Inflation Hits the Rich: LVMH Reports Slower Sales Growth in 3Q 2023

LVMH Moet Hennessy (OTC: LVMUY), perhaps the flagship luxury goods manufacturer in the world, reported much softer across-the-board sales growth in 3Q 2023 than in 1Q 2023 and 2Q 2023. This slowdown could suggest that even the rich are being squeezed by the economy and by persistent inflation. 

Headquartered in Paris, France, LVHM owns world-famous luxury brands such as Louis Vuitton, Tiffany & Co., Christian Dior, Moet Hennessy, TAG Heuer, and Bulgari.

More specifically, LVMH’s year-over-year organic sales growth of watches and jewelry dropped to only 3% in the just-completed quarter from 14% and 11% in 2Q 2023 and 1Q 2023, respectively. Similarly, sales of fashion and leather goods, adjusted for acquisition activity, increased 9% in 3Q 2023 versus 3Q 2022, less than the 21% and 18% year-over-year growth rates realized in 2Q 2023 and 1Q 2023, respectively.

LVMH: Year-Over-Year Percentage Change in Organic Revenue

Fashion & Leather Goods     Perfumes & CosmeticsWatches & JewelryWines & SpiritsTotal
1Q 202230%17%19%2%23%
2Q 202219%8%13%30%19%
3Q 202222%10%16%14%19%
4Q 202210%5%3%4%9%
1Q 202318%10%11%3%17%
2Q 202321%16%14%-8%17%
3Q 20239%9%3%-14%9%

On a geographic basis, LVMH’s sales growth remained muted in the U.S. — positive 2% in 3Q 2023 and negative 1% in 2Q 2023 after a much more robust 8% gain in 1Q 2023. More concerning are the sharp downturns in sales trends in Europe and Asia (excluding Japan). Year-over-year organic sales growth in Europe was 7% over the July through September period, down from 19% in 2Q 2023 and 24% in 1Q 2023.

Adjusted sales in Asia (excluding Japan) increased 11% in 3Q 2023, less than a third of the 34% year-over-year growth realized in 2Q 2023. These results almost certainly reflect tepid demand in China, one of LVMH’s biggest markets. Some consulting and research firms estimate that China represented nearly 20% of global luxury spending in 2022. In 2019, the last full year before COVID hit, that figure may have exceeded 30%.

China’s economy rebounded sharply earlier this year as COVID restrictions were loosened, but that resurgence was short-lived. Joblessness among China’s youngest workers (ages 16 through 24) hit record highs in the spring before China stopped reporting the data.  

LVMH Organic Revenue Year-Over-Year Percentage Changes, by Region

Investors in LVMH seem to have anticipated the recent weakening luxury sales trends. Shares have dropped more than 20% over the last three months. However, investors overall seem to believe that slowing luxury spending trends do not herald an economic downturn; most stock market analysts expect the economy to execute a soft landing in 2024.

The ADR for LVMH Moet Hennessy last traded on the OTC at US$141.27.

Information for this story was found via Edgar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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