LVMH (MCFP; Aa3/AA-) 1H (to June) Earnings Call

LVMH, similar to Richemont,is removing macro as an excuse for co's like Burberry and Kering; "the US customer is doing slightly better, the European customer slightly better, and the Chinese customer is still holding up quite well, albeit at a slightly lower rate than it was the case in Q1.". Common themes were weakness in China (though LVMH had strong Chinese spend in Japan), weakness in watches & jewellery (particularly in China), and weaker aspirational customer spend. Expect Kering to echo that latter with LVMH seeing the slowdown within its Tiffany brand and surprisingly more in the US than Europe.

• It released earnings call presentation since and in there has the growth rates by region; 1H US was +2%, Japan +44%, Europe +4% and Asia (ex. Japan) -10%.
• All as expected and again puts pressure on Kering to not come weak outside China...consensus has HSD falls over the half in Europe and NA... i.e. a continuation of Q1 weakness.
• Even on China both are rolling over tough comps from reopening from last year; LVMH Asia ex. Japan was +23% last year & Kering +16%. Yet Japan for LVMH is reflecting Chinese tourists and the -10% arguably more mute than comps. Consensus is looking for a shaper -19% fall for Kering this half and less of a offset from spend in Japan (+12%).
• We had no issues with LVMH's BS on yesterday's number. There was a chunky EBIT margin contraction (-180bps) to 25.6% but still well above pre-covid levels and ~145bps of that coming from fx. In particular it flagged a declining yen which it is struggling to keep up with on price increases. Rest its blaming on more cyclical wine and spirits headline falls (deleveraging) and Watches & Jewellery where "the strategic decision to maintain the pace of store renovation and relocation at Tiffany."