Luxury conglomerate LVMH reported record sales and profits for 2023 on January 25th, defying expectations of a broader slowdown in the luxury goods market. The world’s largest luxury group posted €86.15 billion ($93.4 billion) in revenue for the year, up 23% from 2022 at constant currency rates. Net profit saw a similar high 23% jump from the previous year, reaching €10.9 billion.
Fashion & Leather Goods Division Fuels Growth
LVMH’s Fashion & Leather Goods division, which includes flagship brands Louis Vuitton and Christian Dior among others, was the primary growth driver in 2023. The division accounted for 51% of total revenue and saw 27% organic revenue growth compared to 2022.
This strong momentum signals that while consumers may be cutting back on more discretionary purchases amidst economic uncertainty, demand for LVMH’s aspirational brands remains exceptionally resilient. The results also reflect the group’s initiatives around innovation, customer experience, and geographic expansion.
For example, Louis Vuitton opened several new stores and grew its accessories categories with product lines such as sneakers and watches. Meanwhile, Christian Dior saw double-digit growth across all product lines and regions.
Key Figures for LVMH’s Fashion & Leather Goods Division:
| Metric | 2023 Result | Growth vs. 2022 |
|---|---|---|
| Revenue | €44.7 billion | +27% |
| Share of Group Revenue | 51% | – |
| Operating Profit | €17.5 billion | +34% |
| Key Brands | Louis Vuitton, Christian Dior, Fendi, Loewe | – |
Ticking to a slightly slower but still healthy pace, LVMH’s Selective Retailing division grew revenue by 19% for the year. The Selective Retailing division includes travel retailer DFS and Sephora beauty stores. DFS has remained below pre-pandemic levels but did manage to maintain a steady recovery in 2023.
Outlook Remains Strong Despite Broader Luxury Slowdown
LVMH’s stellar growth stands out against a backdrop of slowing momentum in the broader luxury goods market. Concerns around a luxury demand drop-off have emerged in recent months, exacerbated by China’s abandonment of its zero-Covid policy leading to a surge in infections.
However, LVMH’s results suggest the world’s wealthy are still spending strongly on the group’s range of high-end fashion brands, fine wines and spirits, perfumes, watches and jewelry. This implies that while “aspirational” luxury shoppers may trim their purchases amidst economic uncertainty, demand remains robust at the highest end.
The group specifically called out the resilience of American and European buyers in the fourth quarter, while Chinese shopper appetite showed slight weakness. But overall momentum through LVMH’s stores globally has remained remarkably strong.
“LVMH has once again shown an outstanding performance through excellent execution and agility. Our Maisons continue their innovative momentum and progress across all business groups. Despite an uncertain environment, we can count on the desirability of our Maisons and the agility of our teams to reinforce LVMH’s global leadership position in 2023.”
Bernard Arnault, Chairman and CEO of LVMH
Looking ahead, LVMH leadership maintains a positive medium and long-term outlook thanks to its brands’ positioning and geographic exposure. Investors can likely expect the group’s development to continue at a steady cadence going forward.
That said, the broader luxury goods market still faces headwinds in 2023 if the global economy continues to deteriorate. And one risk factor is that LVMH’s current momentum simply reflects some luxury spending getting pulled forward, which could result in slowing growth later in the year as consumers tighten their belts. So far however, the aspirational appeal of brands like Louis Vuitton seems resilient against economic troubles.
Breakup Could Unlock Value Across LVMH’s Range of Luxury Brands
Some analysts have suggested LVMH has grown into an excessively sprawling conglomerate over the years, raising the question of whether a breakup could unlock greater value across its range of luxury brands.
The idea would be for LVMH to split into multiple independent companies, with each housing a tighter group of related luxury brands. For example, one company could contain Louis Vuitton, Christian Dior, and other high-end fashion brands. Another may house wines and spirits brands like Moet & Chandon, Veuve Clicquot, and Dom Pérignon. Perfumes and cosmetics brands could form their own separate company as well.
Proponents argue this could enable greater focus for each brand group, with leadership specifically tailored their market. And standalone companies could potentially command higher valuation multiples than grouped under the mammoth LVMH umbrella.
However, there are also good reasons for LVMH to remain intact. Scale enables significant cost efficiencies across support functions like manufacturing, distribution and marketing. And the company gains leverage to make investments that benefit brands across segments, like ecommerce platforms.
So a breakup is unlikely in the cards near-term unless growth meaningfully slows. But LVMH does face eventual succession planning challenges, with long-time Chairman and CEO Bernard Arnault now 74 years old. This could spur rethinking the group’s structure in coming years, especially if growth in fact does decelerate.
For now though, LVMH heads into 2023 remarkably strong given the global economic outlook. While risks remain around the depth of a broader luxury slowdown, the group looks positioned to continue outpacing the overall luxury goods market. This leaves it as one of the more attractive stocks within the sector for those willing to have some exposure to economic cyclicality.
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