LVMH, the world’s leading luxury group, has just released its third-quarter results. The company is showing a clear slowdown in its revenue growth, primarily attributed to an unfavorable comparison base and the normalization of customer demand after the Covid period. The luxury sector is no longer immune to the global economic slowdown.
LVMH, the world’s leading luxury group, has kicked off the release of the CAC40 earnings. While the global luxury leader announced an increase in third-quarter revenue, it still falls short of expectations.
The French conglomerate, which owns 75 brands, including Louis Vuitton, Dior, Hennessy, and Tiffany, reported quarterly sales of €19.96 billion, representing organic growth (at constant exchange rates and scope) of 9%. Analysts were anticipating an 11.5% increase, according to a Visible Alpha consensus. This growth marks a significant slowdown compared to the 17% organic growth in the second quarter.
Over the first nine months of the year, the world’s number one luxury company achieved a 10% increase in reported revenue and a 14% increase at constant exchange rates and scope, reaching €62.21 billion.
“In an uncertain economic and geopolitical context, the group is confident in its growth trajectory,” the company stated in a press release.
In different regions, sales in Asia (excluding Japan) saw an 11% increase, while growth in Europe was 7%. These increases are relatively modest compared to the 34% and 19% growth seen in the second quarter (Q2). Japan experienced a 30% growth compared to the previous year, and the United States returned to positive territory with a 2% increase.
Post-pandemic slowdown
As the barometer of the luxury sector, LVMH is the first company to release quarterly results, with Hermes and Kering’s results expected on October 24th.
Throughout the year, the group has repeatedly highlighted the “normalization” of the global luxury market after two and a half years of post-Covid recovery. However, rising interest rates and declining financial markets in the third quarter presented additional headwinds to growth.
LVMH is now grappling with weakened demand in the United States and Europe, where price increases have led to a slowdown in spending observed since the end of the coronavirus pandemic. Meanwhile, the recovery in China has been uneven and exhibits more moderate growth.
Nonetheless, analysts from Bernstein believe that the company’s growth aligns with investor expectations. It appears that investors have revised their forecasts downward due to the recent decline in LVMH’s price-to-earnings multiples, often referred to as “derating.”
Segments below expectations
In the third quarter, the Perfumes & Cosmetics and Watches & Jewelry divisions experienced a slowdown in their growth, reaching +9% and +3%, respectively. Sales in the Wines & Spirits division declined by 14%. This decline is due to the normalization of post-Covid demand, particularly for Hennessy cognac, as well as high inventory levels among retailers.
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