Sales growth unexpectedly rebounded in the fourth quarter, LVMH's 2023 performance reaches a new historical high | Earnings Report Insights
LVMH's organic revenue in the fourth quarter increased by 10%, which did not slow down further as analysts expected. The organic revenue growth of its largest business, fashion and leather goods, in the quarter was 9%, lower than expected. However, the annual growth was 14%, reaching a historic high in revenue. LVMH's annual revenue growth was nearly 9%, less than half of the growth rate expected for 2022. Meanwhile, other Asian regions such as Europe, Japan, and China recorded double-digit organic revenue growth for the year. LVMH's CFO stated that there are no plans to further increase prices in 2024.
Luxury giant LVMH had a strong start to the earnings season. In the fourth quarter, which includes the heavy holiday season, LVMH's sales growth rebounded, reflecting the resilience of high-end luxury brand demand, and its full-year performance exceeded expectations, reaching a new annual high.
On Thursday, January 25th, local time, LVMH, headquartered in France, announced that its revenue for the fourth quarter of 2023 was EUR 23.95 billion, slightly higher than analysts' expectations of EUR 23.72 billion. Organic revenue growth for the quarter was 10%, not as expected by analysts, who predicted a slowdown to 8.17%.
With this, LVMH only had one quarter in 2023 where revenue fell short of expectations, and the third quarter was also the lowest-growth quarter. Revenue in the first and second quarters both grew by 17%, while the growth rate in the third quarter was 9%, almost half of the previous two quarters.
LVMH also announced that its full-year 2023 performance exceeded expectations, with annual revenue and net profit both reaching new highs compared to 2022.
- Full-year revenue for LVMH was EUR 86.15 billion, approximately 8.8% higher than the previous record in 2022, and slightly higher than analysts' expectations of EUR 85.88 billion.
- Full-year recurring operating income was EUR 22.8 billion, exceeding analysts' expectations of EUR 22.46 billion. Organic revenue growth for the year was 13%.
- Full-year net profit was EUR 15.02 billion, approximately 6.6% higher than the previous record in 2022. Profit from recurring operations was EUR 2.28 billion, a YoY increase of 8.2%.
Looking at the business segments, LVMH's largest source of revenue, the fashion and leather goods business, which includes brands such as Louis Vuitton (LV), Dior, Celine, and Fendi, saw organic sales growth of 9% in the fourth quarter, on par with the growth rate in the third quarter, slightly lower than analysts' expected growth rate of 9.14%. However, for the full year of 2023, this business segment achieved record-high revenue and profit, with an increase in global market share.
LVMH pointed out that, except for the wine and spirits business, the organic revenue growth of the company's other main businesses in 2023 was strong. The decline in the wine and spirits business was due to a high base and the impact of high inventory.
As shown in the chart below, among the main business segments, only the sales revenue of the wine and spirits business declined in 2023, with total revenue down 7% and organic revenue down 4%. Organic revenue for the fashion and leather goods business and the perfume and cosmetics business both grew by more than 10%. The boutique retail business, including the cosmetics brand Sephora, showed the strongest growth, with total revenue and organic revenue increasing by 20% and 25% respectively.
In terms of major market regions, LVMH pointed out that Europe, Japan, and other regions in Asia will all achieve double-digit organic revenue growth for the full year of 2023. The perfume and cosmetics business has shown strong growth worldwide, with Dior's Sauvage once again being the best-selling perfume of the year in 2023. Sephora has performed exceptionally well, confirming its leadership position among beauty retail brands.
When discussing the wine and spirits business, LVMH also mentioned that the growth in the champagne business was driven by the strong performance in the European and Japanese markets, offsetting the adverse effects of the unfavorable macroeconomic environment in the United States. The Hennessy cognac business has been supported by the recovery in China, but the normalization of demand in the US market during the post-pandemic period has had a negative impact.
Looking ahead to 2024, although there is still uncertainty in geopolitical and macroeconomic environments, LVMH is confident that its performance will continue to grow in 2024. Alongside the announcement of the financial report, LVMH's Chief Financial Officer (CFO), Jean-Jacques Guiony, announced that LVMH does not intend to further increase prices in 2024.
LVMH is the barometer of the luxury goods industry and the first luxury giant to release its quarterly report, bringing good news to the market in the field of luxury consumption.
However, after two years of rapid growth following the outbreak of the COVID-19 pandemic, luxury consumption has continued to cool down, especially among young consumers and less affluent groups who are most susceptible to high inflation.
LVMH's annual growth in 2023 has also clearly slowed down, less than half of the 23% growth rate in 2022. Guiony stated during the announcement of the third-quarter report that after three years of rapid growth, LVMH's growth is moving towards a more historically average level of development.
Barclays analysts predict that in 2023, the entire high-end luxury industry will grow by 5%, lower than the 9% growth rate in 2022, and far below the double-digit percentage growth rates in 2020 and 2021. These analysts believe that consumer spending in the United States and Europe will remain sluggish in 2023, and the return of Chinese tourists after the lifting of pandemic restrictions will only partially offset the impact.