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Luxury goods goliath LVMH delivered better-than-expected Q4 organic growth of 10% / Image source: Adobe
  • Growth re-accelerates in Q4
  • Drinks division serves up positive surprise
  • LVMH issues confident 2024 outlook

Shares in LVMH (MC:EPA) leapt 10% after the world's largest luxury goods group confounded investors’ gloomy expectations by delivering better-than-expected fourth quarter organic sales growth of 10%, sending shares in rivals Hermes (RMS:EPA), Richemont (CFR:SWX) and Burberry (BRBY) higher on the reassuring read-across.

This marked an improvement on the 9% growth seen in the third quarter amid resilient demand for LVMH’s high-end wares over the Christmas period, although growth for 2023 slowed versus 2022 as the boom in post-pandemic luxury spending faded.

All LVMH divisions reported robust organic growth for 2023 with the exception of Wines & Spirits, although the drinks unit’s fourth quarter growth of 4% did top analysts’ estimates.

Combined with forecast-beating figures from cognac maker Remy Cointreau (RCO:EPA), whose shares leapt 12%, this positive surprise helped shake spirits leader Diageo (DGE) out of its recent torpor.

ORGANIC GROWTH HOLDS UP

Controlled by French billionaire Bernard Arnault and the force behind high-end brands including Louis Vuitton, Christian Dior, Tiffany and Hennessy cognac, LVMH’s sales grew 9% to €86.2 billion in 2023, a slowdown from the 23% growth the group put up in 2022.

Nevertheless, the company generated sales approaching €24 billion in the final three months of the year including Christmas, up 10% on an organic basis.

Fashion & Leather Goods, the biggest division by sales, delivered 9% organic growth, while growth in Perfumes & Cosmetics and Watches & Jewelry was 10% and 3% respectively.

In Wines & Spirits, organic sales were 4% lower for the year with Hennessy cognac affected by a mixed recovery in China and softer demand in the US, but sales bubbled up by a better-than-feared 4% in the fourth quarter.

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SEPHORA SERVES UP RECORD SALES

Among LVMH’s annual highlights was the performance of beauty retailer Sephora, which sits within the fast-growing Selective Retailing division and served up record 2023 sales and profits amid resilient demand for skincare and cosmetics.

Commenting on the results, chairman and chief executive Arnault said LVMH’s 2023 performance ‘illustrates the exceptional appeal of our Maisons and their ability to spark desire, despite a year affected by economic and geopolitical challenges. The group once again recorded significant growth in revenue and profits.’

Turning to the outlook, he added: ‘While remaining vigilant in the current context, we enter 2024 with confidence, backed by our highly desirable brands and our agile teams. It promises to be an inspiring, exceptional year for us all, featuring our partnership with the Paris 2024 Olympic and Paralympic Games.’

THE FUND MANAGER’S VIEW

Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity (BCLYMF3) fund, said LVMH delivered as well as shareholders could have expected.

‘The main feature is that organic growth in the fourth quarter at 10% has not deteriorated,’ explained Smit. ‘It has been surprisingly strong in Japan, with the rest of Asia and the US also accelerating.’

Smit continued: ‘Most importantly, organic growth has held up at 9% in Fashion & Leather Goods. Structurally, LVMH’s largest brands in this category have taken market share. Overall it is a comforting result in an uncertain environment.’

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Issue Date: 26 Jan 2024