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LVMH Encounters Sluggish Start to the Year as Luxury Demand Cools
Ticker Tea
April 17, 2024
📝 SUMMARY: LVMH Moët Hennessy Louis Vuitton SE ($LVMUY), the world's largest luxury goods conglomerate, experienced a slowdown in sales growth at the beginning of this year, influenced by a dip in consumer spending on high-end products. Reporting only a 2% increase in organic revenue for its fashion and leather goods unit, the growth rate paled in comparison to the 18% surge seen a year earlier. This slowdown marks the least dynamic first quarter for the company since 2016, with the exception of 2020's COVID-19 disruptions.
The conglomerate's performance reflects broader challenges in the luxury sector, exacerbated by economic pressures in key markets like China. Despite a near 10% increase in Chinese demand for fashion and leather goods, LVMH's overall sales in Asia (excluding Japan) dropped by 6%. The luxury market in China has been notably impacted by local economic issues, including rising unemployment and a sluggish property market, which have dampened consumer confidence and spending.
LVMH's wines and spirits segment, home to prestigious labels like Moët & Chandon and Dom Pérignon, saw a significant decline, with organic revenue falling 12%. This slump was attributed to cautious retailer ordering, particularly in the uncertain U.S. market. Conversely, the selective retailing unit, spearheaded by Sephora, was a highlight, with the beauty retailer achieving "remarkable" growth and expanding its market share.
Amidst these mixed results, LVMH's jewelry and watch sectors also faced headwinds. The CFO indicated a reserved outlook for the watch division and highlighted the challenges faced by Tiffany & Co in the inflation-sensitive U.S. market, in contrast to Bulgari's stronger position in Asia.
As the luxury sector navigates post-pandemic adjustments, LVMH's varied performance underscores the changing dynamics and continued uncertainties facing global luxury brands. The upcoming sales report from Hermès ($RMS) on April 25 will provide further insight into the sector's current health.
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