29 January 2025
If you are covering LVMH's Q4 results, please see the following comment from Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
"After a stellar start to the reporting season for the luxury sector, anticipation had been increasing ahead of LVMH’s Q4 results, which is seen as the proxy for the sector. However, the company reported a relatively underwhelming set of results yesterday evening.
"While LVMH saw a sequential improvement, it was less pronounced compared to Richemont and Burberry. Group organic sales were up 1%, while the key sentiment driver of the stock, fashion and leather goods, was down 1% — both two percentage points ahead of consensus.
"Geographically, as its competitors have reported, there was a sequential improvement across all regions except for Japan, which saw a normalisation of trends. Meanwhile, the deceleration of trends in Asia, including China, slowed, while the US and Europe posted single-digit growth.
"That said, the CEO indicated that LVMH has exited the quarter strongly, with key brands Louis Vuitton and Tiffany up 10% so far this year, likely helped by the Chinese Yuan falling earlier this year.
"In the context of muted topline trends and a high fixed cost industry, even the best-in-class player cannot contain operating deleverage.
"LVMH’s earnings before interest and taxes margins were weak (H2: 20.7%), reflecting several factors including lower price increases against ongoing cost pressures, how owned Champagne is booked, as well as one-offs in operating expenses related to the Off-White disposal and the Olympics sponsorship. There was also an element of investment made to remain ahead in marketing and innovation.
"LVMH’s costs should be more under control in 2025, which we hope will help to end margin erosion and perhaps even lead to some expansion. There has been significant news flow recently on the divestment of the Wines and Spirits business, which CEO, Bernard Arnault, commented is not on the agenda. Profits were once again weak, down 36%, but a good recovery is expected in two years’ time, with CFO, Cécile Cabanis, shifted to run the business alongside Alexandre Arnault, the CEO's son.
"Had LVMH been the first to report this earnings season, this set of results would have been digested well. However, peers had already set the bar high, so it is unsurprising to see its shares down this morning, but they remain up 18% YTD."
