Louis Vuitton, Dior Power LVMH’s Sales

PARIS—LVMH Moët Hennessy Louis Vuitton SE said surging revenue at its biggest fashion brands, Louis Vuitton and Dior, propped up the luxury-goods company’s results during the fourth quarter, offsetting other businesses such as Champagne that have fizzled during the pandemic.

The Paris-based conglomerate on Tuesday said revenue in the quarter fell 3% to €14.3 billion ($22.4 billion). Sales at its fashion and leather-goods division—where Louis Vuitton and Dior account for most of the revenue—rose 18%. Revenue for all of 2020 fell 17% to €44.7 billion. Net profit for the entire year was down 34% at €4.7 billion.

The results show how some of the marquee brands of luxury fashion have gained market share during the pandemic. Louis Vuitton, the world’s top-selling luxury brand, Dior and Hermès have posted strong sales growth since boutiques were allowed to reopen after lockdowns in March and April. Smaller brands—both inside and outside LVMH—have lagged behind.

Drawn by the performance of Dior and Louis Vuitton, investors have sent LVMH’s shares to near record highs, brushing aside concerns about the future of the luxury business during and after the pandemic. The company’s market capitalization is now €260 billion, solidifying the place of Bernard Arnault, LVMH’s chief executive and controlling shareholder, among the ranks of the world’s wealthiest people.

Jean Jacques Guiony, LVMH’s chief financial officer, said Louis Vuitton and Dior had a strong pipeline of new products that they continued to roll out despite the lockdowns. The brands also maintained fashion shows in reduced formats and continued digital-marketing efforts when others were forced to pull back drastically. Dior, for example, held a closed-door fashion show for its cruise collection in Lecce, Italy, in July, while rival brands pushed the unveiling of new collections until later in the year.

“We did it when nobody else was talking,” Mr Guiony said. “It was really Dior and Vuitton taking the bulk of the customers’ attention.”

Mr. Guiony said that Fendi and Celine—two of LVMH’s midsize fashion brands—also gathered momentum toward the end of the year. Marc Jacobs managed to turn a profit in 2020 for the first time in years, Mr Guiony said, though that came after a wave of layoffs at the American brand.

LVMH’s performance also benefited from strong consumption of Hennessy, the world’s top-selling cognac brand. Sales in the U.S. surged, LVMH said, bolstered by large government stimulus payments to consumers. Global cognac volumes were down only 4% for the year and rebounded in the second half, the company said.

That helped offset the poor performance of LVMH’s Champagne division, which includes brands such as Veuve Clicquot and Dom Pérignon. With weddings and birthday parties cancelled because of social-distancing rules, consumers had little reason to sip a glass of bubbly, pushing down Champagne sales by 19% for the year.

LVMH just completed its purchase of the American jeweller Tiffany & Co. at the start of this year, after the pandemic nearly cancelled the $15.8 billion deal. Mr Arnault pulled the plug on the merger in September before deciding to see it through after Tiffany agreed to a small discount.

The acquisition could be riding a tailwind: Jewellery sales in the final months of last year were one of the bright spots in the global luxury business, Mr Guiony said.

The Apple growth and profit machine is wavering, and the boost from price increases might not be enough to keep it going at historic rates. That dials up the pressure on Apple’s new chief executive, John Ternus.

The company saved the bad news for its earnings call, an hour after it posted its results for the September quarter, projecting that for the current quarter its high-margin services business will continue to slow and that its widely watched gross profit margin will continue to fall.

Apple AAPL -1.83%decrease; down pointing triangle shares had been flat in post-close trading but declined as much as 4% after the company made the projections, which fell short of Wall Street estimates.

The impact of high memory costs are weighing even more heavily on the company, Ternus and Apple Chief Financial Officer Kevan Parekh said on the company’s earnings call. Apple has stockpiled cheaper components purchased earlier, but those inventories are dwindling.

When Ternus took over as Apple’s third chief executive of the past 29 years on Sept. 1, he inherited sky-high expectations. The men he followed were among the most successful company leaders in American business history. Steve Jobs revolutionized consumer devices multiple times. Tim Cook expanded Jobs’s creation to spectacular heights.

The expectations are reflected in Apple’s huge valuation. Oppenheimer analyst Martin Yang noted that Apple stock trades at 36 times next year’s expected earnings, a premium to the overall market, even though its earnings are only expected to grow 1%, which is slower than its tech peers.

“We see insufficient upside to justify the premium,” Yang wrote in an investor note, adding that Apple needs to boost iPhone sales growth and turn around its slowing services business to make him more bullish.

Investors have bid up Apple shares because it has been a port in the AI storm—a reliable and capital-efficient business that stands apart from rivals which are spending hundreds of billions of dollars racing to the AI frontier.

While others invest in data centers, Apple has been pouring its own cash into buybacks and dividends. But that safety may be challenged if Ternus can’t speed up Apple’s innovation engine.

Apple’s lagging performance in AI was evident when its new “Siri AI” chatbot arrived this past quarter. Its long-maligned assistant was already stale the day it arrived, surpassed by agents such as Instinct and Muse that can complete multistep tasks for consumers, while Siri still sets kitchen timers.

Apple needs to give people reasons to buy its devices as they get more expensive. The company raised prices across the board last quarter to help offset higher costs. Without compelling new features, a big question is whether consumers will slow the frequency of iPhone upgrades.

The new iPhone Duo appears to be a bright spot. Consumers are scooping up the $1,999 foldable smartphone despite mixed reviews—so many that Apple can’t keep up with demand. Shipping dates jumped out to January soon after the device went on sale, a disappointment for the normally reliable Apple supply chain.

Apple said its revenue grew 12% in the September quarter, slightly ahead of Wall Street’s expectations. Its widely tracked gross profit margin, at 47.9%, also came in just ahead of analyst estimates.

Apple will need to find new growth avenues because a reliable engine during the Cook era—the services business—is slowing. Courts and regulators worldwide have limited Apple’s ability to charge developers big fees to distribute apps through its App Store, the biggest component of the company’s services segment.

One of its most lucrative App Store fee generators has been the ChatGPT app from OpenAI. Around the time Apple accused OpenAI of trade-secret theft this past summer, OpenAI began redirecting potential subscribers to pay via its website instead of the App Store, skirting Apple’s tollbooth.

Apple’s valuation has bumped up against a ceiling in recent weeks. Six times it traded above a $5 trillion market capitalization intraday before finally closing above the threshold, which it has already fallen back below.

News Corp, owner of The Wall Street Journal, has a commercial agreement to supply news through Apple services.

Louis Vuitton, Dior Power LVMH’s Sales

Big fashion brands bolster results, while Champagne revenue falls amid pandemic.

Apple’s growth engine is showing signs of slowing, as rising costs, weaker services growth and AI competition challenge its profitability. With John Ternus taking the helm, the pressure is on to reignite innovation and sustain investor confidence.