LVMH, the luxury goods conglomerate, announced its financial results for the first quarter, revealing modest growth amidst varying performances across its business segments. Despite a general decline in global sales, the company expressed satisfaction with a nearly 10% increase in demand for fashion and leather goods in China, highlighting a bright spot in its latest financial quarter.
For the first quarter, LVMH reported organic revenue growth of 3% to 20.696 billion euros, slightly missing analysts' expectations of a 3.28% increase. It's important to note that while overall sales dropped by 2% compared to the first quarter of 2023, organic growth, which excludes external factors like currency fluctuations and mergers, reflects true internal expansion.
By division, the revenue changes from the first quarter of 2023 were as follows:
- The fashion and leather goods segment saw revenues of 10.49 billion euros, with organic growth at 2%, below the anticipated 3.22%.
- The wines and spirits segment faced a significant downturn, with revenues dropping by 12% organically, more severe than the 8.66% decrease expected by analysts.
- The perfumes and cosmetics division outperformed expectations with a 7% increase in organic revenue, against a forecasted 6.72%.
- The watches and jewelry division reported a decrease of 2% in organic revenue, underperforming against a slight expected decline of 0.75%.
- The selective retailing segment saw an 11% increase in organic revenue, surpassing the forecasted 10.5%.
Geographically, the Asian market (excluding Japan) experienced a 6% drop in sales, which was significantly below the expected 4.14% increase. Despite this regional downturn, Jean-Jacques Guiony, CFO of LVMH, pointed out that demand in China for fashion and leather goods still grew by about 10%.
In other regions:
- The U.S. market saw organic revenue growth of 2%, aligning with expectations.
- Japan reported a substantial 32% increase in organic revenue, far exceeding the anticipated 14.7%.
- Europe experienced a 2% increase in organic revenue, slightly below the expected 3.49%.
LVMH's CFO, Jean-Jacques Guiony, commented on the performance, "Despite the current geopolitical and economic uncertainties, we are pleased with our performance for the quarter, particularly with the approximately 10% growth in demand for fashion and leather goods in China."
Following the earnings release, LVMH shares initially dipped by about $3, translating to an intraday decline of approximately 2.5%, though the losses narrowed significantly later.
The significant 12% revenue decline in the wines and spirits division was attributed to a normalization of champagne sales, which had surged during the pandemic. Additionally, the first quarter of 2023 saw distributors stocking up in anticipation of higher market demand, setting a high comparison base for this year. Furthermore, cautious ordering by retailers in the U.S. market impacted the sales of Hennessy cognac.
A notable development in the wines and spirits division was the inclusion of the renowned Minuty estate from Provence, which featured for the first time in the quarterly financial report and may offer new growth opportunities for the segment going forward.
