LVMH reports record profits following boost to marketing spend

Luxury goods giant LVMH has reported record revenue and profits for the second year in a row, after increasing advertising and promotional spend by 25%.

Revenue for 2022 reached €79bn (£69.4bn), while profit from recurring operations hit €21bn (£18.5bn), both up 23% compared to 2021. Sales rose 9% in the final three months of the year alone.

Total marketing and selling costs jumped 26% to €28.2m (£24.7m), amounting to 35.6% of revenue. This marks a 0.8 percentage point increase compared to the previous year. According to LVMH, the increase was largely a result of “higher communications investments” and the development of retail networks.

For analysts, LVMH’s earnings are looked at as a bellwether for the luxury market. Louise Deglise-Favre, apparel analyst at GlobalData, says the results “clearly” illustrate that “luxury shoppers’ wallets remain unaffected by high inflation and mounting living costs”.

All business groups within the firm achieved notable revenue growth over the year, with the fashion and leather goods division setting a new record as revenue grew 20%. The business hailed the role marketing played for a number of its key brands, including Berluti and Celine in fashion, Parfums Christian Dior and Parfums Givenchy in perfumes and cosmetics, and Chandon, Hennessy and Belvedere in wines and spirits.

We approach 2023 with confidence but remain vigilant due to current uncertainties.

Bernard Arnault, LVMH

Flagship designer label Louis Vuitton performed especially well, with revenue surpassing €20bn (£17.59bn) for the first time.

Meanwhile, LVMH-owned beauty retailer Sephora also enjoyed a “record performance”. The retailer’s online launch in the UK last year attracted so many visitors that the website crashed, and there are plans to open a physical store in Westfield London within the next few months.

According to chairman and CEO Bernard Arnault, the business’s performance is evidence of the “exceptional appeal” of its brands and their ability to “create desire” amid challenging economic circumstances around the world.

“Our growth strategy, based on the complementary nature of our activities, as well as their geographic diversity, encourages innovation and the quality of our creations, the excellence of their distribution, and adds a cultural and historical dimension thanks to the heritage of our Maisons,” he says.

“We approach 2023 with confidence but remain vigilant due to current uncertainties. We count on the desirability of our Maisons and the agility of our teams to further strengthen our lead in the global luxury market.”‘Welcome to new luxury’: Why Frasers Group is ‘rewriting’ the Flannels brand

For many consumers navigating the ongoing cost of living crisis, luxury purchases will be the last thing on their minds. Kantar data shared with Marketing Week last year revealed luxury to be the category consumers most planned to cut back on.

However, brands in the sector already capture only a small segment of the most affluent consumers, who are more insulated from the storm of the macroeconomic environment. Indeed, experts have warned of a “two-tier” economy emerging as a result of inflation, with the least affluent disproportionately impacted.

According to the most recent forecasts from Retail Economics’ cost of living tracker, produced in collaboration with HyperJar, the discretionary income of the UK’s least affluent households fell by 17.2% (£83) in November 2022 compared to the year prior. Those on middling incomes took a 9.6% hit, averaging at a loss of £104, while the most affluent households actually saw their discretionary incomes increase, up 0.6% (£28).