LVMH Moët Hennessy - Louis Vuitton

Welcome to our H1 results conference call. I'm here with Rodolphe. We are very happy to have you with us and we will start now. What we'll do is I will start with the key highlights, then Rodolphe will give you a bit more details in terms of the divisions and activities performance. Then I'll go through the key numbers and we will open for Q&A. Maybe before we start, I invite you to go to page two and read the Safe Harbor Statement. So I give you a few seconds to do that. And then I propose we start with slide three. LVMA showed good resilience in the first half of 2025, recording 40 billion in revenue, down 3% on an organic basis, with disparities by region, as I will explain later. In term of profit, the profit from recurring operations is 9 billion euros, down 15% versus the first half of 2024, although operating margin remains excellent at 22.6%, which is 150 basis points above the first half of 2019. Finally, very strong financial situation with the free cash flow increasing to 4 billion euros and gearing at 15.2. Turning to slide 4, a few qualitative comments on the key highlights of this first half. The start of the year has been disrupted by several layers of micro uncertainties, as you are well aware, as well as currency swings impacting short-term performance, albeit with a pocket of resilience. More specifically, we saw solid local demand in Europe and in the US and a tangible sequential improvement when it comes to mainland China in the second quarter. In addition, we saw a very abrupt currency swing in Q2, which eroded the purchases of American and Chinese consumers abroad, and especially in Japan, where we faced a very abnormal growth of 57% in the same period last year. In this context, we focused on the qualitative development of local clientele as well as on the following priorities. Continued emphasis on product innovation coupled with the start of new creative chapters in certain maisons. Selective investments in retail projects to continue to build long-lasting competitive advantages for our maisons. And on cost, we capitalize on current context to initiate long-term structural efficiencies beyond short-term mitigation efforts in order to maximize also profitable through when the headwinds subside. Rodolphe will now comment on numbers and initiative by business group and I will come back on financials in more details after that.

Thank you, Cécile. We'll start with brains and spirits. Turning to slide 7, the Wines and Spirits Business Group recorded €2.6 billion in revenue in the first half of 2025. This represents a 7% decrease on an organic basis versus the first half of 2024 and an 8% decrease on a reported basis after taking into account a negative 1% currency impact. Broken down, champagne and wines generated 1.4 billion euros in revenue in the first half, representing a 2% increase on an organic basis. Revenue was unchanged on a reported basis after taking into account a negative 2% currency impact. Cognac and spirits delivered 1.2 billion euros in revenue in the first half, a 15% decrease on an organic basis. and a 16% decrease on the reported basis, after taking into account a negative 1% currency impact. Finally, profit from recurring operations reached €524 million for this business group, down 33% year-on-year, with the operating margin for the division coming to 20.3% in the first half of 2025, slightly above the second half of 2024. On slide 8, the first half performance of champagne and wines benefited from improving trends in the second quarter in Europe, driven by stronger selling for champagne, and in the US by improving trends at Veuve Clicquot and Dom Pérignon, as well as continued international expansion of rosé wines. Champagne also benefited from improved selling in Japan in the second quarter. Moving on to brand initiatives, Moët & Chandon celebrated the 75th anniversary of the Formula One Championship as its official partner and collaborated with Phalle Williams for the global launch of a limited edition collection to elevate the birthday celebration experience. Ruinard and Veuve Clicquot gained market share on their key markets and Veuve Clicquot continued to support its value strategy with the launch of La Grande Arme 2018 Vintage. Dom Pérignon launched a new brand platform and unveiled a communication campaign highlighting its values and ties with artists. In cognac and spirits, the uncertainties related to tariff weighed on cognac demand in the U.S. and China, although Hennessy's depletions were better than selling in the U.S. Hennessy also highlighted the versatility of its VS quality to enhance cocktail recipes with a communication campaign called Made for More. Elsewhere, a new marketing campaign for Glenmorangie featured Harrison Ford and the Maison's distillers. Turning to fashion and leather goods, on slide 10, revenue reached 19.1 billion euros for the first half of 2025, down 7% on organic basis and down 8% on a reported basis after taking into account a negative 1% currency impact. Profit from recurring operations reached 6.6 billion euros, down 18% year on year, notwithstanding good control of operating expenses, which were further reduced compared to the first half of 2024. As a result, operating margin reached 34.7%, well above long-term average of about 30% in the first half. Moving on to slide 11, which details performance by brand. Louis Vuitton continued to