LVMH Q1 2024 Sales Performance
Sales miss expectations
Back in January, LVMH reported better-than-expected Q4 results and provided an upbeat outlook on 2024.
LVMH - FY 2023 Earnings Discussion
The results from the luxury juggernaut have been awaited eagerly and here they are: re-accelerating growth in Q4, with a strong performance in US and Asia (excl. Japan) and a positive take on 2024. Let’s guide you through the main takeaways and what the LVMH results imply for our luxury tilt (to which we’ve added recently) and which names we deem the most attractive.
As we look at the Q1 2024 sales performance, it may look rather disappointing. But remember: LVMH faced a high bar set in last year’s Q1 when it blew past the analyst consensus. Since then, we’ve seen increased sales growth volatility, the chatter around de-stocking in the “Spirits” business and ultimately lower profit expectations.
Source: LVMH slide deck
Total organic revenue growth in Q1 was +3%, on top of last year’s 17% resulting in a 20-21% two-year stack growth. Japan really stood out with +32% while other Asian regions saw a 6% drop. This was driven primarily by the fact that Chinese consumers were shopping outside Mainland China. Pricing in Japan was +7%.
Source: LVMH slide deck
A couple of points that suggest the comps will improve from hereon (as we expected them to) and that high-end luxury should continue to stay strong:
Cognac business in US is finally stabilizing, despite further de-stocking in Q1. CFO is reasonably hopeful for the remainder of the semester.
Don't expect the situation for aspirational buyers to improve much, as long as inflation persists. Chinese clients have been relatively well isolated from inflationary pressures but it’s difficult to predict where exactly they’ve been skewing the numbers (shopping abroad).
Sales to Chinese consumers were up 10% globally.
As we wrote in January:
Looking at LVMH’s underlying organic invested capital (i.e. measuring the effectiveness of investing internally), the ROIC comes in at a rock-solid 25.4%. As LVMH currently reinvests half of the NOPAT back into organic growth investments, it’s poised for double-digit earnings growth in FY24 and beyond (including inflation).
At today’s levels, LVMH is trading at 23x roughly EV/NOPAT for 2024. Does that make it a buy? We currently don’t own it. Nonetheless, we do have a significant luxury tilt.