LV China market "no growth"

All along, LV hold up half the sky of the LVMH Group, LVMH Group also seems to rely too much on LV's performance growth to maintain the financial performance of the beautiful performance. From the beginning of the LVMH Group’s three-quarter report, Arnold has been browbeat for more than two weeks, so that the performance of the glasses dropped him a cold water.

Since last year, the development of LVMH Group has been faltering, and the poor performance of LV, which accounts for 50% of the Group's profit, has dragged down the overall growth rate. Although savvy Arnault recognized the various problems of LV as early as a year ago, it started a series of rectification measures: upgrading product lines, refurbishing stores, suspending expansion speeds, de-logoizing in the Chinese market, and mentioning in the Japanese market. Price, etc., but it seems to have little effect. Although high-end new bags are popular, they have little impact on overall performance.

LV has already finished its appearance.

In 2013, it was undoubtedly an eventful event for LV. The soul character Marc Jacobs just left, the morale of the LV team collapsed, the quarterly report came out, and the capital market also fell. As of the 21st of the 5 trading days, the LVMH Group's share price fell by nearly 4%.

As also LV, defeat also LV

Recently, LVMH Group released its third quarter financial report for fiscal year 2013. Since the quarterly results were unexpectedly unsatisfactory, the LVMH Group mentioned in the press release only the total sales of 20.7 billion euros in the first nine months of this year, an increase of 4.3% over the same period of last year, and a natural growth rate of 8% (eliminating the effect of exchange rate changes).

According to the financial report, the Group’s revenue in the third quarter was approximately US$9.48 billion, an increase of only 1.7% compared with the US$9.3 billion in the same period of last year, which was lower than the expected 7.24 billion euros in the capital market, which is also significantly lower than the 7% in the second quarter. And 3% in the first quarter.

From the perspective of the Group's product categories, fashion and leather goods dominated by LV, Fendi and Céline performed the worst this year, representing a year-on-year decrease of 3.8% compared to 2012. This is undoubtedly a heavy blow to the leather goods-based LVMH Group, especially the main brand LV, although in the official financial report, said LV will continue to implement strategic transformation, adhere to high-quality product line and a reasonable store layout However, some people in the industry believe that the performance of LV may decline even more.

The performance of the perfumery and beauty products sector was also not satisfactory. Compared with the same period of last year, it decreased by 2.1%. The department is centered on Dior and Guerlain. Although the watch and jewellery sector also experienced negative growth, the 1.9% year-on-year decline in the quarter was better than the previous quarter, and it was down 3.8% in the previous quarter.

For Arnott's relief, the wine and spirits sector, driven by strong demand from Asia and the United States, saw a recovery in performance during the quarter, a year-on-year increase of 2.6%. From a pure growth point of view, the 12.8% growth rate of the specialized retail sector (Sephora, DFS) can be described as strong, with revenues of approximately US$2.8 billion, but compared with 16.4% and 18.4% growth rates in the previous two quarters, respectively. The third quarter's performance is also the worst performance this year.

Decline in brand value LVMH Group shifts focus or abandons LV to find new growth point In the face of LV's relentless financial performance, LVMH management has always stressed that the transformation of LV will take a year and a half to complete. However, from the performance of financial reports, there has been little success.

“After carefully observing the LVMH Group’s move this year, it bought another brand and invested in the aroma industry, including investing heavily in the wine industry, stating that it has realized that its core growth point has been over the sunset and that it needs new The growth point to make up for the loss of the entire group's financial reports brought about by the decline in LV performance." Zhou Ting said.

Although LVMH Group’s financial statements never disclose individual brand performance, according to industry estimates, LV's annual sales amounted to approximately 7.3 billion euros, which contributed more than half of operating profits. The growth of more than 60 other brands in the group is difficult to offset. The impact of the slowdown in core brand growth.

Recently, LVMH’s Marc Jacobs has annual sales of US$1 billion, but because Marc Jacobs has established a separate listing within three years, this growth point has been excluded. So looking for new growth points became a major issue for Arnault. From the acquisition performance of LVMH Group this year alone, Arnott's "please for a thirst for satisfaction" is evident, especially in the loss of two players: After John Galliano and Marc Jacobs.

In September of this year, Arnault continued to hold the cutting-edge designer brand Nicholas Kirkwood with lightning speed, and took a share of JWAnderson and took the latter as the creative director of Loewe, a famous Spanish leather goods brand. The enthusiasm of the long-awaited competitor has not been felt. The rush of the luxury goods industry seems to be heating up.

