Due to the closure of luxury boutiques during the Coronavirus pandemic, the world’s largest luxury retailer is experiencing significant financial difficulties. In its financial report for the first half of 2020, the LVMH conglomerate showed an 84% drop in profits to $612.3 million. This figure was much lower than predicted, and analysts had previously predicted a much faster recovery from quarantine.
In addition to the closure of retail outlets, one of the main reasons for such significant losses of the company is its vertical organizational structure. LVMH owns most of its suppliers, manufacturers, and even individual stores. Therefore, the conglomerate was not able to quickly reduce costs by cutting backorders to suppliers.
During a conference call, Jean-Jacques Gioni, LVMH’s Chief Financial Officer, said that the situation remains “very difficult” for the company. He also said that already in June there were improvements, which continued in July, mainly due to the opening of stores in China and the beginning of the quarantine process in Europe. However, the lack of tourist flows for LVMH boutiques is still a serious issue. The LVMH representative also added: “I don’t think we’ve ever seen the planets lined up against us so much.
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