LVMH falters: half-year performance weaker than expected

(AOF) – The luxury sector is falling after LVMH published results below expectations for the first half of 2024. Bernard Arnault’s company posted the biggest drop in the CAC 40 index, losing 3.95% to 664.30 euros. Hermès lost 1.15%, Kering lost 3.02% and L’Oréal fell 1.25%. LVMH’s net profit fell 14% to 7.3 billion euros, compared to expectations of 7.68 billion euros. Its current operating income stood at 10.7 billion euros (a drop of 8%) compared to 11.13 billion euros expected.

This current operating result shows an operating margin of 25.6% against a consensus of 26.3% and 27.4%, a year earlier. The negative exchange rate impact is high over the half-year: 607 million euros.

Jefferies, which lowered its price target on LVMH (from 710 to 690 euros), explains that “the slightly disappointing growth of the Fashion & Leather Goods division in the second quarter and the drop in margins in the first half led to an operating profit down 8% year-on-year for this half-year”.

UBS, for its part, expects a downward revision of the consensus of 5%. The broker notes that comments on growth at the end of the quarter – given the sequential deceleration of growth despite a more favorable comparison base – and on margins in the second half will be decisive for the evolution of the share price.

Also reacting to LVMH’s half-year performance, Alphavalue notes that “weak traffic and weaker demand persisted in China, although Chinese consumers continue to drive global growth, particularly in the Fashion & Leather Goods division.”

All divisions contribute to underperformance

In addition, LVMH sales fell by 1% to €41.7 billion compared to €42.24 billion in the first half of 2023. They increased by 2% organically.

Regarding sales, LVMH underlines that “Europe and the United States are growing at comparable currencies and scope; Japan is achieving double-digit growth in sales; the rest of Asia reflects the strong growth in spending by Chinese customers in Europe and Japan.”

“Like revenue, all divisions contributed to the underperformance of the LVMH group’s results, in particular the Watches & Jewelry division whose current operating income stood at 877 million euros (-19%) against 948 million euros expected,” reports Invest Securities. It recorded a drop (-3% organic) in its sales in the first half of 2024.

The Fashion and Leather Goods business recorded organic growth of 1% in sales over the first half of the year and a current operating profit down 6% to 8.06 billion euros.

Thus, the Wines and Spirits business recorded a drop (-9% organic) in its sales over this first half. Current operating income fell by 26% to 777 million euros. The Champagne business is down in a context of continued normalization of post-Covid demand but remains in significant growth compared to 2019.

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