display its pioneering mindset and exceptional craftsmanship through a wide array of initiatives, including a new collaboration with Takashi Murakami, as well as spectacular fashion shows from Nicolas Ghesquière and Pharrell Williams presented at the historic Cour d'honneur du Palais des Papes and the Centre Pompidou. The Maison also unveiled a unique new space in Shanghai, drawing amazing interest well beyond the city itself and highlighting Louis Vuitton's ability to express its DNA, the art of travel, through a wide diversity of differentiating experiences. Louis Vuitton also continued to innovate in its core leather lines and announced the launch of La Beauté Louis Vuitton, its new cosmetic segment, with first products available this autumn. Lastly, Louis Vuitton kept building on its involvement in major sports, including as official partner of the Real Madrid. We're going to Christian Dior. The brand began a new chapter in its history with the arrival of Jonathan Anderson as head of creation for men's and women's couture and accessories with the debut men's show achieving more than 1 billion views on social media. This follows the presentation of the final collections designed by both Maya Grazia Chiuri and Kim Jones for women's and men's respectively. Dior also saw good success of new bag innovation, including the D-Journey and Dior Toujours, which was complemented with new shapes, and the unveiling of its new high jewelry collection, Dior X-Key, designed by Victoire de Castellane. Moving on to share some highlights of our other brands. Loro Piana continued to perform well, capitalizing on its icons and exceptional fabrics, including a new one blending wool and silk. Céline enjoyed a successful debut show by its creative designer, Michael Ryder, just a few weeks ago, as did Givenchy's new creative director, Sarah Burton, whilst Loewe announced Jacob McCullough and Lazaro Hernandez as the Maison's new creative directors. with their first runway show upcoming in October. Loewe also celebrated the 10th anniversary of their puzzle bag with a number of limited edition designs, while Fendi saw the successful launch of the Mama Baguette, a larger soft leather version of the icon created by Silvia Vento and Yves Fendi in 1997. Fine Neri Mova continued to elevate its retail network, inaugurating a new flagship store on New Bond Street in London, and Berluti announced its partnership with French actor Victor Belmondo. Moving on to perfumes and cosmetics, on slide 13, revenue remained stable on an organic basis at 4.1 billion euros and decreased 1% on a reported basis after taking into account a negative 1% currency impact. Profit from recurring operations came to 425 million euros, down 4% year on year, leading to an operating margin of 10.4. Now to slide 14 and to look at some specific brand highlights. Parfum Christian Dior remained resilient and maintained its leadership in its strategic markets with good growth notably in China, Americas and the Middle East. The new eau de parfum version of the iconic J'adore and the launch of Dior Homme, reinterpreted by Francis Courrignon, contributed to this resilience, along with the Collection Privé high perfumery line, enriched with a new Bois Talisman scent. In makeup, the Maison enjoyed the global success of its forever foundation, as well as rising demand for the latest additions to the juridict and backstage ranges. Parfum Christian Dior also pursued its sustainability initiatives and committed to rewilding large natural habitats in partnership with the Worldwide Fund for Nature. A few comments on our other brands. Guerlain benefited from strong growth in Europe, the US, and the Middle East, as well as from good performance in key franchises, such as Rouget in makeup, L'Art et la Matière, and Aqua Allegoria in fragrances. Also doing well in fragrances were Givenchy, with its three key franchises, L'Interdit, Gentleman's Society and Irrésistible, as well as Maison Francis Courgeant and Acqua di Parma, which opened the door of its newest flagship, Rue Saint-Honoré in Paris. Parfum Loewe also delivered significant outperformance. Finally, in makeup, Benefit successfully launched Bad Girl Bounce mascara, one of its historical bestsellers, and consolidated its leadership in brow care. next turning to watches and jewelry on slide 16 where revenue for the first half of 2025 reached 5.1 billion euros unchanged on an organic basis and down one percent after taking into account a negative one percent currency impact profit from recurring operations came to 762 million euros in the first half of 2025 down 13 percent year-on-year EBIT margin reached 15%, improving sequentially compared to the second half of last year. On slide 17, we showcase some of the initiatives of our watch and jewelry maison, starting with Tiffany, whose iconic lines, Tiffany T, lock, hardware, knot, continued to achieve strong growth and to rise in the mix. The maison also continued to move forward with its store renovation plan, with nearly one third of the network now featuring the new store concept and outperforming. and enjoyed the recent opening of its latest flagship store in Europe on Via Monte Napoleone in Milan. Tiffany also unveiled its latest high jewelry collection, Sea of Wonders, inspired by Jean Schlumberger's aquatic designs. Bouguerie kicked off celebrations of the Year of the Snake in China with a unique art exhibition in both Shanghai