Max Zhang’s Post

After #Kering last week, now #LVMH accordingly: LVMH‘s third-quarter revenue declined, which the company attributed to Japan’s stronger yen and China’s weak consumer confidence. The luxury retailer’s sales slid 3 per cent to €19.08 billion ($20.78 billion), with wines and spirits decreasing 7 per cent to €1.38 billion ($1.5 billion). Fashion and leather goods fell 5 per cent to €9.15 billion ($9.96 billion), while watches and jewellery dropped 4 per cent to €2.39 billion ($2.6 billion). “The fashion division saw a slight improvement with Europeans and Americans but worse performance with Chinese and Japanese,” said Jean-Jacques Guiony, CFO of LVMH, in an analyst call. However, Guiony said LVMH still believes in the future of the luxury market despite consumer confidence in China plunging to pandemic-era lows. Meanwhile, perfumes and cosmetics grew 3 per cent to €2.01 billion ($2.19 billion), and selective retailing rose 2 per cent to €3.93 billion ($4.28 billion). Piral Dadhania, an RBC analyst, said that there would be a “more pronounced slowdown than expected” as the market will likely view the results negatively. UBS forecasts the third quarter will be the worst for the luxury sector in four years, with organic sales dropping 1 per cent year over year.

🤽♀️🏊♀️LUXURY UNDERWATER: LVMH TAKES A DIVE 🤿 🌊 🗼🇫🇷 AS PARIS OPENS the Olympic Games, their largest FR company gives praise to Tokyo for rescuing Asian results. 🇨🇳✈️ CHINA LUXURY SHOPPERS (and resellers) hopped over to Japan to buy trinkets priced in JPY. Asia Region declined by 14% (ex Japan) as LVMH posted a scant 1% organic sales growth. 2️⃣ LVMH IS EUROPE'S second largest company by market cap (340bn euro) a Goliath of all things indulgent. 🅰️ 🛒"ASIAN SHOPPER" BIG BETS in 2015, fizzled in 2021-2023. Others similarly stumbled, especially those tilting toward Duty Free Shopping (DFS) just as the "Asian Traveller" stayed home. 🥷👜 LITTLE DISCUSSED IS THAT “exceptional H1 growth” in Japan was boosted by "ninja resellers" who may easily trans-ship goods back home in what is known as "luxury arbitrage". 💱  FX DIFFERENTIALS incentivize shopping abroad, reselling at home. Japan's bent for fashion/leather, perfume/cosmetics, and watches/ jewelry is durable. Bright side of JPY collapse. € 💶 UNDAUNTED, LVMH just splashed out 3.6bn euros on CRE, events and promotion. LVMH pour toujours et pauvre riche aussi. https://lnkd.in/gXxbgnWa #arbitrage #asianshopper #japan #china #LVMH #resellers #luxury #recession

LVMH, Richemont, and Hermès defied a global sales slowdown in luxury. Global sales at LVMH for the full-year 2023 grew 13 percent, with the French luxury conglomerate recording organic growth across its business groups except wines and spirits. LVMH recorded double-digit organic growth seen in Europe, Japan and the rest of Asia. Richemont’s sales for the year ended March 31, 2023 experienced a significant increase of 19 percent at actual exchange rates and 14 percent at constant exchange rates. All regions, distribution channels, and business areas saw sales growth, both at actual and constant exchange rates. Asia Pacific showed a resurgence with a 6 percent increase in sales, while double-digit growth was observed in all other regions, particularly Japan and Europe. At Hermès, all geographical regions showed strong performance with growth of approximately 20 percent. The sales saw an increase in both the group’s stores (+20 percent) due to high demand and the strengthening of the exclusive distribution network, and in wholesale activities (+24 percent), driven by travel retail. Asia saw robust growth (+19 percent) with significant sales growth in all countries within the region. Japan, too, experienced a consistent increase in sales (+26 percent).

LVMH said net profit fell 14 percent in the first half as the slowdown in luxury spending in China continued to weigh on group sales. The luxury conglomerate, which owns more than 75 brands including Louis Vuitton, Dior, Tiffany & Co. and Sephora, said revenues rose 1.4 percent in the second quarter to 20.98 billion euros, below a Visible Alpha consensus estimate of 21.48 billion euros. Stripping out the impact of currency fluctuations, revenues in the three months to June 30 were up 1 percent year-over-year, indicating a slowdown from the first quarter, when organic revenues increased 3 percent. Read more here: https://lnkd.in/ecXTbg-5

Salvatore Ferragamo said revenues fell 7.6 percent to EUR 1.16 billion in 2023, with the Italian luxury firm citing a "softening luxury demand," especially in the second part of the year. By region, Asia Pacific registered a 13.1 percent decrease in net sales during 2023. Sales in the region in the fourth quarter did, however, gain 2.2 percent, with wholesale recording growth and retail sales in Greater China up double-digits. In 2023, the Japanese market saw sales fall 12.6 percent, with sales down 6.5 percent in the fourth quarter. FULL ARTICLE: https://lnkd.in/gJxYjXbF #retailinasia #retailnews #Ferragamo #luxury #salesinasia

LVMH Sales Drop 3% as Chinese Luxury Demand Weakens French luxury titan LVMH (LVMH.PA) reported a 3% drop in third-quarter sales, marking its first quarterly sales decline since the pandemic, raising concerns among investors about the future of the luxury market. For the three months ending in September, LVMH's revenue reached €19.08 billion ($20.8 billion), falling short of the 2% growth analysts had anticipated. The fashion and leather goods division—home to powerhouse brands like Louis Vuitton and Dior—saw a 5% decrease, a stark contrast to the expected 4% growth. This segment, which makes up nearly half of LVMH's revenue and a significant portion of its profits, hasn’t seen such a drop since 2020. Asia (excluding Japan), with China as its key market, faced a sharper downturn. Sales plummeted by 16%, down from a 14% decline in the previous quarter, as the country's economic challenges impacted consumer confidence. Although hopes were high that government stimulus measures could revitalize Chinese demand for luxury goods, the rebound hasn’t materialized. In Japan, sales growth also slowed significantly, falling from a 57% surge in the previous quarter to 20%, impacted by a stronger yen. Analysts like Luca Solca from Bernstein and Piral Dadhania from RBC have expressed concerns over LVMH’s performance, calling it a deeper-than-expected slowdown. UBS predicts that this quarter may be the toughest for the luxury sector in four years, with an estimated 1% decline in organic sales. #LVMH #LuxuryMarket #ChinaEconomy #FashionIndustry #LouisVuitton #SalesDecline #InvestorConcerns #LuxuryGoods #EconomicOutlook #AsiaMarkets

Key takeaways: -       LVMH still trading at 26x trailing earnings, with growth slowing to single digit (albeit Q1 is the most difficult from comparison base perspective) and possible margin pressure (high growth in low margin segments- Cosmetics and Selective Retailing); -       Chinese cluster remains a bright spot with 10% growth globally in Fashion and Leather (we have previously argued that Chinese demand has the most pent-up potential, however, negative sentiment so far has weighed on rebound). Both aspirational and wealthy Chinese consumers are increasing spending, unlike in the West where aspirational consumers remain under pressure (what we cautioned for after post-pandemic spending boom); -       Big brands tend to outperform in downturns, so LVMH slowdown would be exacerbated in smaller brands especially those struggling with turnarounds (e.g. Ferragamo, Burberry). This is likely already reflected in consensus; -       F&L division growth of 2% is driven by pricing (and still below inflation), pricing is not expected to contribute much to performance near-term. Checkout insights into LVMH's Q1 sales from Fortune, with some of my quotes. https://lnkd.in/ebFw9EYc #fortune #investing #luxury #morningstar #morningstarequityresearch #equities #stocks #luxurysector #lvmh

