LVMH’s Results Were More Demure Than Haute Couture

LVMH’s Results Were More Demure Than Haute Couture
Reda Farran, CFA

4 months ago2 mins

What’s going on here?

French luxury conglomerate LVMH reported results that were far less glamorous than expected.

What does this mean?

LVMH was hanging celebratory banners around the office back in April, when the owner of brands like Louis Vuitton and Christian Dior became the first European company to boast a market value of over $500 billion. Thing is, the conglomerate was projected to cash in when China – a motor for the luxury industry’s record sales since 2020 – abandoned its strict pandemic restrictions. No luck: the country’s economic stumbles have tripped up consumer confidence. LVMH’s organic revenue – excluding the effects of currency swings and acquisitions – in Asia (not including Japan) ticked up just 11% last quarter, well short of analyst expectations and the 34% recorded the quarter before. And because that’s LVMH’s prime market for sales, the firm’s overall organic revenue only managed to inch up by 9% – roughly half the pace notched over the first half of the year.

LVMH organic revenue by region

Why should I care?

The bigger picture: Fatigue’s contagious.

After three years of properly luxurious sales figures in the high-end industry, LVMH warned that growth is now headed toward historical averages instead. And because the firm’s by far the world’s biggest luxury group, it’s considered a bellwether for the sector as a whole. So that warning may well ring out again when rivals Hermès and Gucci-owner Kering report later this month.

For markets: London’s luxury life.

LVMH’s stock fell 6% on Wednesday. And because together, LVMH, L’Oréal, Hermès, and Kering make up almost a fifth of the French CAC 40 stock market index, any more bad news for the squad could really weigh on the French stock market. In comparison, 14% of the UK’s FTSE 100 consists of energy companies, a sector that’s been riding high thanks to towering oil prices since the summer. So unless trends change, London could well overtake Paris as Europe’s biggest stock market, less than a year after relinquishing that title.

LVMH stock
Source: Google Finance
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