LVMH sales growth loses fizz as post-pandemic splurge wanes. A strong wave of post-pandemic spending has slowed down due to rising prices and economic uncertainty, according to luxury goods industry leader LVMH (LVMH.PA), announcing a 9% increase in third-quarter revenue on Tuesday. This represents slower growth.
According to LVMH Chief Financial Officer Jean-Jacques Guiony, “growth is converging toward numbers that are more in line with historical average after three roaring and outstanding years.”
After adjusting for currency changes and acquisitions, LVMH, which owns brands including Louis Vuitton, Dior, Tiffany, and Bulgari, reported sales of 19.96 billion euros ($21.16 billion), up 9% over the previous year. Annualized total income increased by 1%.
In contrast to analysts’ estimates of a 10% increase, the fashion and leather goods segment, which includes Louis Vuitton and Dior, reported sales growth of 9%. While the recovery in China has been patchy, LVMH is dealing with a decreasing demand for high-end items in the United States and Europe. Rising costs have caused consumers, particularly younger generations, to withdraw from a post-pandemic spending spree.
Although business in Europe slowed throughout the quarter, Guiony stated that there was no difference in demand for Chinese fashion and leather items compared to two years earlier; other than that, more purchases are being made outside of the mainland as travel has resumed.
According to Guiony, there hasn’t been much of a shift in tendencies in the U.S. The firm reported reduced demand for Champagne during the quarter, while the terrible economic climate in the U.S. and a slower-than-expected recovery in China hurt demand for Hennessy cognac. The wines and spirits segment reported a 14% sales loss throughout the quarter.
LVMH is the first significant global luxury company to announce profits this quarter, providing investors with a preview of what to anticipate from competitors. On October 24, Hermes and Kering reported.
“This seems good enough to support the share price, as buyside expectations were possibly more muted, as the significant market derating suggests,” said Luca Solca, an analyst at Bernstein. He added that the company faced a tougher comparison period after strong performances in China, the United States, and Europe a year ago.
Investors have reduced their expectations for the luxury market, and since April, the value of LVMH has fallen by over 96 billion euros.
After holding the title for the previous two and a half years, the Danish pharmaceutical firm Novo Nordisk (NOVOb. C.O.) NOVOb. C.O., aided by the success of the anti-obesity medicine Wegovy, displaced the French luxury group last month.
The firm also suffered from a higher euro than the dollar a year ago because U.S. sales were worth less in its native currency. Guiony said that he expected the negative currency effect to significantly influence margins in the second half, although hedging techniques will offset part of it, and that the impact was worse than projected.
This earnings season, the exchange rate’s impact is anticipated by European businesses with significant U.S. operations.
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