38% at constant currency rates compared with the same period two years earlier. Kering will publish its annual results on February 17.

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