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The world’s biggest luxury group LVMH will raise its annual dividend even as the pace of sales growth slowed after years of record revenues and profits, ushering in a new era for the industry as a historic luxury boom draws to a close.
The slowing sales growth comes as French billionaire Bernard Arnault, president and chief executive of the group, consolidated the hold of the controlling family’s next generation with nominations for two of his sons to the board.
Both Alexandre, 31, and Frédéric, 29, have been put forward as candidates for the board, the company said on Thursday, confirming earlier media reports.
The nominations will be voted on at the company’s annual meeting in April. If successful, four out of five Arnault children will be on the board, with only 25-year-old Jean with no seat.
“When we enter LVMH, we are joining a family,” Arnault said. “But I have no intention of leaving in either the short or medium term.”
The company will also propose increasing its annual dividend to €13 per share at the annual meeting, up from €12 the year before.
LVMH is seen as a bellwether for the industry because of its size and the range of the 75 brands it owns, from fashion houses Louis Vuitton and Dior to jeweller Tiffanys and Cheval Blanc hotels.
The performance of its fashion and leather goods division in particular is seen by analysts as a proxy for the performance of personal luxury goods globally.
Demand for luxury handbags and ready-to-wear clothing — its biggest division by revenues — rose by 9 per cent to €11.3bn in the fourth quarter, although the pace of growth for the whole year slowed compared with 2022.
A standout for the year was its beauty retailer Sephora, which delivered record sales and profits as shoppers’ appetite for skincare and cosmetics defied the dent made in their spending power by inflation.
The group “had a level of activity which was satisfactory at around 10 per cent growth [around the critical Christmas period], which the market might find disappointing because they had foolishly gotten used to 20 or 25 per growth every year,” LVMH chief financial officer Jean-Jacques Guiony told the Financial Times.
“That is not something we can do forever and it is not desirable. We are in a moment when these numbers have normalised to a relatively high and relatively favourable level, so we are quite happy.”
The company grew its sales by 9 per cent to €86.2bn in 2023, in line with consensus estimates from analysts.
But this was at a slower pace than the 23 per cent increase it achieved in 2022. Profits increased by 8 per cent to €15.2bn, while its operating margin remained stable year on year at 26 per cent.
“The 2023 performance illustrates the exceptional attractiveness of our brands and their capacity to create desire during a year that was tense on the economic and political spheres,” said Arnault. “While remaining vigilant in the current context, we look to the year 2024 with confidence.”
The desire to project confidence was underscored by the company’s decision to propose increasing its annual dividend.
LVMH shares have fallen by a fifth in the past six months from historic highs for a market value of €343.6bn, in line with a sector-wide sell off as investors queried the luxury sector’s future growth trajectory after three years of precipitous growth as the US market showed signs of slowing.
The French luxury group’s selective retail division, which houses Sephora as well as travel retail, grew sales by a quarter to €17.8bn in 2023 and increased its operating profit by 76 per cent, carried by strong performance in North America, Europe and the Middle East.
The business benefited from global beauty demand as well as the return to work after the pandemic, Guiony said, with shoppers flocking back to city centre locations that had emptied out during global lockdowns.
Fashion and leather goods gained 9 per cent for revenues of €42.2bn for the year, in line with consensus expectations compiled by Eikon. However the pace of growth dropped off compared with the runaway 25 per cent increase in sales in 2022.
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