Zhou Ting believes that the competition of luxury brands in the future will focus on four aspects. One is to control production capacity, that is, the integration capabilities of upstream and downstream industry chains. This is the core of the competition, it guarantees the market's right to speak; Second, the best way to control talent, is to first buy the designer brand, then the designer into its own; Third, control channels, including agents, dealers , Outlets, etc., The brand will gradually eliminate fake goods, recover agency rights, control profits, and design reasonable products and price systems in e-commerce channels. The fourth is to control customers, improve service levels, and increase customers' viscosity.

In the competition for talents, Arnold, who is rich in money, does not hesitate, and he is good at nurturing and maximizing the use of designers, just as previously John Galliano and Marc Jacobs. They not only served as design directors for DIOR and LV, but also for LVMH Group. Arnault also holds two namesake brands. This spare no effort to acquire new designer brands is undoubtedly to use the strength of the designer to revive the power of the group.

In terms of controlling production capacity, although not as positive as Chanel and Hermès, Arnott did not hesitate. This year, Arnold acquired 80% of the world's largest cashmere maker and Loro Piana, the largest wool buyer, for a total value of 2 billion euros. The valuation is equivalent to 19 times 2013 EBITDA, which greatly exceeds the average level of the luxury goods industry.

Arnault, who is a native of the construction industry, is an authentic businessman. He has a keen sense of smell and never limits his vision to a single field. Especially in the non-core business of LVMH Group this year it seems to have gained a lot.

In June this year, Arnott beat rival PRADA and acquired a majority stake in Cova, a nearly 200-year-old coffee shop in Milan, Italy. Competitors speculated that LVMH will use Cova's window to promote its brand of porcelain cutlery.

If this is just Arnold's skill in the fast-moving industry, then Arnold’s generous investment in high-end hotels will be fantastic, and maybe the “high-end hotel” will become the next new division of the LVMH Group.

In August this year, Arnott acquired a boutique resort hotel on the French St. Barth island in the Caribbean: Hotel St.Barth Islede France. It is reported that the island is popular with celebrity stars and is a hidden resort for European noblemen. Previously, LVMH's hotel management company had two boutique hotels in the French mainland: Cheval Blanc Hotel and White1921.

However, Arnott’s enthusiasm for high-end hotels seems to be far from stopping. According to the news, LVMH is preparing to open a third resort hotel in the Maldives: Randhila Resort, which is expected to open in November this year; the fourth hotel Cheval Blanc Hotel Paris was postponed until 2015 - converted from the old department store La Samaritaine In the future, boutique hotel projects will also be developed in Egypt and Oman.

"Now is the best time to sell LV."

In Zhou Ting's opinion, LVMH seems to be extracting the last remaining value that LV brings to the group.

All along, LV hold up half the sky of the LVMH Group, LVMH Group also seems to rely too much on LV's performance growth to maintain the financial performance of the beautiful performance. In terms of promotion, LV is mainly played excessively, resulting in the popularity of the entire brand value brought about by the popularization of the market.

Zhou Ting believes that Arnault's strategy for manipulating DIOR and LV is obviously different, and the gap in performance is also obvious. DIOR is more "pretentious" and the starting point of promotion is to maintain the brand reputation, and the stores are not blindly expanding.

“Now is the best time to sell a brand, and the value of the LV brand is rapidly declining. Now that the sale is still at a high point, in a year or two, the brand will become worthless, and it will not be able to sell.” Zhou Ting is amazing.

Looking at the luxury goods industry this year, "M&A" and "Sale" become the key words. The old rivals Kering Group and Richemont Group of LVMH Group are selling brands continuously.

The Kering Group earlier this year sold the directory mail order business of children's clothing and homeware divisions Cyrillus and Vertbaudet under the directory mail order group Redcats, as well as Swedish home textile and apparel brands Ellos and Jotex. In October, the Italian mid-term bank was commissioned to handle the sale of its Italian footwear luxury brand Sergio Rossi. On the 22nd, Reuters again reported that in order to get rid of the last retail business package (La Redoute), Kering Group had to promise to reinvest 300 million euros in this loss-making catalog and online retail company to attract the acquirer.

