LVMH, the luxury goods conglomerate, experienced a significant slowdown in its growth during the third quarter of the year, falling short of analysts’ expectations. While the company had achieved strong organic growth of 14% to 62.2 billion euros over the first nine months, the increase was only 9% in the third quarter. This is a notable decline compared to the impressive 17% growth seen in the preceding quarters of 2023. As a result, the market reacted negatively, causing LVMH’s share price to plummet by over 6% on the Paris Bourse.
The Fashion & Leather Goods division of LVMH, which includes renowned brands like Louis Vuitton and Dior, experienced a similar trend. While it saw organic growth of 16% over the nine-month period, the growth rate was only 9% in the third quarter. During the results presentation, CFO Jean-Jacques Guiony expressed caution and highlighted the challenges of making accurate forecasts in the current macroeconomic and geopolitical landscape. He acknowledged the impact of exchange rates on sales, further contributing to the uncertainty surrounding the company’s performance.
Guiony believes that the slowdown in growth may be a natural correction in the luxury market rather than a sudden anomaly. After a period of exceptional growth in the post-Covid era, consumers might be taking a pause. He emphasized the difficulty of drawing conclusive trends based solely on three months of data. Moreover, sales in Asia and Europe have slowed down, particularly in China, where more Chinese consumers now prefer to spend abroad.
Regionally, LVMH experienced a growth rate of 11% in Asia excluding Japan, a decline from the 23% growth rate seen in the first half of the year. In Europe, sales rose by 7% in the third quarter, down from the 24% and 19% growth in the first and second quarters respectively. However, the US market has not shown significant changes compared to earlier in the year.
Guiony stressed that the slowdown is a normal part of the business cycle following several exceptional years. He cited the example of Dior, one of LVMH’s flagship brands, which saw sales growth in line with the division’s average. Guiony explained that expecting Dior to sustain a growth rate of 30% per year is unrealistic. The company needs to focus on consolidating and analyzing the size and distribution of its products.
Despite the challenges faced, LVMH remains confident in its strategy and future growth prospects. The company’s quarterly results reflect the complexities and uncertainties in the global environment, including geopolitical tensions, economic difficulties, and the slowdown in China. Analysts forecast that the deceleration witnessed in the third quarter is likely to continue into the final quarter of the year.
Useful links:
– Bloomberg: LVMH third-quarter sales grow 9% as growth slows in fashion
– Reuters: Paris Bourse slips, LVMH income up, luxury goods stocks drop
