Luxury giant LVMH has experienced substantial market reactions following its recent financial disclosures, which, though presenting higher-than-expected revenues, highlighted disappointing margins and sector-wide concerns. This has led to significant declines for LVMH shares, along with many of its peers.
The company's fourth-quarter earnings report indicated sales of €23.93 billion, reflecting organic growth of 1% when most analysts anticipated a downturn. For the full year 2024, LVMH reported total revenue of €84.59 billion, marking a 2% decline year-on-year. Notably, the company struggled with its Wines & Spirits division, which experienced noted weak performance, particularly outside of Japan.
On January 28, 2025, Bernard Arnault's luxury empire reported net income fell by 17% down to €12.55 billion. This disappointing outcome was reflected across the luxury sector; within hours, shares fell by over 6% when trading commenced on January 29, 2025—a stark shift from earlier positive projections fueled by strong results from competitors like Richemont and Burberry.
Many analysts echoed concerns, noting the peculiar weakness of LVMH among its luxury peers, as reflected by the stock drop of 5.16%, pushing prices down to €711.90. Kering suffered similarly, down 7.63%, and Hermès observed minor losses of 0.86% during the same trading slump.
Despite these setbacks, LVMH’s fourth-quarter results suggested some glimmers of recovery. The fashion and leather goods sector, the most significant part of the group's revenue, saw only a 1% decline compared to expectations of 3%. The Watches and Jewelry division demonstrated some resilience, surpassing growth expectations with figures at 3%.
Investors had been optimistic following positive earnings reports from Burberry and Richemont, driving speculations of improved demand. But market sentiment turned when LVMH's results failed to match these raised expectations, prompting market analyst Kathleen Brooks to state, "LVMH remains the benchmark for the entire sector." This sentiment contributed to the pricing adjustments meant to reflect wider market realities, marking it as a tough macroeconomic period for luxury brands.
Jean-Jacques Guiony, CFO of LVMH, addressed investors during the conference, characterizing 2024 as primarily a year of consolidation, following three years of impressive growth. Guiony mentioned slight signs of improvement toward the end of year, especially in the U.S. and Europe and emphasized, “We have had three years of euphoria; now we have one year of consolidation.”
Despite these cautious remarks, Guiony also acknowledged the operational challenges faced by LVMH. The operating margin slipped to 23.1% from the previous 26.5% amid rising input costs and unfavorable currency fluctuations. He noted several exceptional, rendering these operational metrics below investor expectations.
Market analysts from Deutsche Bank and Royal Bank of Canada echoed similar sentiments, adjusting their expectations from LVMH profits. They outlined how the performance deviated from what many considered possible, noting investors might have over-inflated projections based on competitor performances.
Yet, LVMH's leadership maintained a hopeful outlook. Bernard Arnault, during the results press conference, showed marked optimism about both 2025 and LVMH’s future. "Several companies within LVMH have recorded double-digit growth since the start of 2025," he stated. He also expressed confidence about the Wines & Spirits division bounce-back over the next two years and predicted the U.S. market to be “booming," offering some solace amid broader concerns.
Arnault, nevertheless, candidly portrayed the anticipated recovery of the Chinese market as slow—a complex challenge for luxury brands heavily reliant on Chinese consumers. He projected it might take approximately two years for typical consumer sentiments to revitalize post-COVID and various economic pressures.
These fluctuated market dynamics point toward uncertainty not only for LVMH but the entire luxury sector, especially as traditional markets adapt to shifting economic conditions. Following this report, it is anticipated investors will stay watchful as other luxury brands adapt their strategies to navigate these challenges. The volatility observed after LVMH's figures reflects deep market scrutiny and collective apprehension about the future profitability of luxury goods, which thrive on consumer confidence.
Overall, as LVMH adjusts to these challenges, market watchers will look closely at consumer trends, pricing structures, and global economic sentiment pivotal for the luxury segment throughout 2025.