LVMH Beauty Division Grows Steadily by 11% in Q1

In the first quarter of 2023, LVMH said that growth benefited in part from a rapid and strong rebound in Chinese consumption.

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On April 12, LVMH released its financial results for the first quarter of 2023. According to official figures, revenues of LVMH achieved €21.04 billion ($23.2 billion) for the three months ended 31 March, up 17% on the same period in 2022.

LVMH said that it had started the year well, although the geopolitical and economic environment remained uncertain.

LVMH Perfumes & Cosmetics achieved revenue growth of 11% in the first quarter of 2023. The group said it would continue its strategy of highly selective distribution. In the first quarter, Christian Dior continued to consolidate its leadership position with a strong performance. Its iconic Sauvage, Miss Dior and J'Adore fragrances were important growth channels.

Make-up and skincare also contributed to the brand's performance. Guerlain benefited from the success of its Aqua Allegoria line, while Benefit expanded its The Porefessional skincare range, and Fenty Beauty benefited from strong visibility following its founder Rihanna's Super Bowl LVII halftime show, which drew an audience of nearly 119 million.

Of the division's overall performance, LVMH concluded that "Makeup is doing well, but fragrances are doing even better and the skin care business if flattish,"

Personnel changes may boost the growth of LVMH's cosmetics business

LVMH's ambition is to strengthen its cosmetics business and seek more growth possibilities. A glimpse of this may be seen in the personnel changes at LVMH this quarter.

CHAILEEDO found that in March this year, LVMH appointed Stephane Rinderknech as Chairman and CEO of LVMH Perfumes and Cosmetics, who was in charge of 15 beauty brands including Guerlain, Fresh, Belle Epoque, Beauty, Fenty Beauty and Acqua di Parma.

Stephane previously spent nearly 20 years at French beauty giant L'Oréal Group, where he was Director of L'Oréal Lancome North America in Miami in 2001. He moved to China in 2011 to head the Consumer Public Affairs and L’Oreal Luxe divisions before being promoted to CEO of L'Oréal China in 2016 and joining the L'Oréal Group Executive Committee two years later.

Commenting on the change, Bernard Arnault, CEO of LVMH, said: “Stéphane has since his arrival guided the rebound of our hotel activities with considerable strategic agility, driving tremendous momentum across the entire organization,” Arnault continued. “This experience in a new industry confirmed his ability to adopt, his leadership and direct engagement with teams. His deep understanding of the beauty industry will help him leverage the unique assets of each of our maisons.”

(Credit: Stephane Rinderknech, Chairman and CEO of LVMH Perfumes and Cosmetics）

It is worth noting that Stephane's career shows that he has led L'Oréal USA, significantly driving the digital transformation of the region and affirming the company's values of diversity and inclusiveness. This coincides with LVMH's strategy for the future, as indicated in its earnings report. LVMH said that LVMH Perfumes and Cosmetics would continue to invest selectively in its areas of strength, such as brand appeal, accelerated innovation and digital initiatives, and a selective approach to its retail network, as the existing environment is rife with uncertainty.

In the same month, Acqua di Parma announced that it had appointed Giulio Bergamaschi as its new Chief Executive Officer. Prior to joining LVMH, Giulio was Global President of L'Oréal's Biotherm and General Manager of International Product Development for L'Oréal China's mass cosmetics division.

LVMH had this to say about Giulio: "Giulio is a seasoned and passionate beauty professional and leader. His deep sense of international markets and knowledge of the beauty category are critical assets for Acqua di Parma and the division,” Medioni said in a statement, adding that the new executive “will further elevate the Maison uniqueness and position as worldwide promoter of Italian lifestyle and craftsmanship."

(Credit: Giulio Bergamaschi, CEO of Acqua di Parma）

This quarter also saw CEO change at Make Up For Ever, Guerlain and Dior.

Important decisions by leaders often influence the growth prospects of brands. With the talents such as Stephane and Giulio Bergamaschi taking on key roles, the newly appointed leaders perhaps playing an important role in achieving steady growth in LVMH Perfumes and Cosmetics this quarter.

