French company LVMH Moët Hennessy Louis Vuitton, or LVMH (FR:MC), yesterday announced its second-quarter and first-half earnings for 2023. The company reported slower growth in the U.S. luxury market, which was balanced out by a rebound in China and other Asian markets.
Shareholders appeared somewhat concerned about the U.S. numbers, leading to a slight decline in the share price of 0.42% yesterday. The company’s stock has delivered a return of 18.8% so far in 2023.
LVMH is a well-known European conglomerate that owns around 75 luxury brands across multiple sectors. The company’s product line includes luggage, watches, cosmetics, wine, perfumes, and more.
LVMH Results
In its first-half earnings, the company posted a jump of 15% in its revenues to €42.2 billion, as compared to the same period last year. For Q2, the revenue growth was 17%, with a performance similar to the company’s first quarter. The revenue was higher in all business segments, except for Wines & Spirits, which encountered a challenging comparison due to a high basis in the previous period. The operating profits grew by 13% to €11.5 billion.
Among the segments, