Following yesterday’s release of LVMH’s figures for the three months ending 30 September 2023; Alice Price, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “After a stellar performance in recent years, LVMH proves that not even luxury brands are immune to the challenging economic environment, with its reported group revenue in Q3 FY2023 growing by just 1.1% to €20.0bn, a marked slowdown from the growths of 16.8% and 13.2% recorded in Q1 and Q2 respectively. Revenue for the nine months to the end of September rose by 10.1%, and while the group affirmed its confidence in delivering continued growth for the rest of the financial year, it seems likely that a similar deceleration could be experienced throughout the brand’s final quarter.
“LVMH’s slowdown can be attributed to the ongoing inflationary pressures in Europe and the US, which is inhibiting spend among aspirational shoppers, with these regions experiencing organic revenue growth of just 7% and 2% respectively. Previously, these consumers had been protected by savings accrued during the pandemic and government stimulus payments issued in the US, enabling them to splash out on luxury goods. However, with savings beginning to dwindle, exacerbated by the pressure of increasing costs, these products are gradually becoming out of reach for many. Europe’s more resilient performance than the US can be attributed to the return of international tourism, with shoppers capitalizing on favourable exchange rates to purchase luxury goods. Japan and the rest of Asia continued to report double-digit growth, with revenue rising by 30% and 11% respectively, driven by the rapidly growing middle class population and pent up demand for high-end goods after many countries in the region eased their lockdown restrictions at the end of 2022.
“The group’s Wines and Spirits division was its worst performer, with reported revenue declining by 20.5%, attributed to weak sales in the US and a post-pandemic normalization in demand. In contrast, its Selective Retailing division, which includes Sephora and DFS airport stores, drove growth, with revenue rising by 17.6%. Sephora had a strong performance in North America, Europe, and the Middle East, aided by its unparalleled offering of cult beauty brands. Following the success of Sephora’s Westfield London store, which opened in March 2023 and regularly experiences long queues, in July 2023 the group also announced the opening of a second store in the city later this year, giving scope for the brand to gain further market share in the UK.
“LVMH’s Fashion and Leather Goods division grew 0.7% to €9.8bn, a significant step back from its Q1 and Q2 performance, when it reported double-digit growth of 17.6% and 15.8% respectively. In order to weather this storm, LVMH must continue to focus on star brand Louis Vuitton and its influence over the lucrative Gen Z demographic. Louis Vuitton should prioritise the launch of innovative collaborations to gain visibility among these shoppers and encourage spend, with its ongoing partnership with artist Yayoi Kusama a notable example, having received widespread attention on social media for its eye-catching polka dot designs.”
