Luxury goods giant LVMH reported better-than-expected sales and profit growth for 2023 on Wednesday, driven by strong momentum in Europe and the United States that helped offset cooling demand in China. The results provide hope that the luxury industry can weather an expected broader economic slowdown this year.
2023 Performance Highlights
LVMH posted record annual revenue of €86.2 billion in 2023. This represents organic growth of 9% over 2022 levels – only slightly slower growth than the 13% rise seen last year, and ahead of analyst forecasts. The world’s largest luxury group also achieved record 2023 profits.
Key highlights from LVMH’s 2023 results include:
-
Revenue increased by 9% organically to €86.2 billion. This is ahead of LVMH’s growth forecast of +8% that was set a year ago.
-
Operating profit hit €21 billion, representing an increase of 17%.
-
Net profit jumped 14% to €14.1 billion – another record level for the group.
LVMH benefited from high demand in key markets like Europe and the United States. The fashion and leather goods division also delivered robust growth thanks to flagship brands like Louis Vuitton, Dior and Celine.
| Key Figures | 2022 | 2023 | Growth |
|---|---|---|---|
| Revenue | €79.2 billion | €86.2 billion | +9% |
| Operating Profit | €17.5 billion | €21 billion | +17% |
| Net Profit | €12.8 billion | €14.1 billion | +14% |
Q4 Performance Was Resilient Amid China Headwinds
While analysts had predicted a more significant slowdown for LVMH in Q4, the luxury group’s momentum continued largely unabated during the key holiday period. LVMH said that Q4 organic revenue increased by 5% year-on-year to €22.7 billion, beating expectations.
China has been a sore point for luxury players due to COVID disruptions and geopolitical tensions. Chinese shoppers account for over one-third of global luxury spending. LVMH noted that business in China is “normalising gradually” after an extremely difficult 2022.
However, LVMH has managed to offset weaker China sales through stronger performance in other regions like Europe and the U.S. Company management said that demand from local customers in China also partly compensated for the downturn.
2023 Divisional Performance
LVMH’s Fashion & Leather Goods division – home to brands like Louis Vuitton, Christian Dior, Fendi etc. – posted organic revenue growth of 12% in 2023 to €38.6 billion. This was its best ever year in terms of sales.
The Selective Retailing segment saw a more modest 5% sales rise, though it exceeded pre-pandemic levels. Revenue at Sephora stores gained around 10%. LVMH’s acquisition of luxury hotel group Belmond also boosted Selective Retailing growth as tourism continued picking up.
Performance was strong across most of LVMH’s other divisions spanning wines & spirits, perfumes & cosmetics, watches & jewelry etc. Organic revenue improved by 7% at the perfumes & cosmetics unit. Meanwhile, the wines and spirits segment delivered 1% sales growth despite supply chain pressures and rising inflation affecting cognac volumes.
Management Upbeat For 2024 Despite Economic Uncertainty
LVMH CEO Bernard Arnault struck an optimistic tone about 2024 even as analysts warn of turbulence ahead with surging inflation, rising interest rates and fears of recession in major markets.
“LVMH is well-equipped to build upon the success achieved in 2023. However, we will remain vigilant and count on the desirability of our Maisons to gain market share and further reinforce our global leadership position in luxury goods,” Arnault commented.
The luxury titan believes that demand should remain solid amid resilient local spending in key hubs like the U.S. and Middle East. LVMH doesn’t see any signs of slowing momentum following “outstanding” January sales.
If global conditions worsen, analysts expect LVMH’s scale, pricing power and unique portfolio of must-have status brands to help it fare better than struggling peers. Louis Vuitton remains an “exceptional brand” that drives LVMH’s performance no matter the environment, according to one analyst.
Outlook for Broader Luxury Industry
LVMH’s latest sales trends reinforce why it is considered a relative safe haven for investors even as warning signs flash for the luxury industry. Swiss giant Richemont posted disappointing holiday sales earlier this month amid tepid watch demand. Burberry and Cartier owner Richemont have also warned of lower profits.
Chinese luxury spending isn’t expected to properly recover at least until H2 2024 as COVID disruptions continue hampering tourism and consumption trends.
However, LVMH is better insulated given Europe and the U.S. accounted for over 50% of revenues last year. Its diversified portfolio spanning fashion, spirits, perfumes etc. also reduces exposure to any one geography or category compared to more concentrated peers.
If global headwinds worsen, analysts believe LVMH has enough momentum to take further market share away from struggling rivals in 2024. The year ahead will likely separate the winners from losers in the global luxury goods industry.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
