Lanvin Group lacks shine amid luxury market slump

The Shanghai-based luxury goods company owned by conglomerate Fosun posted just 1% revenue growth last year, with the figure contracting in the second half

Key Takeaways:

• Lanvin Group’s revenue grew just 1% last year, though the figure contracted in the second half of the year after growing 6.4% in the first half
• The luxury goods maker’s Caruso menswear line was its best performer with 30% revenue growth last year, while sales for its flagship Lanvin brand fell by 7%

By Edith Terry

Luxury goods maker Lanvin Group Holdings Ltd. (LANV.US) likes to point out it did well by containing losses and bumping up revenues slightly last year, first with a pre-announcement of its annual results in February and then with the final audited figures last week.

But investors weren’t buying it. The company’s shares have sunk by 25% since the February announcement, and the lone analyst who follows Lanvin rates it a “hold” – not exactly the best showing for a company that someday hopes to challenge global luxury powerhouses like LVMH (MC.PA) and Kering (KER.PA).

Despite the lack of enthusiasm, there are at least a few reasons to stick with this company that made its official New York trading debut a little more than a year ago through a backdoor listing using a special purpose acquisition company (SPAC).

First, Lanvin is not simply making excuses when it talks about market headwinds that are causing it headaches. Luxury spending started strong last year after China’s post-pandemic reopening, only to see consumers in the middle- and high-income category slow down their buying through the rest of the year. So Lanvin’s ability to post 9% sales growth in China to 53 million euros ($57 million) last year is an indication of momentum, although China was a relatively small share of its overall revenue of 426 million euros for the year.

Not all of its competitors have been so lucky, at least not more recently. French group Kering lost $9 billion in market value last month after warning that sales for its core Gucci brand fell 20% for the period, led by weakness in the Asia-Pacific region. Lanvin hasn’t given detailed guidance yet for 2024, though it said on its earnings call last week it expects to face “continued macroeconomic challenges.”

Growth in the global market for personal luxury goods was relatively soft at 4% in 2023, totaling 362 billion euros, according to the annual Bain-Altagamma Luxury Goods Worldwide Market Study. Lanvin’s sales in Europe, the Middle East and Africa (EMEA) make up nearly half of the company’s total and were down by 2% to 201.8 million euros last year. Sales in North America were almost flat, up 1.2% to 147.3 million euros. “Other Asia” was another bright spot besides China, with revenues up 7% to 23.8 million euros.

Among the company’s five major brands, revenues for its Lanvin flagship sagged by 7% to 111.7 million euros; Wolford revenues were nearly flat at 126 million euros; St. John was up by 5% to 90.3 million euros; and Sergio Rossi was down by 4% to 60 million euros. Only Caruso showed strong growth at 30% to 40 million euros.

The company’s overall revenue grew 1% for all of last year. But despite posting growth for the year, its situation weakened from the first half to the second, with revenue growth slowing from 6.4% in the first six months to a 4% contraction in the second half, according to calculations using company data.

Turbulence at the top

Turbulence in Lanvin’s executive suite and among its top designers may have been partly to blame for the company’s consolidated loss of 146.2 million euros last year, though that marked an improvement from the 240 million euro loss in 2022. Lanvin’s profits were weighed down in 2022 by 84 million euros in fees it paid as part of its SPAC listing that year.

The company’s new CEO, Eric Chan, was brought in from Fosun International (0656.HK), which owns 65% of Lanvin, in December last year, after Chairman and CEO Joann Cheng left only a year after its listing. Sergio Rossi also appointed a new CEO, Helen Wright. Lanvin lost its creative director, Bruno Sialelli, in April last year, after launching a new “creative hub for designers,” the Lanvin Lab Project, with a collection inspired by Atlanta-born rapper and producer Future.

Like larger rival LVMH, whose brands include Christian Dior and Givenchy, Lanvin Group is essentially a collection of mostly smaller luxury brands purchased by Fosun over the last decade. Fosun began its purchasing in 2013 with American women’s wear brand St. John, and purchased the crown jewel of its collection in 2018 when it acquired Lanvin, a storied French couture group founded in 1889.

The company was valued at about $1 billion at the time of its listing, and positioned itself as a Shanghai-based challenger to the largely European luxury brand powerhouses. But its stock has moved steadily downward since then, bringing its market cap down to about $200 million.

Lanvin sees its revenue gains in the Asia-Pacific region last year as validation of its China- and Asia-centered strategy. But for now, at least, its rivals are doing better at riding a global rebound in luxury spending. LVMH’s shares are up 9% year to date, alongside a nearly equal increase in revenue, while shares of Hermès (RMS.PA) are up by nearly 20%, with revenue up by 15% for the year. As we previously noted, Kering has stumbled in part due to its China exposure, with its shares down 19% year to date. On the same year-to-date basis, Lanvin’s shares are down more than 40%.

Lanvin’s price to sales (P/S) ratio of 0.49 is nothing to write home about, and its market cap is tiny compared to LVMH’s 394.8 billion euros and Hermes is 240 billion euros. Despite its slow progress, CEO Chan tried to sound an optimistic tone on the company’s earnings call. “We are nearing an inflection point, and we have laid the groundwork for accelerating the footprint growth and market share gains,” he said, also noting “there is significant room to grow in many of our geographic regions.”

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