Luxury-Goods Stocks Show Resilience as LVMH Beats Expectations

Luxury-goods stocks have been under pressure amid concerns that consumer spending will decline in 2024. However, the latest earnings report from LVMH Moët Hennessy Louis Vuitton suggests that the sector may have more strength than anticipated.

LVMH reported a 10% increase in fourth-quarter revenue compared to the previous year, reaching €23.9 billion ($25.9 billion). This boost was largely attributed to a successful holiday season. Analysts had predicted sales of €23.6 billion, making LVMH’s performance even more impressive.

The company’s full-year revenue amounted to €86.2 billion ($93.4 billion), surpassing estimates that stood at €85.8 billion and representing a 13% YoY growth.

While LVMH fell slightly short of expectations for diluted earnings per share in the full year, posting €30.33 ($32.86) instead of the anticipated €31.29, investors appeared to overlook this as they focused on the company’s robust top-line performance. LVMH did not provide earnings per share figures for the fourth quarter, citing adverse effects from foreign-exchange fluctuations and rising interest rates.

On Thursday, shares of LVMH’s U.S.-listed stock rose by 3% to $153.94, demonstrating investor confidence despite the slight earnings miss.

In 2023, LVMH experienced revenue growth across all sectors except wines and spirits, which had faced challenges in recent quarters due to a decline in demand for high-end liquors in the U.S.

Sales Growth Disparity: U.S. Struggles Compared to Other Markets

In the global luxury goods industry, the United States has emerged as a weak market for one prominent company. In 2023, its sales in the U.S. experienced a paltry 4% increase compared to the previous year. To put this into perspective, Japan witnessed a significant growth of 28%, while Europe and Asia saw sales rise by 13% and 18%, respectively.

The significance of this slowdown should not be underestimated, as the U.S. represents a substantial portion of the company’s market share. In 2023, it accounted for approximately a quarter of total sales, a slight decline from its previous share of 27% in 2022.

The company attributes the sluggish sales growth in the U.S. to Americans’ reduced inclination to spend on luxury goods. The fourth quarter revenue growth of 10% is notable, although it does indicate a slower pace compared to the robust growth witnessed in the first half of the fiscal year. These observations align with LVMH’s previous acknowledgment when their third-quarter revenue fell short last October. However, it is worth noting that the growth rate was higher than the 9% recorded in the third quarter.

Despite these challenges, LVMH remains optimistic about luxury brands’ prospects in 2024. CEO Bernard Arnault believes it could be another strong year, citing confidence in their highly desirable brands and agile teams. He anticipates an inspiring and exceptional year for the company.

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