(Credit: A product of Acqua di Parma)

A good rebound in China

Looking specifically at LVMH business by region in Q1, Japan grew by 34% in the quarter, Europe by 24%, Asia (excluding Japan) by 14% and the US by 8%.

Although Asia, where China is located, did not grow as much as Japan and Europe, but Jean-Jacques Guiony, LVMH's Chief Financial Officer, made a point of mentioning China's recovery in a video conference. He said: "We registered some pretty nice pick-up in China, which bodes well for the rest of the year, " "So we’re really back to where we were prior to the complicated period of 2022."

According to WWD, Luca Solca, senior luxury industry analyst at leading international asset management firm Bernstein, said in a research note: "LVMH is making the most of sustained European and American demand growth, while reaping the benefit of a rapid and strong rebound in Chinese spend."

The recovery of Q1 in China was previously predicted by LVMH, with Bernard Arnault, Chairman and CEO of LVMH, saying in his 2022 annual earnings report that the optimised adjustment of China's epidemic prevention and control policy in 2023 had given LVMH a strong start to the year. He was confident and optimistic about the Chinese market. Previously, a luxury market research report published by Bain & Company also suggested that the Chinese luxury market is expected to recover in the first to second half of 2023.

It is worth mentioning that among the above-mentioned personnel changes in the first quarter, Stephane, the newly appointed Chairman and CEO of LVMH Perfumes and Cosmetics, and Giulio Bergamasch, CEO of Acqua di Parma, both have extensive experience in the China market. Stephane has led L'Oréal's China region to outstanding results. According to L'Oréal's previous annual reports, after 2017, when Stephane took over, L'Oréal turned things around in China and achieved impressive results with continued high double-digit growth in main business revenue.

(Credit: Bernard Arnault, CEO of LVMH)

Confident in the recovery of the Chinese luxury market this year

According to the LVMH Group's FY2022 annual report released earlier, revenue performance in Asian markets outside of Japan, including China, was essentially unchanged from 2021. In the first half of the year, LVMH's revenue in Asia grew by 1% and declined by 2% in the second half of the year, ultimately resulting in China's share of LVMH's revenue falling from 35% in 2021 to 30% in 2022.

In contrast, in Q1 this year, LVMH saw a recovery in the Chinese consumer market. In a global analyst conference call held by LVMH, the group's management said it was confident that the Chinese luxury market would recover this year as China continued to reopen. Bernard Arnault, LVMH's chief executive, had also said at the FY2022 financial presentation that affluent Chinese consumers are returning to its shops. And there is good reason to be confident, even optimistic, about the Chinese market.

In addition to the personnel changes, LVMH is also expanding its own brand category and its promotional efforts in China. In February, Benefit announced that it would launch The Porefessional skincare range, making its debut in the skincare. In March, Make Up For Ever launched a velvet powder in China, containing 10 exclusive Asian shades. In March, Dior announced Diligeba as the brand's China make-up spokesperson; Givenchy Beauty announced Modern Brothers In March, Dior announced Diligaba, a Chinese well-known actress, as the brand's Chinese make-up spokesperson. Givenchy Beauty announced Liu Yuning as the spokesman of the brand.

Earlier, at the end of 2022, LVMH also demonstrated its increased investment in the Chinese market. L Catterton, the world's largest consumer private equity fund under LVMH, completed the first close of its first RMB fund, which has a target size of 2 billion yuan ($290.9 million), exceeding expectations for the first close. The fund includes investments in eight consumer segments including going global, beauty and personal care, food and beverage, pets, healthcare, consumer technology, new retail and apparel and fashion.

Li Jing, Head of L Catterton RMB Fund, has said that L Catterton has long been bullish on the development of China's consumer industry. The establishment of its first RMB fund in China represents a move to nurture more brands for China that can take a place in the international market in the future.

Along with the Group's presence in China, it is foreseeable that the Chinese market will be a top priority for LVMH in the future. But whether steady growth of LVMH in the future can be achieved still need to be tested by discerning Chinese consumers.