LVMH defies economic challenges, reports higher-than-expected sales and dividend increase

The pandemic luxury boom may be winding down, but it hasn't turned to a bust just yet. LVMH, the owner of Louis Vuitton, Moët & Chandon and Hennessy on Thursday night reported sales of 86.15 billion euros ($93.46 billion), exceeding consensus forecasts, equating to 13% organic growth from the previous year. The result was boosted by 14% annual growth in the critical fashion and leather goods sector, along with 11% growth in perfumes and cosmetics. Wines and spirits meanwhile posted a 4% decline.

Shares jumped more than 12% on Friday morning adding the equivalent of around $39 billion to the company's market value, after the world"s largest luxury group posted higher-than-expected sales for 2023 and raised its annual dividend. Other European luxury fashion and beverage stocks also surged. The sector rally boosted France's luxury-heavy benchmark CAC 40 index, which rose more than 2% to an all-time high. Barclays upgraded European luxury stocks to overweight early Friday.

LVMH"s fourth-quarter revenue rose 10% from a year ago to €23.9 billion ($25.9 billion), bolstered by a solid holiday season. Analysts polled by FactSet had expected sales of €23.6 billion. Revenue grew across all the company"s verticals in 2023, except wines and spirits, which has been struggling in recent quarters as demand for high-end liquors fell in the U.S.

The U.S. was the company"s weakest market, with sales up just 4% in 2023 from a year ago. For context, Japan"s sales rose 28%, Europe"s 13%, and Asia 18%. Comps in the U.S. were more difficult. LVMH said growth was helped by an improvement in U.S. sales and an easier comparison with a year earlier, when Covid-19 cases swept over China.

After a boom during the pandemic, the luxury sector endured a rough end to 2023 as challenging geopolitical and macroeconomic conditions weighed on consumer spending, particularly in the U.S. and China. Concerns that consumers will stop splurging in 2024 have weighed heavily on luxury-goods stocks. But LVMH latest earnings report suggest investors shouldn"t count out the sector just yet.

LVMH in April 2023 became the first European company to surpass $500 billion in market value, but a share price decline over the last six months allowed it to be eclipsed as Europe"s largest company by Danish pharmaceutical giant Novo Nordisk.

British luxury brand Burberry issued a profit warning earlier this month in response to slowing demand, as the balloon in high-end spending that peaked during the pandemic loses air. At the time, the news sent Burberry shares plunging and dragged down the wider sector as concerns over consumer spending increased. Luxury stocks broadly advanced on Thursday as investors took heart from LVMH"s reassuring results. Burberry"s own shares were up 1.7% Friday morning.

LVMH lost its spot as the largest public company in Europe in the fall to Novo Nordisk, the Danish maker of the Ozempic weight-loss and diabetes drug. LVMH's results are likely to tame investor concerns, said analysts at Citi. 2024 could be a smooth rather than difficult year of normalisation for LVMH, they wrote.