On July 23, LVMH confirmed what most analysts expected and that is that luxury spending continues to cool and cool quickly. Overall revenue growth for the first six months of the year was down 1 percent, when compared with the same period in 2023, with organic growth up 2 percent and deleterious currency effects pulling down revenue by 3 percent.
The biggest driver of slowing sales growth was a collapse in Asia, particularly China. LVMH reported that H1 2024 revenue growth in Asia (excluding Japan) was down 10 percent after a 14 percent decline in Q2. Growth was positive though anemic in the U.S. and Europe with H1 growth up 2 and 3 percent, respectively. One bright spot is that revenue growth remained strong in Japan with H1 growth of 44 percent after a huge 57 percent spike in Q2. Japan can be a proxy for some underlying elements of demand in China, and parts of Southeast Asia, as favorable exchange rates make luxury purchases much cheaper. WWD reports that Louis Vuitton handbags can now be purchased at a 25 percent discount in Japan when compared with mainland China.
At the product level, most divisions reported negative growth in H1. The group’s biggest division, fashion and leather goods (comprising about 50 percent of total revenues) reported a decline of 2 percent, watches and jewelry (12 percent of revenue) was down 5 percent, and wine and spirits (about 6.5 percent of revenue) was down 12 percent. The biggest positive was Selective Retailing (Sephora, DFS, and Le Bon Marché comprising about 20 percent of revenue) was up 3 percent while perfumes and cosmetics (10 percent of revenue) was up 3 percent.
LVMH’s underlying financial strength remains sound. Operating free cash flow surged to €3.1 billion, from €1.4 billion in H1 2023 as the costs of debt servicing fell by 42 percent. The group’s net debt to equity ratio fell three percentage points year-over-year in H1 to 18 percent, which is massively down from the 36 percent reported at the end of H1 2021.
You can find LVMH’s financial results here: https://lnkd.in/eBuae
In intraday trading in New York, LVMH shares are down almost 4 percent after closing down 3.3 percent in Paris.