LVMH Luxury Market Leader Slows Down: Analyzing LVMH’s Q3 Earnings Report
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LVMH, the world’s leading luxury goods conglomerate, has reported a slowdown in its third-quarter earnings. Despite an overall growth of 10% in the year, organic growth slowed to 9% in Q3, down from 17% in the first and second quarters. This slowdown has raised concerns about the future prospects of the luxury market.
The slowdown can be attributed to several factors. Firstly, the company took a 4% hit due to exchange rate fluctuations. Adjusting for this, sales advanced by 10%, from $60 billion last year to $66 billion this year. Secondly, the luxury industry’s market leader, LVMH, has a revenue of $84 billion, making it nearly four times larger than the industry’s number two, Kering, at $22 billion. This highlights the significant impact that LVMH’s performance can have on the overall luxury market.
In addition to the slowdown in organic growth, LVMH’s reported numbers for the third quarter showed a 1% increase in revenue, from $20.9 billion in 2022 to $21.2 billion in 2023 (€19.8 billion to €20 billion). This indicates that the company’s momentum is flagging, and it may be facing challenges in maintaining its growth trajectory.
The slowdown in LVMH’s performance can be seen as a reflection of the broader luxury market. Luxury consumers have been putting the brakes on their spending due to concerns about geopolitical upheaval, current political disputes, and global instability. Chandler Mount, CEO of the Affluent Consumer Research Company, stated that the aspiration of luxury consumers is ebbing, and this is having a significant impact on the luxury industry’s growth prospects.
LVMH’s performance in different markets also highlights the challenges faced by the luxury market. While Japan continued to advance at a robust 30% organic rate, all other markets, except for Asia, experienced a slowdown. Asia, which accounts for nearly one-third of LVMH’s revenues, saw a decline in organic growth from 23% in the first half of the year to 11% in the third quarter. Europe, which generates 24% of revenues, saw a decline from 22% organic growth in the first half to 7% in the third quarter. The U.S. experienced a decline in its contribution to the Group’s topline results, dropping from generating 26% of revenues last year to 24% this year.
LVMH’s performance in different segments also provides insights into the challenges faced by the luxury market. The Wine & Spirits segment saw a decline of 14%, while the Fashion & Leather Goods segment was flat, with a 1% increase in revenue. The Selective Retailers segment, which includes Sephora, DFS, and Le Bon Marché, saw a 18% increase in reported revenue. The Watches & Jewelry segment declined by 5%, and the Perfume & Cosmetics segment saw a 2% increase in revenue. The Wine & Spirits segment was the most troubled, with a 21% decline in reported revenue.
LVMH’s Chief Financial Officer, Jean-Jacques Guiony, attributed the slowdown in the luxury market to several factors. He mentioned that demand is soft in the U.S., and it is difficult to measure the impact of this on the luxury market due to the many different points of sale. Guiony also noted that the company’s performance in China is uncertain, and forecasting its prospects for 2024 is challenging.
In conclusion, LVMH’s slowdown in Q3 earnings highlights the challenges faced by the luxury market. The slowdown can be attributed to several factors, including exchange rate fluctuations, geopolitical upheaval, and consumer concerns about global stability. The impact of these factors on the luxury market is significant, as LVMH’s performance is indicative of the broader trends in the industry. The slowdown in LVMH’s performance raises concerns about the future prospects of the luxury market and the ability of luxury brands to maintain their growth trajectory.