and Seoul, inspired by one of its most iconic and successful designs, Serpenti. Bouguerie also continued to capitalize on its very strong legitimacy at higher price points with its polychroma collection in high jewelry and a new record for the world's thinnest tourbillon watch with the Octo Finissimo Ultra Tourbillon, marking its 10th world record in fine watchmaking. The Maison will also unveil its new flagship store in Milan on Via Monte Napoleone and its newly expanded manufacturer in Valenza. Finally, Chaumet and Fred continue to innovate on their iconic lines, B is for Chaumet and B for Chaumet and Force 10 for Fred. In watches, Beyond Tagovia's return to Formula 1 as official timekeeper in 2025 and title partner of the Grand Prix de Monaco, the Maison complemented its Formula 1 line of watches and launched a new design-to-win marketing campaign, taking inspiration from one of its most legendary ambassadors, Ayrton Senna. And finally Hublot celebrated the 20th anniversary of its Big Bang collection and then its 160th anniversary. Now, moving on to our last business group, Selective Retailing. On slide 19, you can see revenue reached €8.6 billion, up 2% organic and flat reported after taking into account a negative 2% currency impact. Profit from recurring operations rose to €876 million in the first half of 2025, an increase of 12% year-on-year. with the operating margin rising 110 bps to 10.2. Final slide of our business group, turning to slide 20, Sephora had a good start to the year with solid growth in Americas, Europe, and the Middle East, supported by the excellent performance of its store network, where Sephora continued to gain market share in ski geographies, as well as in more recent ones like the United Kingdom. all product categories contributed to growth with notable momentum in fragrances and Sephora of course continued to cultivate its selection of exclusive brands as well as its commitment to diversity and inclusion. DFS showed improving profitability in the first half of 2025. It undertook a series of measures to reduce costs and streamline its operations, including the decision to close the Galleria in Venice and finally Le Bon Marché, once again posted revenue growth driven by its differentiated range of products. and rich array of cultural events. The group also strengthened the organization of its department stores by implementing a shared governance structure for La Samaritaine and Le Bon Marché. This concludes the business group presentation and I will now pass back to Cécile for financial results.

Thank you, Rodolphe. Moving on slide 22, first half revenue reached 40 billion euros, down 3% on an organic basis and down 4% on a reported basis, including a negative 1% currency impact. If we move to slide 23 on the geographical balance, you can see that our regional mix remains well balanced, with Europe 25, US 25, Asia is down 2 points to 28, Japan is down 1 point to 8%, and other markets increasing 2 points to 14%, which I will explain further on the next slide so that you understand the geographical move of the performance sequentially. Moving to slide 24, here you have a good illustration of the regional disparities that I highlighted in my introduction, and it deserves a bit of observations. Europe and US are flat, whereas trends in Asia are much more negative, which is not particularly surprising in the context of a downturn in China, but it's worth highlighting. The impact of currencies I was mentioning in the introduction on tourism is very visible and requires a few explanations. In the West, the impact of tourism is measured but visible. Euro strength penalized touristic purchases in Europe in Q2, whereas the US region improved modestly. In Asia, the impact of tourism is much more significant as Japan benefited from exceptional demand last year driven by the yen weakness and we saw the reversal of this in Q2. Outside Japan, Asia improved in Q2 driven by local consumption. Turning to slide 25, which summarizes organic revenue growth by business group, a few comments here. Wine and spirit and fashion and leather goods are both down 7%. In the case of wine and spirit, it is mostly driven by demand in cognac. In the case of fashion and leather goods, by Asia and weaker touristic business. Perfume and cosmetics are flat. Here, too, there are significant contrasts between local markets, which are positive, and travel retail, which remains negative. Watches and jewelry are flattish, with modest growth in jewelry offset by watches. The contrast with fashion and leather goods come from Asia and Japan, where jewelry brands face much easier comps. Europe and US are not very different. Finally, selective distribution delivered 2% organic growth, driven by Sephora and with DFS improving sequentially versus the second half of 2024, but remained of course impacted by tourism. Slide 26, organic growth in Q2 was close to the first quarter at group level, but with two big moving parts. The first one we discussed is fashion and leather goods, which faced more difficult comps than group average in Japan in Q2 last year. And this market explains most of the sequential slowdown. Two divisions improve sequentially, wine and spirits mostly driven by better selling in Champagne in Q2 and selective distribution driven by better trends at both Sephora and DFS. Let's now move to operating income by division on slide 27. Wine and spirits saw the