By
Chimamanda U. Martha
January 16th, 2024
The French giant attributed this decline to post-COVID-19 normalization, high inventory levels among retailers, and a slowdown in Hennessy cognac sales in the United States.
LVMH, the world’s largest luxury conglomerate, experienced a significant drop in its shares on Wednesday following a disappointing financial earnings report for the third quarter (Q3) ending in September.
The French luxury group, which controls popular brands like Louis Vuitton, Dior, Tiffany, and Bulgari, unveiled its third-quarter results and nine-month figures after the market closed on Tuesday, showing a 9% increase in sales for Q3, totaling €19.9 billion.
LVMH Shares Drop to Lowest since January after Q3 Financial Report
Despite this impressive increase, the company’s quarterly revenue growth slowed to 9% year-on-year, a sharp deceleration from the robust 17% growth in the second quarter, surprising many market analysts who had anticipated a growth rate of approximately 11%.
Consequently, the company’s stock took a hit on Wednesday morning, reaching its lowest level of the year at 11:58 a.m. London time, LVMH shares were down by 6%, trading at 689.4 euros ($730.96).
Data from the London Stock Exchange Group (LSEG) indicated that the shares had fallen to 683.2 euros earlier in the session, marking their lowest level since December 29, 2022.
The decline resulted from LVMH losing its status as Europe’s most valuable company by market capitalization to Danish pharmaceutical firm Novo Nordisk.
LVMH’s Fashion and Leather Goods Business Sees Profit
The first nine months of 2023 also saw a reduction in revenue growth for a company controlled by billionaire Bernard Arnault.
Currently, the firm boasts a 14% revenue growth, compared to the impressive 20% growth achieved during the same period the previous year. While several business segments, including Louis Vuitton and Dior, demonstrated an increase, a significant 10% decline in wine and spirits sales during the nine months leading to October drew attention.
The French giant attributed this decline to post-COVID-19 normalization, high inventory levels among retailers, and a slowdown in Hennessy cognac sales in the United States.
Jean-Jacques Guiony, the Chief Financial Officer of LVMH, acknowledged the financial shift, noting the company is approaching average growth figures.
“After three roaring years and outstanding growth, we are now witnessing a convergence toward growth figures more aligned with historical averages,” said he.
This surprising performance in the third quarter starkly contrasts the growth trajectory that the company had experienced during the pandemic, which had led to record results and soaring share prices.
Luxury Goods Industry Faces Economic Turmoil
The luxury goods industry, typically known for performing well in economically challenging environments, is currently navigating multiple economic and geopolitical threats.
Factors such as China’s transition to slower growth and higher interest rates impacting US demand for “affordable luxury” contribute to this shift. While the recent LVMH results may indicate a return to more historical growth levels, the industry’s resilience and adaptability will be crucial in shaping its future performance.
Meanwhile, the impact of LVMH’s performance also extended to other European luxury stocks, with Christian Dior, Richemont, Burberry, Hugo Boss, Hermes, and Kering among those experiencing lower trading volumes.
The company was the first major global luxury firm to announce its quarterly earnings this quarter, offering investors a preview of what to anticipate from its competitors. Other brands such as Hermes and Kering, are scheduled to release their earnings reports on October 24.