LVMH Moët Hennessy Louis Vuitton CFO Jean-Jacques Guiony has expressed some optimism over the outlook for the luxury-goods group’s Cognac business in the US.

Cognac makers selling in the US have seen demand fall from a boom during the Covid-19 pandemic, leaving retailers holding stocks and distillers struggling to sell through more products.

LVMH yesterday (16 April) posted its sales for the first quarter of 2023. The Hennessy Cognac owner does not disclose sales figures for individual markets, nor for Cognac specifically, but said its overall Cognac and spirits business unit saw its sales fall 16% organically year-on-year.

LVMH said Hennessy had been “impacted” during the quarter by “the cautious restocking of retailers in the US” and by “soft local demand” in China during the Chinese New Year period. However, it added: “In both cases, the sell-out is better than the sell-in, and US depletions continued to recover.”

Speaking to analysts after the group sales numbers were published, Guiony was asked for his thoughts on the outlook for the company’s Cognac sales.

The LVMH finance chief said the dynamics between “sell-in” – the sales a manufacturer makes to a retailer – and “sell-out” – sales made by a retailer to an end-consumer – were different in the US and China.

“In the US, there was further destocking in Q1, which to be frank, we did not expect but the good news is that depletions and overall consumer consumption were about flat in the first quarter of the year in Cognac, which is the first time in about 18 months that we see the business stabilising,” Guiony said. “So, it’s encouraging, although we were a little bit surprised that there was further destocking and therefore the sell-in was not as good as the sell-out.”

He added: “The level of inventories in the US was quite low at the end of February. I don’t have it at the end of March but I see no reason why it would be different, so, the level of inventories is reasonably low. This bodes well for the rest of the semester, so, for the first time in many, many quarters, I’m reasonably hopeful as far as Cognac is concerned in the US.”

The “sell-out” figures for LVMH's Cognac sales in China fell during January and February, Guiony explained.

“In China, the situation is a little bit different. Our sell-out numbers during January and February, so by and large Chinese New Year, were down double-digit in China,” he said. “Our sell-in numbers were worse than that, as we wanted to avoid at all costs the build-up of inventories. We monitored that fairly tightly.”

Guiony added LVMH was seeing signs that sales trends in the on-premise in China were better, in relative terms, than in the off-premise, while he indicated some improvement in duty-free sales in the wider market in Asia.

“Obviously, as far as wine and spirits is concerned, we don’t get the same precision in analysis that we get in [our] retail businesses as these are not our own data, but … when we look at depletions, it seems that the off-trade segment is doing much worse than the on-trade. The on-trade is not fabulous, don't take me wrong, but the off-trade is doing much worse and, conversely, we see that duty-free business in Asia is picking up quite significantly,” he said.

Overall, LVMH’s wine-and-spirits division saw its sales drop 12% in the first quarter on an organic basis to €1.42bn ($1.51bn), or by 16% on a reported basis.

The company said Champagne sales were “down, reflecting the normalisation of post-Covid demand”. It added: “Moreover, the beginning of the year was compared to strong growth in the first quarter of 2023, due in particular to restocking among distributors.”

LVMH’s group-wide sales were up 3% organically but down 2% on a reported basis at €20.69bn.