LVMH expects pandemic to dampen sales for some time yet

PARIS (Reuters) – The fallout from the coronavirus crisis will weigh on LVMH’s earnings for some time yet, though there were some signs of recovery this month, executives at the world’s biggest luxury goods group said on Tuesday.

Second quarter earnings at the owner of Louis Vuitton and other brands will be hit particularly in Europe and the United States, Chairman Bernard Arnault told a shareholder meeting, conducted online.

“We can only hope at this point for a gradual recovery,” Arnault told investors, adding that the second half of the year looked better. He flagged some “quite vigorous” signs of recovery in June, as virus lockdowns lifted in much of Europe, including in Milan and Paris, two major shopping hubs.

Luxury labels are still suffering from a lack of tourist travel even though consumption is picking up again on a local level as stores reopen, including in China.

Finance chief Jean-Jacques Guiony said the fallout would still be felt in the months to come but that it was not possible to make definite projections.

Asked whether the crisis had changed LVMH’s view of its $16 billion purchase of Tiffany – which has yet to close – managing director Antonio Belloni said only that the U.S. jeweller was an “emblematic brand” which had its place in the company’s portfolio.

Sources told Reuters in early June that Arnault was exploring ways to potentially pressure Tiffany to lower the acquisition price, including by examining its compliance with its debt covenants.

Since then, however, Tiffany has amended some of its debt agreements, removing any immediate threat of hiccups in this regard.

LVMH, which has come under scrutiny from French tax authorities over how and where its activities are reported, said on Tuesday it paid 50% of its taxes in France. It declined to give details for other countries.

(Reporting by Sarah White, Editing by Dominique Vidalon and Susan Fenton)