Similarly, Richemont Group has also been busy selling its underperforming brands. In October, Lancel, its French leather goods brand, finally welcomed buyers. Private equity developers Change Capital Partners and Hong Kong Swire Group have expressed interest in Lancel. According to Reuters quoted insiders, Richemont will sell Chloé next.

This year only LVMH Group has no brand plan for sale. However, from the perspective of capital market performance, the LVMH Group's stock price also appears to be gloomy, only slightly up 5% this year, far below the price increase of major competitors: Richemont 27%, Swatch 26%, both Hermes and Kering 18%.

The proliferation of counterfeit goods in China "no growth"

Jean-Jacques Guiony, chief financial officer of LVMH, attributed the main reason for the decline in the conference call to the LV's price increase strategy in Japan. He also said that although the recently introduced new high-end women's bags, Capucine and W, are popular, they have not Has a substantial impact on sales; and the sales of these high-end product lines are limited by the shortage of quality leather supplies.

In addition, he admitted that LV's local sales in China "flattish" (flat, no growth), but benefited from overseas travel shopping, the overall sales of Chinese consumers still have "single digit" growth. Although the sales momentum of watches and jewellery in the Chinese market has improved, fashion and leather goods remain weak. The Group's business in Europe remains difficult, especially for perfumes and cosmetics, with flat sales and no growth. From the market demand, Guiny bluntly stated that the market demand for certain brands under LVMH is weak.

As for the reason that Japan's price increase is the main cause of the decline in performance and the shortage of leather materials, Zhou Ting, dean of the Wealth Quality Institute, believes that these two points are not established and they are totally excuses.

Zhou Ting believes that in terms of market capacity, the Japanese market's global sales share is declining, and due to the long-term economic downturn, the overall environment of the entire luxury goods market is declining. Japan’s global market share in LV is also declining, and the proportion of sales in the Japanese market is not enough to affect LV’s global sales.

Money Weekly reporter found from the financial report released by LVMH Group in 2012 that Japan’s sales accounted for only 8% of LVMH’s global sales, while Asia’s (including China, Hong Kong, Macao, and Taiwan) accounted for 28% of the sales in Japan, becoming second only to LVMH’s global sales. The second largest market in Europe. Moreover, the price increase strategy is also applied to the European and Asian markets, not simply increasing the price of LV in the Japanese market.

Similarly, the reason for the shortage of leather supply is also unfounded. Zhou Ting said that in terms of current technology and supply of goods, it is entirely possible to meet brand production needs, but only if they are willing to produce. “The usual practice of luxury brands is to artificially control the production process and create scarcity of product supply to maintain high prices,” explained Zhou Ting, causing “hunger marketing” similar to the “limited edition” of luxury brands.

In Zhou Ting's view, the continuous decline in the value of LV brands has caused Chinese high-end consumers and ordinary consumers to abandon it at the same time is the main reason for the decline in performance.

"Our investigation found that there are two points of greatest damage to LV. First, LV's fake products have already achieved full coverage of channels in China, including purchasing, e-commerce, distribution agents, etc. The proliferation of counterfeit goods has caused high-end consumers to quickly discard. It, our research found that 94% of the rich have said they will not consume the most fake brands, LV is in. And for the average consumer, they are not willing to buy real LV. From the perspective of cost-effective, They are more willing to go to Taobao, or to buy high imitation goods." Zhou Ting said.

Whether it is high-end consumers or the general public, have gradually abandoned LV, although there are new consumers to buy LV, but Zhou Ting think that the number is far less than to abandon the LV, this is the important cause of LV performance decline.

In fact, LV has long been aware of the issue of counterfeit goods and has taken some measures. In October, LV and Taobao signed a memorandum of understanding. In order to avoid counterfeit LV products on Taobao, the “Remind and Withdraw System” will be activated.

However, in the eyes of the industry, this seems to be a public relations show. Zhou Ting bluntly said that the fakes of big-name luxury goods have been flooded, especially the LV fakes have covered the whole channel. Recently, the Shanghai Chamber of Commerce and Industry seized 61 fake cases in the area along Huaihai Road in Shaanxi South Road. It seems to be the case that there are more than 5,000 counterfeit luxury brands such as LV, PRADA and CHANEL.

An industry insider told the Money Weekly reporter that dealers or agents began selling fake products to chase profit. In the physical shop, the luxury clerk is also "seeing people serve", want to buy authentic products directly to buy the products displayed in the window.