A tougher than expected start to luxury earnings season Analysts expect weak H2 results from luxury so forecasts for the Q3 earnings season, which kicked off this week, were low. So far, those expectations are not proving low enough. The industry’s giant, LVMH, which has a market capitalization greater than its six largest competitors combined, was in the spotlight yesterday. LVMH reported Q3 revenue of €19.1 billion, which fell short of analyst expectations. The company posted a 3% organic decline in sales, whereas analysts had predicted 2% growth. This disappointing performance was primarily driven by a 16% revenue drop in Asia (excluding Japan), particularly in China, where consumer demand softened and which comprises about a third of LVMH’s sales. Growth in Japan was the only bright spot (up 20%) yet Japan contributes to less than 10% of group revenue. Sales growth in the U.S. was flat, but the U.S. continues to become a more important market for LVMH given the protracted slump in Asian sales. Revenues were negative across all LVMH business groups apart from Perfumes and Cosmetics (3%) and Selective Retailing, principally SEPHORA (2%). One of the most impacted sectors was fashion and leather goods, which fell by 5% when a slight 0.5% growth had been anticipated. This is especially bad news as this segment comprises almost half of LVMH’s revenues. LVMH’s share price closed down almost 7% yesterday, which drove down the FSW Markets All Luxury Index by over 5% on a day when the benchmark S&P 500 was flat. Over the second half of the year, the FSW Index and the S&P 500 have moved in almost complete opposite directions as per the below figure. Our index is now down about 13 percent year YTD while the S&P is up about 23%. Earnings season continues later this week and next with Brunello Cucinelli and Kering due to report on Q3. General expectations are that Gucci will continue to pull down Kering while Cucinelli may continue to show some resilience. Investors did show some appetite for LVMH today as its share price is up over 1%. LVMH’s valuation has turned more attractive over the course of the year with its P/E ratio declining from over 25x in March to around 21x now. #economics #finance #earningsseason #luxury #fashion

It has been quite a fall from glory for the luxury goods sector. Last night LVMH reported  3Q24 organic sales growth for its all-important ‘Fashion and Leather Goods’ division of -5% y-o-y. This was a substantial deterioration from its 2Q24 sales growth of +1% y-o-y. LVMH is not alone. Some of its luxury peers are performing even worse. In its last set of financial results (2Q24), Kering (owner of Gucci) reported organic sales growth of -11% y-o-y. Kering has yet to report its 3Q24 sales but chances are they will be even worse than LVMH’s. When I started my investment career luxury goods were considered cyclical stocks, albeit high quality cyclical stocks due to their brand power. They typically performed well when the economy was performing well and performed poorly when the economy was performing poorly. That all changed after 2008, when an increase in Chinese consumption of luxury goods propelled the revenue and earnings growth of these companies to unimagined heights and made the sector a secular growth story. Cyclical concerns were forgotten. Now with the poor performance of the Chinese economy and the very real possibility that Chinese demand for luxury goods has been permanently impaired with policies like the ‘Common Prosperity’ policy, some of the hype is starting to leave the sector. Does this mean luxury goods stocks will make unattractive investments? Not at all. A consequence of hype leaving the sector is that valuations are starting to reach very attractive levels. Kering, for one, now trades on 16X blended forward earnings and these are low earnings as margins are forecast to be 16-17% versus a five year average of 26%.      #investing #globalinvesting #valuationsmatter Photo by Kouji Tsuru on Unsplash

Earlier today, LVMH confirmed what most analysts expected and that is that luxury spending continues to cool and cool quickly. The group reported that H1 2024 organic revenue growth slowed to 2 percent on the back of a 10 percent decline in revenues from China and weak growth almost everywhere else. LVMH’s largest division, fashion and leather goods (which comprises about half of total revenues), was down 2 percent during January to June. For more, check out the latest from FSW High Frequency Luxury Monitor below. #luxury #economics #luxurystrategy #data #finance #luxuryeconomics #retail #retailstrategy #fashion