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The French luxury goods group reported late on Thursday that its sales rose 9% in the fourth quarter as shoppers in Europe and the United States splurged over the crucial holiday season, helping partly to offset COVID-19 disruptions in China.
However, some analysts focused on its flat margins.
“The slight wrinkle is on the margin, where the group delivered a flat operating margin year-on-year (versus consensus of +90 bps) – largely a reflection of maintaining/raising H2 marketing spend despite disrupted revenue growth,” Credit Suisse analysts wrote in a note.
LVMH chief financial officer Jean Jacques Guiony said on Thursday that it decided to maintain marketing investments in the second half, at a level of 30% higher than the previous year despite lower revenue growth, but had not expected such a sharp decline in business in China in December.
Guiony also said that LVMH’s strategy of parallel channels for its perfumes and cosmetics division was “a costly decision” that drove down profitability, but that it was “the right decision” and will protect the appeal of its labels.
The division’s profit from recurring operations came to 660 million euros for the year, a fall of 3%.
