The French luxury conglomerate LVMH, which owns brands such as Louis Vuitton, Dior, and Tiffany, saw its shares drop to their lowest level in 10 months on Wednesday, after reporting slower revenue growth in the third quarter of 2023. The disappointing results also dragged down other fashion stocks, such as Kering, Hermes, Swatch, Richemont, and Burberry.
LVMH reported a 9% increase in revenue in the third quarter, compared to the same period last year, but this was lower than the 14% growth it achieved in the first half of the year. The slowdown was attributed to weaker demand for high-end goods in the United States and Europe, where inflation and economic uncertainty have dampened consumer confidence and spending. The recovery in China, a key market for luxury goods, has also been uneven amid regulatory changes and COVID-19 outbreaks.
Analysts said that LVMH's performance reflected the challenges facing the luxury sector as a whole, as the post-pandemic boom fades and consumers become more selective and price-sensitive. They also warned that the outlook for the fourth quarter and beyond remains uncertain, given the ongoing health crisis and geopolitical tensions.
"LVMH in our view remains...among the names that should navigate this ongoing volatility relatively better; but with currently negative earnings momentum and uncertain outlook, we see limited scope for absolute re-rating in the short-term" wrote JP Morgan in a research note.
Shares in LVMH fell by around 6% in early trading on Wednesday, reaching their lowest level since December 2022. The company's market capitalization dropped by more than 30 billion euros ($34 billion) in one day. Other luxury stocks also suffered losses, with Kering, Hermes, Swatch, Richemont, and Burberry losing between 3% and 5% of their value.
"An end to the roaring 20s", a Berenberg analyst wrote in a briefing note as they cut their target price for LVMH.
"Our lowered forecasts reflect softer H2 momentum and normalized growth in outer years", Berenberg added.
