LVMH Experiences a Dip in Demand for Luxury Goods
LVMH Moët Hennessy Louis Vuitton, the world's largest luxury goods company, recently reported third-quarter organic sales that fell short of average analyst expectations as tracked by Bloomberg. This development suggests a wider slowdown in luxury markets in China and the West. The results have raised concerns about cost-conscious consumers in a global economy where central banks are shifting from interest rate hiking cycles to interest rate cuts to prevent a harsh economic downturn.
LVMH, based in Paris, reported unexpected lower sales in the third quarter, largely due to a decrease in Chinese luxury demand. The company reported an organic revenue of -3%, missing the Bloomberg Consensus of +.39%. Every division of the company, from fashion to perfumes to watches to fine wine, fell short of analyst expectations. The company reported a revenue of 19.94 billion euros, which was less than the estimated 20.05 billion euros.
LVMH's Third-Quarter Earnings Snapshot
Here's a quick look at LVMH's third-quarter earnings as provided by Bloomberg:
- Organic revenue -3%, estimate +0.93% (Bloomberg Consensus)
- Fashion & Leather Goods organic sales -5%, estimate +0.48%
- Wines & Spirits organic sales -7%, estimate -2.41%
- Perfumes & Cosmetics organic sales +3%, estimate +4.26%
- Watches & Jewelry organic sales -4%, estimate -3.71%
- Selective Retailing organic sales +2%, estimate +5.09%
- Revenue EU19.08 billion, -4.4% y/y, estimate EU20.05 billion
- Fashion & Leather Goods revenue EU9.15 billion, -6.1% y/y, estimate EU9.74 billion
- Wines & Spirits revenue EU1.39 billion, -8.2% y/y, estimate EU1.47 billion
- Perfume & Cosmetics revenue EU2.01 billion, +1% y/y, estimate EU2.07 billion
- Watches & Jewelry revenue EU2.39 billion, -5.5% y/y, estimate EU2.43 billion
LVMH's Outlook
LVMH's outlook is gloomy, suggesting that consumers in its main markets will continue to face pressure through the end of the year. The company plans to maintain a strategy focused on enhancing the desirability of its brands, drawing on the authenticity and quality of its products, excellence in distribution, and agile organization, despite the uncertain economic and geopolitical environment.
RBC Capital Markets analyst Piral Dadhania stated to clients that the results "indicate a more pronounced slowdown than expected."
The spending boom that drove luxury sales during the pandemic era appears to be losing steam globally. In the US, low/mid-tier consumers are cost-conscious and heavily indebted with depleted savings. LVMH is seen as a bellwether for the entire sector.
In the markets, LVMH ADRs dropped 6% late in the session, just 50bps from entering a bear market for the year. As LVMH shares decline, Bernard Arnault's luxury empire takes a hit, reducing his net worth by billions of dollars, according to Bloomberg data. Rivals Ralph Lauren Corp., Estee Lauder Cos, and the ADRs of Gucci owner Kering SA also experienced a fall in New York as concerns grew among traders that consumers were losing momentum.
Bottom Line
The recent dip in LVMH's sales and the broader slowdown in the luxury market raise questions about the sustainability of luxury spending in a volatile global economy. It appears that consumers are becoming more cost-conscious, and this is affecting the luxury sector. What are your thoughts on this trend? Do you think the luxury market will bounce back, or is this a sign of a more significant shift in consumer behavior? Share this article with your friends and discuss these issues. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
LVMH Experiences a Dip in Demand for Luxury Goods
LVMH Moët Hennessy Louis Vuitton, the world's largest luxury goods company, recently reported third-quarter organic sales that fell short of average analyst expectations as tracked by Bloomberg. This development suggests a wider slowdown in luxury markets in China and the West. The results have raised concerns about cost-conscious consumers in a global economy where central banks are shifting from interest rate hiking cycles to interest rate cuts to prevent a harsh economic downturn.
LVMH, based in Paris, reported unexpected lower sales in the third quarter, largely due to a decrease in Chinese luxury demand. The company reported an organic revenue of -3%, missing the Bloomberg Consensus of +.39%. Every division of the company, from fashion to perfumes to watches to fine wine, fell short of analyst expectations. The company reported a revenue of 19.94 billion euros, which was less than the estimated 20.05 billion euros.
LVMH's Third-Quarter Earnings Snapshot
Here's a quick look at LVMH's third-quarter earnings as provided by Bloomberg:
- Organic revenue -3%, estimate +0.93% (Bloomberg Consensus)
- Fashion & Leather Goods organic sales -5%, estimate +0.48%
- Wines & Spirits organic sales -7%, estimate -2.41%
- Perfumes & Cosmetics organic sales +3%, estimate +4.26%
- Watches & Jewelry organic sales -4%, estimate -3.71%
- Selective Retailing organic sales +2%, estimate +5.09%
- Revenue EU19.08 billion, -4.4% y/y, estimate EU20.05 billion
- Fashion & Leather Goods revenue EU9.15 billion, -6.1% y/y, estimate EU9.74 billion
- Wines & Spirits revenue EU1.39 billion, -8.2% y/y, estimate EU1.47 billion
- Perfume & Cosmetics revenue EU2.01 billion, +1% y/y, estimate EU2.07 billion
- Watches & Jewelry revenue EU2.39 billion, -5.5% y/y, estimate EU2.43 billion
LVMH's Outlook
LVMH's outlook is gloomy, suggesting that consumers in its main markets will continue to face pressure through the end of the year. The company plans to maintain a strategy focused on enhancing the desirability of its brands, drawing on the authenticity and quality of its products, excellence in distribution, and agile organization, despite the uncertain economic and geopolitical environment.
RBC Capital Markets analyst Piral Dadhania stated to clients that the results "indicate a more pronounced slowdown than expected."
The spending boom that drove luxury sales during the pandemic era appears to be losing steam globally. In the US, low/mid-tier consumers are cost-conscious and heavily indebted with depleted savings. LVMH is seen as a bellwether for the entire sector.
In the markets, LVMH ADRs dropped 6% late in the session, just 50bps from entering a bear market for the year. As LVMH shares decline, Bernard Arnault's luxury empire takes a hit, reducing his net worth by billions of dollars, according to Bloomberg data. Rivals Ralph Lauren Corp., Estee Lauder Cos, and the ADRs of Gucci owner Kering SA also experienced a fall in New York as concerns grew among traders that consumers were losing momentum.
Bottom Line
The recent dip in LVMH's sales and the broader slowdown in the luxury market raise questions about the sustainability of luxury spending in a volatile global economy. It appears that consumers are becoming more cost-conscious, and this is affecting the luxury sector. What are your thoughts on this trend? Do you think the luxury market will bounce back, or is this a sign of a more significant shift in consumer behavior? Share this article with your friends and discuss these issues. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
