Image courtesy: LVMH.com
Was there a collective sigh of some relief as LVMH posted its 2023 Financial Results, beating analysts’ estimates? Or did it perhaps highlight a continued slowdown in growth?
LVMH, the luxury conglomerate home to Louis Vuitton, Dior, Celine, Loewe, Fendi, Rimowa Tiffany, Bulgari, Sephora, and many more, reported revenue of €86.2 billion in 2023, representing 13% organic growth (9% when factoring in exchange rate fluctuation) over 2022. All business lines except Wines & Spirits were in positive territory. Revenues were lifted by sales results in the fourth quarter of 2023. China, Japan, and Europe achieved double-digit organic growth in 2023.
LVMH Chairman and CEO Bernard Arnault pointed to:
“the exceptional appeal of our Maisons and their ability to spark desire, despite a year affected by economic and geopolitical challenges. The Group once again recorded significant growth in revenue and profits. Our growth strategy, based on the complementary nature of our businesses, as well as their geographic diversity, encourages innovation, high-quality design and retail excellence, and adds a cultural and historical dimension thanks to the heritage of our Maisons.”
Arnault says the group “enter[s] 2024 with confidence backed by our highly desirable brands and our agile teams.” LVMH looks forward to its partnership with the Paris 2024 Olympic and Paralympic games.
Image courtesy: @cherriemun_
Image courtesy: @cherriemun_
Diving into the results further, let’s begin with a review of what happened over the course of 2023. LVMH began the year strong with 17% organic growth in both Q1 and Q2. However, Q3 evidenced slower growth – 9% – with much discussion of the economic headwinds facing the “aspirational consumer”, particularly in the United States.
Indeed, in the 2023 Half Year results, LVMH noted a softening in the shopping habits of these U.S. customers. Specifically, the 8% year-over-year U.S. revenue growth in Q1, was largely canceled out in Q2.
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LVMH Revenues Grow, But More Slowly Based on 2023 Q3 Results
Image courtesy: @celine
In Q4, however, revenue growth overall improved. A 10% hike over 2022 Q4 annual results, helped lift overall 2023 numbers to 13% (9% reported) for the year, notwithstanding the negative currency impact in the second half of 2023. And as will be discussed below, much of that success comes from China and Japan.
But first, how did our favorite business line – Fashion & Leather Goods – fare? It is LVMH’s largest group (2.5x greater revenue than the next largest business – Selective Retailing), and represents nearly half of the business revenues. In 2023, its revenues rose 14% on an organic basis (9% reported) virtually mirroring the overall LVMH results for the year.
LVMH does not break down results by brand, but in its report states (1) Louis Vuitton had “[a]nother record-breaking year”; Dior experienced “[r]emarkable growth across all product lines.” In addition to these hallmark brands, LVMH highlighted that desirability reached new highs for not only Louis Vuitton and Dior, but also Celine, Loewe, Loro Piana, and Fendi.
Selective Retailing – the group that includes Sephora – rode to a 25% annual increase in revenues (20% on a reported basis) due to very strong results from Sephora. Interestingly, its strongest results were in Q1 and Q3. Watches & Jewelry (which includes Tiffany and Bulgari) ended 2023 up 7% over 2022, albeit slower in Q3 and Q4.
As indicated earlier, Wine & Spirits slowed the overall LVMH growth. In this regard, it separated Wine & Champagne (up 2%) from Cognac & Spirits (down 10%).
Image courtesy: @dior
Image courtesy: @dior
Notably, in recent weeks, there has been media and financial speculation that perhaps LVMH should break up the company to maximize value for shareholders. They posit that the company’s stock is undervalued – facing a “conglomerate discount” – rather than receiving top value for its top brands like Louis Vuitton and Dior, unlike its hallmark heritage competitor Hermès.
Geographically, LVMH points to “double digit organic revenue growth in Europe, Japan and Rest of Asia” (mostly considered China). However, the largest sector and driver of growth in 2023 was China, which represents 31% of the company’s overall revenues. The United States and Europe each carried 25%.
Revenues in China were up 18% for the year, with Q4 hitting 15%, an increase over the slower growth in Q3. LVMH saw success in Japan, with a 28% spurt in 2023 over 2024, although Q4 was slower than the other quarters. Europe was up 13% for the year; however, it saw slower growth in Q4.
Interestingly, revenues in the United States only rose 4% over 2022. However, Q4 saw an 8% increase, perhaps suggesting the return of U.S. consumers. At least for some of LVMH’s brands.
Image courtesy: @fendi
LVMH is typically seen as a bellwether of the fortunes (or failures) in the luxury goods market. It reports first, and as a conglomerate in so many coveted high end categories, it has a broader view. These latest results seem to temper the doom and gloom stories, but also do not prove an oncoming boom. Others suggest that there is a bifurcation in the luxury market – where the higher end brands, like Louis Vuitton, Dior, Chanel, and Hermès, will do better than others. Stay tuned.
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Updated: January 27th, 2024
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