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LVMH defied expectations and increased sales in its most recent quarter thanks to a buoyant US economy and resilience in Europe, raising optimism that the worst of the downturn in the luxury goods market has passed.
LVMH, the sector bellwether, is the latest luxury group to outperform expectations in the quarter ending December 31, after positive surprises from Cartier owner Richemont and Burberry sent industry shares higher.
This follows a tough rest of 2024, as the industry contended with a sharp slowdown in luxury sales and a stubbornly downbeat performance in the previously buoyant Chinese market.
The Paris-based company, controlled by French billionaire Bernard Arnault, said on Tuesday that fourth-quarter sales rose 1 per cent on an organic basis to €23.9bn, above analyst expectations for a 1.25 per cent fall, according to estimates compiled by Visible Alpha.
“This year has been roughly stable,” chief financial officer Jean-Jacques Guiony told the Financial Times, adding that performance had been “objectively better in Europe and the US” in the fourth quarter.
“It’s not great, but it’s also not a catastrophe compared to some commentaries,” he said.
“I think in 2025 we have all the tools to continue to improve our leading position in the luxury market,” said Arnault, pointing to double-digit growth at several big LVMH brands in January.
Full-year revenues for 2024 came in above expectations to grow 1 per cent year on year on an organic basis to €84.7bn, compared with Visible Alpha consensus expectations that they would be flat.
However, full-year operating income fell for the first time since 2020 — down 14 per cent year on year on an organic basis to €19.6bn — as slower growth, increased costs and minimal price rises on products put some pressure on margins.
Sales at LVMH’s core fashion and leather goods division, which contains top brands Louis Vuitton and Dior, also came in above expectations, declining 1 per cent to €11.1bn in the fourth quarter compared with Visible Alpha expectations for a 3 per cent decline.
“We’re in a ‘wait and see’ mode because the economy in the US is good but our performance is linked to inflation, to interest rates and to regaining confidence . . . from aspirational customers who were under pressure earlier in the year. That’s all under way now,” said Guiony.
In China, he said the market remained depressed but had improved slightly from previous quarters. LVMH’s sales in the Asia Pacific region outside Japan were down 10 per cent in the fourth quarter and 11 per cent for the full year.
Analysts at HSBC wrote that they “remain convinced, for the sector as well as for LVMH, that Chinese consumption has not deteriorated further since Q3 2024”, while the US had picked up “convincingly” since the presidential election in November.
LVMH’s wines and spirits division remained its worst performer as the company contended with a global slowdown in alcohol demand after the euphoria of the pandemic, weak Chinese demand and the struggles of its Hennessy cognac brand in the US. Sales fell 8 per cent in line with expectations in the fourth quarter, while full-year operating income for the division declined 36 per cent.
Investments in the watches and jewellery division, which did better than expected as growth picked up by 3 per cent year on year in the fourth quarter, also weighed on operating profit, falling 28 per cent for the division in 2024 to €1.55bn, as the company continued to invest heavily in a turnaround of the Tiffany jewellery brand.
“To absorb those costs, you need a bit of growth, which we didn’t get,” said Guiony. However, continuing to invest in Tiffany since buying it in 2021 was a “countercyclical investment . . . because there’s a lot of work to do, but we have a high level of confidence in the quality of the brand”, he added.
But he also said Tiffany’s performance had “markedly improved” in the fourth quarter.
LVMH said it would maintain its dividend this year, paying investors €13 per share.
Guiony leaves his role on February 1 after two decades as finance chief, to take over at Moët Hennessy.
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