In the first three quarters of the year, LVMH achieved impressive organic growth, recording a 14% increase, amounting to 62.2 billion euros in revenue. However, Q3 witnessed a slight deceleration, with a 9% rise to 19.9 billion euros, falling short of the 11.9% anticipated by Bloomberg analysts. This growth rate represents a decline from the remarkable 17% in the first and second quarters of 2023, leading to a more than 6% drop in LVMH’s share price post-quarterly results on the Paris Bourse, raising market concerns.
The trend of this slowdown extends to LVMH’s Fashion & Leather Goods division, with organic growth reaching 16% over nine months (11% on a reported basis), accumulating 30.9 billion euros. However, the third quarter reveals a growth rate of 9%, down from the impressive 18% in the first quarter and 21% in the second quarter, once again falling short of analyst expectations. During the results presentation teleconference, CFO Jean-Jacques Guiony’s cautious remarks, emphasizing the significant impact of exchange rates on sales and the challenge of forecasting, did little to ease market concerns.
This caution is a response to current macroeconomic and geopolitical uncertainties. According to Guiony, more time is necessary to determine whether this represents a new consumer trend or a temporary market anomaly. «After three exceptional years, it’s likely that growth is returning to historical averages. There’s no reason to expect a collapse, but we shouldn’t anticipate the consistent 20% growth we’ve seen,» he notes, underscoring the challenges of analyzing trends over just three months. After the post-Covid sales surge, «clearly, consumers need a pause as well,» he adds.
This adjustment is also evident in slowing sales in Asian and European markets, particularly in Asia, excluding Japan. LVMH’s sales in this region increased by 11% in the third quarter, a decrease from the robust 23% growth observed in the first half. This decline is partly due to a tough comparison with the particularly strong third quarter of 2022 and an increasing number of Chinese consumers spending abroad.
Jean-Jacques Guiony highlights a significant shift in the proportion of sales made within Greater China and outside of it. «When shopping abroad, consumers tend to spend more than they do at home,» he explains. Notably, Chinese customers’ spending abroad for fashion and leather goods has doubled in a year, averaging 30% compared to 15% the previous year, while it’s less than 20% for watches and jewelry. Sales of most fashion and leather goods brands to Chinese customers have surged by 40% over two years. Meanwhile, Japan continues to show strong growth, with a 30% increase in the third quarter and 31% over nine months.
In Europe, LVMH’s sales grew by just 7% in the third quarter, a stark contrast to the 24% growth observed in the first quarter and 19% in the second quarter. The proportion of domestic consumers decreased, while that of tourists rose, nearly returning to pre-pandemic levels, thanks to favorable exchange rates. The decline in European demand can be attributed to various factors, from global confidence to geopolitical tensions. Guiony acknowledges that these trends are challenging to explain and analyze within a three-month timeframe.