most significant drop driven by negative volume and mixed impact along with continued inflation in cost of goods sold. Fashion and leather and watches and jewelry are close to group average but with different situations. In fashion and leather, top-line evolution led to gross margin deleverage while we managed to contain OPEX. And in watches and jewelry, profits are resilient in jewelry. Despite continued investment in the renovation of distribution network at Tiffany, watches saw a more pronounced decline in percentage terms. Perfume and cosmetics reflect contrasted trends. Modest decline overall, driven by the brands which are more exposed to AGR and travel retail. Parfum Christian Dior was less exposed to these headwinds, given its particular, largely selective distribution strategy. Finally, selective distribution delivered a very good performance, driven by Sephora. which is growing both in revenue and profits and very tangible efforts to reduce the losses at DFS. If you comment slide 28 on the income statement, firstly, gross margin delivered as a consequence of a sales decline, including underutilization of capacity and some inflation in cost of goods sold. Operating expenses also contributed to the decline in profits but were contained with a 2% decline in marketing and selling expenses and a 5% decline in G&A which reflects the discipline in cost in the current context. I will comment the financial results on a specific slide. Maybe stop on the tax rate which increased by four points to 30.9%. 100% of this increase is connected to the booking of the first part of the surtax in France. So we've booked 317 million. The overall amount is a bit more than 700 and everything will be paid at the end of the year. Finally, minorities decline in line with profit at MH, partly offset by the reduction of losses at DFS. Slide 29, a few comments on operating income constituents. As you can see, perimeter impact was very negligible. Currencies had a negative 225 million impact, reflecting limited transactional and translation impact from currencies, but also the anniversary of relatively significant aging gain in H1 last year. In the second half of the year we will have higher transactional and translation impact if we extrapolate of course the rates that we have today and we should benefit from stronger hedging gain. Moving on slide 30 on the financial result, the cost of debt is broadly unchanged. The main evolution is linked to the revaluation method in mark to market of our investment financial portfolio, which led to an increase in value, but smaller than the one we had in the year before. So it creates a negative contribution to the financial results. It's not a profit or loss, it's purely theoretical and it's the way we've chosen to account for this financial investment. A few words on the structure of the balance sheet. Currencies had a significant impact on most balance sheet lines in Euro terms and this applied both to assets and liabilities. So the structure of the balance sheet is as a result quite similar to end of last year. Inventories remain under control and stable versus end of December at 16% of assets. slide 32 illustrates the very strong financial position of lvmh with as i said in the beginning a 4 billion cash generation in h1 up 29 this evolution is explained by a strong improvement from working capital offsetting fully the decline from profits taxes contributed a bit more than 500 million This is not including the French surtax that we will pay at the end of the year. And finally, investments also decreased modestly in Euro terms in the tune of 370 million euros. Overall, this leads us to an H1 where our net debt declined by almost 2 billion and Gearing now stands at 15% and we are proposing an interim dividend as a consequence that will be stable. Maybe a few words to conclude the presentation and then we will move to Q&A. If we look at H1, we can see that the performance was distorted by a macro context with a significant impact on touristic demand. Whilst the situation has weighed on our gross margin, we were able to contain the leverage on OPEX and we will continue, not with a view to do less, it's very clear that we will continue to invest, but with a view to do and manage to find more structural efficiencies. Currency moves allows us also to focus more qualitatively on our local consumers and we believe it's a healthy situation to build a closer and qualitative relationship locally with our customers and it has proven on many initiatives, it has proven important and successful. Product innovation has been and continues to be a key focus with tangible successes across all of our brands. There is more to come in retail, product offering and new creative chapters as commented by Rodolphe. Finally, we have been selective and demanding but we have kept investing in the most promising projects and you have a good illustration of this dual mindset in the delivery of the free cash flow in the first half. Investments remained elevated but we were able to generate incremental cash through lean management of inventories in particular. Against this backdrop and beyond the current macro disruption, we are very confident for the future in the ability of our Maison to continue to build desirability and build on their competitive advantages when the macro headwinds subside. Thank you very much for your attention and I propose that we move now to Q&A.