(News Bulletin 247) – The luxury group exceeded expectations in the fourth quarter and its fashion and leather goods division did not disappoint. Which demonstrates the resilience of the number one luxury brand at a time when demand is slowing.

LVMH had lost its stock market luster in recent months. The last two publications of the luxury group (the results of the first half and the turnover of the third quarter) had also been sanctioned by investors, and the group lost, last summer, its crown of first capitalization European for the benefit of the Danish Novo Nordisk.

But this time LVMH did not disappoint. The largest group in the CAC 40 delivered its annual results and its fourth quarter activity on Thursday evening.

At a time when luxury demand is experiencing a serious slowdown after years of dizzying post-pandemic growth fueled by ‘revenge purchasing’, the end of 2023 for LVMH was particularly watched by the market.

Ultimately, LVMH recorded sales of 23.95 billion euros over the last three months of 2023, generating growth of 10% year-on-year on a comparable basis. Which marks an acceleration compared to the third (+9% on a comparable basis).

The company above all exceeded the expectations of analysts who expected an increase of 8% on a comparable basis, according to Royal Bank of Canada.

This good publication delights the market this Friday morning: LVMH shares jumped 8% around 9:30 a.m., signing by far the largest increase in the CAC 40.

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The United States is accelerating

“All divisions recorded growth at least in line with expectations,” underlines Royal Bank of Canada.

This is the case of the most important, “fashion and leather goods”, which represents 47% of revenues and whose sales growth was 9% on a comparable basis, the figure expected by analysts. “The fashion and leather goods activity continued to benefit from the strong desirability of major brands, notably Louis Vuitton and Dior,” notes Jie Zhang, analyst at the independent research firm AlphaValue.

Two divisions performed much better than expected. Wines and spirits, which had a complicated year in 2023 due to large stocks of cognac, defied predictions in the fourth quarter. This division returned to growth, with an increase of 4% year-on-year on a comparable basis, while the consensus was forecasting a decrease of 6%. Selective distribution, which brings together Sephora and “travel retail” activities (sales in airports), for its part recorded growth of 21% on a comparable basis compared to 15% expected by the consensus.

By region, the United States experienced a remarkable acceleration over the last three months of 2023, with growth of 8% compared to 2% in the third quarter, and -1% in the second. The Stifel bank considers this performance “encouraging” and particularly appreciates it.

Japan, for its part, continues to show remarkable growth (+20%) despite a high basis of comparison and past price increases “to prevent Japan from being the duty free of Chinese Daigou (companies which buy goods of luxury goods abroad to resell them more expensively in China),” explained financial director Jean-Jacques Guiony.

Over the whole of 2023, sales increased by 13% on a comparable basis to 86.15 billion euros.

Desirability rather than growth

“Regarding profitability, investors feared poor performance, but good cost control in the second half of 2023 made it possible to beat the consensus by 2% in terms of current operating income,” Stifel appreciates. “The group’s current operating margin of 26.5% (over the whole of 2023, editor’s note) exceeded the consensus by 30 basis points (0.3%, editor’s note),” adds the bank.

“These results are robust and demonstrate LVMH’s defense capacity on revenues and margins in our opinion (…) LVMH remains our favorite idea for large-cap luxury goods in 2024,” concludes Royal Bank of Canada.

“The difficult macroeconomic context and uncertainty over consumption trends in China cloud visibility for the coming year,” explains Jie Zhang of AlphaValue. But in this difficult context, “we believe that the group will continue to benefit from the strong desirability of its brands,” she adds.

The “confident tone (from management, editor’s note) of the analysts’ meeting reinforces our idea that 2024 could be a year of smooth rather than difficult normalization for LVMH,” wrote Thomas Chauvet, analyst at Citi. , in a note cited by Bloomberg.

LVMH CEO Bernard Arnault told analysts and journalists that he was indeed “confident” for 2024. The executive estimated that the first effects of interest rate cuts should support the market, as well as the impact of the American elections on the American economy. “Every time there is an election in the United States the market is more dynamic so we think that the United States market should be more dynamic in 2024 than in 2023,” he explained.

The leader also declared that he was very comfortable with current growth rates, which are less dizzying than in the past.

“Growth should not be an objective, the objective is the desirability” of brands, explained Bernard Arnault. “8-9% growth, 10% maximum, that suits me very well”, assured the manager who added that he preferred “to slow down than to push”. “I don’t know if for the analysts it’s enough…It’s never enough anyway, they’re never happy,” he laughed.