A photograph taken on April 23, 2024 shows a view of the new Louis Vuitton luxury shop belonging to French luxury group LVMH Moet Hennessy Louis Vuitton SA, on the Champs Elysee avenue in Paris.
Julien De Rosa | Afp | Getty Images
Shares of LVMH retreated on Wednesday as investors remained cautious about a sweeping luxury sector rebound following slightly better-than-expected annual results from the world’s largest luxury company.
The owner of brands including Louis Vuitton, Moët & Chandon and Hennessy posted revenues of 84.68 billion euros ($88.27 billion) for 2024, exceeding the 84.38 billion euros forecast by LSEG analysts and equating to organic growth of 1% versus the previous year.
LVMH shares pared losses slightly to close 5% lower. London time. Fellow luxury goods stocks Kering and Christian Dior ended the session 5.4% and 5.28% lower, respectively.
Investors have been looking for further confirmation of a recovery in the luxury sector after Cartier owner Richemont reported its “highest ever” quarterly sales figure over the festive shopping period. However, declining sales in LVMH’s critical fashion and leather goods and wines and spirits segments pointed to continued pressure within the group.
LVMH
“After a stellar start to the reporting season for the luxury sector, anticipation had been increasing ahead of LVMH’s Q4 results, which is seen as the proxy for the sector. However, the company reported a relatively underwhelming set of results yesterday evening,” said Mamta Valechha, consumer discretionary analyst at Quilter Cheviot.
LVMH on Tuesday attributed its revenue growth to solid demand within its selective retailing division — which includes retailer Sephora — and perfume and cosmetics. Growth was also broadly driven by consumers in the U.S., Europe and Japan, while the wider Asia Pacific region — and notably China — lagged.
“Sentiment among wealthier shoppers has recovered in Europe the U.S. and Japan but in China, which has been the powerhouse for the luxury sector it’s still been weaker. Nevertheless, this is signs of steady progress, with the luxury ship chugging forward,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.
The French luxury goods giant is seen as a bellwether for the wider luxury industry, which has faced significant pressure over recent years amid declining China sales and broader macroeconomic headwinds.
“While LVMH saw a sequential improvement, it was less pronounced compared to Richemont and Burberry,” Quilter Cheviot’s Valechha continued. “Had LVMH been the first to report this earnings season, this set of results would have been digested well. However, peers had already set the bar high, so it is unsurprising to see its shares down this morning.”
Luca Solca, senior analyst for global luxury goods at Bernstein, said Tuesday’s earnings pointed to a continued divergence between the best and the rest in the luxury sector, adding that LVMH had “work to do” to regain market share — particularly in its prestigious handbags segment.
“If you look at the organic growth gap between the jewelry Maisons of Richemont and the fashion and leather goods segment of LVMH, you see that this has continued to increase,” Solca told “Squawk Box Europe” on Wednesday.
“That is clearly a message that there’s work to do. And we think that the most important work to do is at Dior, which has been increasing prices significantly and it’s no longer the talk of the day anymore,” he added.
Shares in LVMH are currently up around 14% year-to-date. Earlier this month, the group surpassed Danish pharmaceutical giant Novo Nordisk to regain the title of Europe’s most valuable company.