Luxury shares drop amid muted analyst reaction to LVMH sales growth

Investing.com - LVMH posted an increase in 2024 revenue to 84.7 billion euros as the group grappled with a challenging global economic environment and foreign exchange headwinds, but a tepid analyst reaction to fourth-quarter sales growth weighed on its Paris-listed shares on Wednesday.

The owner of high-end brands like Louis Vuitton and Bulgari -- which, like its rivals, has been facing sluggish demand stemming in part from economic weakness in the key Chinese luxury market -- highlighted strong performances in Asia, the U.S., and Europe during the fourth quarter. The regions helped lift organic revenue by 1% in the quarter, beating expectations of a 1.6% decline.

However, although LVMH’s sales performance improved sequentially -- particularly in fashion and leather goods, which was down by 1% in the fourth quarter compared to a 5% decline in the prior quarter -- the pace of the recovery did not match that of its peers or the higher expectations set by investors, according to analysts at JPMorgan Chase (NYSE:JPM).

"We think this confirms that while the sector backdrop is improving, brand and category specific dynamics continue to play an essential role to drive traction with still very discerning consumers," the JPMorgan analysts said in a note, adding that they continue to think the backdrop remains bumpy and does not offer not much growth in the short term.

LVMH's full-year figures showed a 2% drop in reported revenue compared to 2023, largely attributed to exchange rate impacts and a high post-COVID comparison base. Profit from recurring operations reached 19.6 billion euros, equating to an operating margin of 23.1%, surpassing pre-COVID levels. Group share of net profit stood at 12.6 billion euros, while free cash flow rose 29% to 10.5 billion euros.

Chairman and CEO Bernard Arnault credited the company’s strategy, product quality, and geographic diversity for its ability to "weather the storm in highly turbulent times.” Key drivers included robust performances in Europe and the U.S., “exceptional” growth in Japan, and strong demand from Chinese consumers in Europe and Japan.

Arnault added: “While remaining highly vigilant with regard to cost management and our single-minded focus on the desirability of our designs, we enter 2025 with confidence.”

The company also proposed a dividend of 13 euros per share.

(Sam Boughedda contributed reporting.)