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LVMH's Fashion Business Hasn't Grown at All This Year

Marc Jacobs and soon-to-be-sold Donna Karan were again pain points for the company.
Marc Jacobs's fall 2016 runway show. Photo: Imaxtree

Marc Jacobs's fall 2016 runway show. Photo: Imaxtree

LVMH had a disappointing first half of 2016 when it came to its most important (and relevant to this website) categories: fashion and leather goods. Overall sales of ready to wear and leather accessories — encompassing brands like Louis Vuitton, Givenchy, Celine and more — were completely flat on an organic basis and down about 1 percent including negative currency effects. The French conglomerate saw stronger growth in its other businesses like wines and spirits (up 9 percent) and perfumes and cosmetics (up 8 percent). Overall revenue was up 3 percent.

LVMH does not break out sales for its individual brands, but it did give some indicators as to who was a boon to revenue and who was dragging it down. As for the former category, the company emphasized the "strong creative momentum" at Louis Vuitton, always a strong performer. Fendi, Kenzo, Loewe, Berluti and Céline also saw growth, the company said. Unsurprisingly, the stragglers were Marc Jacobs and Donna Karan, that latter of which — it was announced Monday — is being sold to American company G-III. Execs confirmed during Tuesday's earnings webcast that both companies saw declines in sales during both the first and second quarters of this year. But don't expect LVMH to go selling off Marc Jacobs next just because it's another American brand in the midst of a repositioning.

During the call, LVMH CFO Jean-Jacques Guiony explained that the G-III/Donna Karan deal (which LVMH did not actively pursue) made sense because of the importance of diffusion line DKNY to the brand, noting that "access is a key component of the success of [Donna Karan]," and that for the rest of LVMH, "access is not necessarily a priority." Simply put, the price was good and G-III is likely a better home for the brand in the long run than LVMH, which is better at maintaining exclusivity than it is at creating accessibility. He assured investors and analysts that "Marc Jacobs is not for sale," and that the Donna Karan deal does not indicate any change in strategy for the company.

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So, no scandal there. But what about recent rumors that Nicolas Ghesquiere will be leaving Louis Vuitton soon? While he didn't address them directly, Director of Financial Communications Christopher Hollis said that a "top priority" for the rest of the year would be "continuing the momentum at Louis Vuitton under the direction of Nicolas Ghesquiere." Does that mean anything at all? We'll have to wait and see.

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