The latest earnings report from Moët Hennessy Louis Vuitton (LVMH) has proven that concerns over consumers slowing down on luxury goods may not be the case of this French luxury fashion house and company.
LVMH wrote in its financial report that the group recorded revenue of €86.2 billion in 2023, equating to organic growth of 13% with respect to 2022. All business groups reported strong organic revenue growth, with the exception of Wines & Spirits, which was faced with a high basis of comparison and high inventory levels. Europe, Japan and the rest of Asia achieved double-digit organic growth. In the fourth quarter, organic revenue growth came to 10%.
Profit from recurring operations stood at €22.8 billion for 2023, up 8%. The current operating margin remained stable with respect to 2022. Group share of net profit amounted to €15.2 billion, up 8%.
Several reports in early October last year warned that there were signs of a slowdown in the spending boom, citing European luxury and travel stocks posting the biggest quarterly slide since 2020 due to weak recovery in the Chinese economy. Other factors also contributed to the decline such as rising interest rates, investor positioning and earnings cuts. Lower spending in the U.S. was also seen from the data.
Later that month, the luxury stocks began to take off again before plunging right before the year end and then started another run in mid January.
Theoretically, it can be said that the sectors bottomed out, while the markets were seeing positive signs such as higher spending, potential rate cuts and more stimulus to boost the Chinese market. Realistically, the rich just got richer last year.
Consumers that can buy these kinds of luxury goods leisurely are people that deem to be wealthy, not the kind that spends life saving for just one bag and goes broke for months to come.
The source of funds from the rich mostly comes from investment, especially equity. Look at how the European and US stock markets went last year. The Euro Stoxx 600 was up 12%, Germany’s Dax rose 20%, France’s gained 16.4% and FTSE 100 increased 3.64%. Meanwhile, the S&P 500 jumped 25%, Dow Jones and Nasdaq Composite rose 13% and 43%, respectively. It is not a surprise why the spending of wealthy people went up, considering the returns from stock markets.
LVMH believes this year could be another strong year for luxury goods.
“While remaining vigilant in the current context, we enter 2024 with confidence, backed by our highly desirable brands and our agile teams,” said CEO Bernard Arnault in a statement. “It promises to be an inspiring, exceptional year for us all.”
Additionally, analysts are forecasting that the US S&P 500 will extend gains in 2024 with the index pointing to surge above 5,000 or even 5,200 points.
