In the shadow of a global luxury market slowdown in 2023, LVMH Moët Hennessy Louis Vuitton, the renowned French multinational corporation and conglomerate specialising in luxury goods, emerged as a beacon of resilience and growth. Despite a year fraught with economic and geopolitical uncertainties, LVMH, with its prestigious brand portfolio including Dior, Louis Vuitton, Sephora, and Tiffany & Co., reported an impressive 10% increase in sales in the last quarter of 2023. This growth not only exceeded analysts’ expectations but also demonstrated the unwavering demand for high-end luxury products, even amid a sluggish economy.
CEO Bernard Arnault acknowledged the unique allure of the company’s Maisons. He stated, “Our performance in 2023 illustrates the exceptional appeal of our Maisons and their ability to spark desire, despite a year affected by economic and geopolitical challenges.” His confidence in the company’s trajectory was further highlighted by his optimistic outlook for 2024.
This positive sentiment had a ripple effect on the stock market, where LVMH’s shares witnessed their most significant rise in almost two years. Furthermore, the buoyancy spread across the luxury sector, positively impacting the shares of other luxury brands, including Kering, the parent company of Gucci.
LVMH’s diverse portfolio, spanning fashion, beauty, spirits, and hotels, has been a focal point within the luxury industry. The fashion and leather goods segment, in particular, experienced a robust 9% sales increase in the last quarter. The conglomerate’s other domains, including watches, jewellery, beauty, and fragrances, also reported thriving performances, with Sephora standing out for its exceptional results throughout the year.
Despite LVMH’s consistent growth, the luxury sector did experience a period of apprehension due to a slowdown in revenue growth during the third quarter of 2023. This slowdown was seen as a potential shift in the industry, following a significant surge in luxury consumption driven by pandemic-related savings.
Flavio Cereda, co-manager of GAM’s luxury brands investment strategy, commented on LVMH’s pandemic-era performance, noting, “The stock doubled between March 2020 and March 2021 and trebled to its high in April 2023, establishing the company as the real pandemic winner with very significant market share gains and raising profitability by over a third.”
“Our performance in 2023 illustrates the exceptional appeal of our Maisons and their ability to spark desire, despite a year affected by economic and geopolitical challenges. The Group once again recorded significant growth in revenue and profits. Our growth strategy, based on the complementary nature of our businesses, as well as their geographic diversity, encourages innovation, high-quality design and retail excellence, and adds a cultural and historical dimension thanks to the heritage of our Maisons.” Bernard Arnault, Chairman and CEO of LVMH
However, challenges remain for the luxury industry, particularly in the Chinese market. Jean-Jacques Guiony, LVMH’s CFO, highlighted that shopping activity of Chinese consumers in Europe, specifically at Louis Vuitton stores, was still recovering at 70% of pre-pandemic levels. This indicates a resilient demand from Asian countries, yet full recovery may take longer due to ongoing travel disruptions and economic uncertainties in China.
Jelena Sokolova, a senior equity analyst at Morningstar, noted the gradual return of Chinese tourists to Europe, emphasising the significance of group travel in the recovery process. She also pointed out the impact of visa backlogs and the Chinese real estate market’s uncertainty on consumer spending habits.
The luxury sector is also witnessing a widening gap between high-end luxury brands like LVMH, Richemont, and Hermès, and those catering to a more aspirational consumer base, such as Burberry. Bernard Arnault highlighted the robust demand for ultra-premium products, noting their particular appeal to affluent consumers.
Sokolova underscored the importance of targeting affluent customers, citing their economic resilience as a key driver of sales for high-end brands like Cartier and Van Cleef & Arpels, both part of the Richemont group, as well as Hermès.
While LVMH’s strong performance in 2023 and its optimistic outlook for 2024 bring a ray of hope to the luxury industry, the sector continues to navigate through the complexities of varying consumer behaviours and economic uncertainties.