LVMH Reports Mixed Results for 2024 as Investors Brace for Recovery
The luxury goods titan LVMH Moët Hennessy Louis Vuitton SE unveiled its fourth-quarter earnings report on January 28, 2025, highlighting both resilience and struggle amid turbulent market conditions. Analysts had anticipated challenges, yet LVMH's performance still managed to surprise with insights on its future growth prospects.
Despite the backdrop of declining demand and economic uncertainties, LVMH reported total revenues of €84.68 billion for the year, narrowly surpassing analyst expectations of €84.32 billion. This marked only a 1% increase from the previous year, which raised eyebrows as the company had previously enjoyed more substantial growth.
While sales held steady, the net profit was less favorable. Analysts had estimated net earnings of around €13.65 billion, but the company fell short, reporting €12.55 billion—a decline attributed to continuous pressures within the luxury market.
Details outlined the breakdown of LVMH's revenue streams, showcasing the brand's diversified offerings. The company derives approximately 48.9% of its revenue from fashion and leather goods, including prestigious brands like Louis Vuitton, Celine, and Christian Dior. Other segments include watches and jewelry (12.8%), perfumes and cosmetics (9.6%), and wines and spirits (7.7%). Notably, remaining revenues come from selective retailing, including chains such as Sephora.
Regionally, the company maintained significant sales distribution, with 30.8% of its revenue originating from Asia, 25.3% from the United States, and 16.4% from Europe. These figures reflect LVMH's strong global presence, though it faces increased scrutiny as economic conditions shift, particularly within China, where sales have reportedly suffered due to fluctuated consumer habits and economic concerns.
Investors had been eagerly anticipating the report, hoping for signs of growth, particularly as industry competitors like Richemont reported unexpectedly strong results. Therefore, LVMH's slight revenue increase was overshadowed by disappointing profit margins. The operational profit for LVMH's continuing businesses was noted at €19.57 billion, down approximately 14% from the previous year. This was below analyst expectations, which had anticipated around €20.3 billion.
After the earnings announcement, LVMH’s stock saw immediate backlash, with shares dropping 4.2% post-market to €728.00. The shares initially plummeted to as low as €681.00 before bouncing back slightly. Investor sentiment largely hinged on the lower-than-anticipated profitability rather than revenue, signaling concern over LVMH's resilience against higher costs and increasing competition.
Looking closer at the operational metrics, the fashion and leather goods sector—which remains LVMH's cash cow—recorded sales of €41.06 billion, down from €42.17 billion the previous year, prompting worries about how its flagship brands are faring amid these challenging times.
Interestingly, the company noted improved performance over the holiday quarter. For the fourth quarter alone, LVMH posted revenues of €23.9 billion, exceeding consensus forecasts of €23.34 billion. This included strong contributions from the fashion and leather goods sectors during the holiday shopping season, indicating potential stabilization even amid broader economic challenges. Analysts had predicted sales declines, making the 1% growth across the final months of the year notable.
Looking forward, experts remain cautiously optimistic. While 2024 emerged as challenging for LVMH, with its performance reflecting overall market trends, the company’s financial stability potentially positions it for future growth. Some analysts believe the luxury sector may rebound as early as 2025, driven by recovering consumer confidence and spending, particularly from regions like North America and potentially Asia.
Investment banks like Bank of America have reaffirmed their buy recommendations on LVMH, indicating confidence among investors about the future growth and recovery potential of the luxury sector. The company’s CEO, Bernard Arnault, recognized for his wealth and strong ties within U.S. economic circles, has also been cited as instrumental to LVMH’s strategies moving forward.
While acknowledging the immense challenges LVMH faces, including shifts away from brand consumption toward individual self-expression among consumers, there is hope for recovery. The anticipated easing of economic pressures and strategic pivots might pave the way for stabilization and growth of luxury sales, particularly as the global economy adjusts to post-pandemic realities.
Despite the overall net income dip and share value adjustments among LVMH, the luxury retail giant retains its position as the largest luxury company worldwide, thanks to its diverse portfolio and geographic reach, showing the world may just have to wait and see if LVMH can reclaim its growth momentum.