LVMH: confirmed slowdown in sales, activity in China reassuring

(AOF) – LVMH (+4.27% to 815.50 euros) occupies the head of the CAC 40 while its sales slowed in the first quarter. Recalling the 9% drop in the luxury giant’s shares over one month, UBS anticipated a “slightly positive” reaction from the stock in “the absence of any obvious indication of a weakening of trends” at the end of the quarter. for the Fashion and Leather Goods division “what the market feared”. The analyst remains at Neutral “awaiting signs of a return to positive profit dynamics”. In published data, LVMH’s revenues fell 2% to 20.7 billion euros.

Overall in line with expectations, over this period, organic sales growth stood at 3%, despite a geopolitical and economic context which remains uncertain. They amounted to 21.03 billion euros in the first quarter of 2023.

“By geography, this organic growth breaks down into +2% for the United States, +32% for Japan, -6% for Asia excluding Japan and +2% for Europe,” indicates Invest Securities.

Commenting on this publication, Stifel explains that “the activity in China saved the day of the luxury group with a reassuring growth of 10% in this first quarter. It is driven by “a very strong growth in offshore purchases, which stimulated sales, particularly in Japan.

In the wake of this information, luxury values ​​are progressing: L’Oréal (+1.47%), Hermès (2.05%), Burberry (+2.05%). LVMH was the first company in the sector to reveal its first quarter revenues.

Contrasted performances by division

In this first quarter, LVMH was penalized by the Wines and Spirits activity: a drop in turnover of 12% organically to 1.41 billion euros. “The Champagne activity is in decline in a context of normalization of post-Covid demand. Hennessy cognac is still penalized by the caution of retailers who are limiting their orders in a still uncertain context in the United States,” said the The company managed by Bernard Arnault.

In addition, the Watches and Jewelry activity fell slightly (-2% organically) in this first quarter to 2.46 billion euros.

On the other hand, LVMH saw its sales increase for its largest division, Fashion and Leather Goods, which represented nearly 75% of the group’s current operating income in 2023. They increased by 2% organically in this first quarter of 2024 thanks to its Louis Vuitton brand to reach 10.49 billion euros.

With organic growth of 7% in sales to 2.18 billion euros, the Perfumes and Cosmetics business benefits from strong innovation dynamics and its selective distribution strategy.

In selective distribution, organic sales growth was 11% in the first quarter of 2024, amounting to 4.17 billion euros.
Following this publication, Citigroup anticipates increased polarization in the growth of LVMH brands. The research firm specifies that “shares are up 8% since the start of the year but have underperformed over the last month (-9% versus -7% for the sector”). He expects a credible scenario of sequential improvement in demand from now on, helped notably by falling interest rates.

“In an uncertain geopolitical and economic context, management remains both confident and vigilant, maintaining a strategy focused on the development of its brands,” indicates LVMH in parallel with the publication of these quarterly results.

According to Invest Securities, the consensus anticipates organic growth of 5.8% for LVMH in 2024, including 8% in the second half.

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