On Tuesday, LVMH announced a 9% increase in third-quarter revenue, reflecting slower growth as a significant wave of post-pandemic spending slows due to rising inflation and economic uncertainty.
“Growth is converging towards numbers that are more in line with historical average,” LVMH Chief Financial Officer Jean-Jacques Guiony told analysts after three “roaring years,” or excellent years.
After taking into account acquisitions and currency fluctuations, LVMH, the parent company of brands such as Louis Vuitton, Dior, Tiffany, and Bulgari, reported revenue of 19.96 billion euros ($21.16 billion), an increase of 9% over the previous year. Year over year, total revenue increased 1%. Lower than analysts’ forecasts of a 10% gain, the fashion and leather goods segment, which includes Louis Vuitton and Dior, reported sales growth of 9%.
In contrast to China’s patchy economic recovery, LVMH is currently dealing with a drop in demand for luxury goods in the US and Europe. Consumers, especially those in younger generations, are refraining from post-pandemic spending binges due to rising expenses.
Although business in Europe slowed over the quarter, Guiony stated that there was little difference in demand for Chinese fashion and leather items compared to two years earlier, other than the fact that more purchases are being made outside of the mainland as travel has resumed.
Guiony claims that there hasn’t been significant change in US trends. The company reported lower demand for Champagne during the quarter, while Hennessy cognac demand was negatively impacted by the bad economic situation in the U.S. and a slower-than-expected recovery in China. The wines and spirits segment reported a 14% sales decline throughout the quarter.
LVMH is the first significant global luxury company to announce earnings this quarter, providing investors with a preview of what to anticipate from competitors. On October 24, Hermes and Kering reported.
“This seems good enough to support the share price, as buyside expectations were possibly more muted, as the significant market derating suggests,” said Luca Solca, analyst at Bernstein. He added that the company faced a tougher comparison period after strong performances in China, the United States, and Europe a year ago.
Investors have reduced their expectations for the luxury market, and since April, the value of LVMH has fallen by over 96 billion euros. After a 2-and-a-half year reign as Europe’s most valuable listed business, Danish pharmaceutical giant Novo Nordisk NOVOb.CO, which saw growth from the anti-obesity medicine Wegovy, dethroned the French luxury brand last month.
The company also suffered from a stronger euro versus the dollar compared to a year ago because U.S. sales were worth less in its native currency. Guiony expected the negative currency impact to significantly influence margins in the second half. As hedging techniques will offset it, the impact was worse than projected.
European businesses with significant U.S. operations will see an impact of the exchange rate.
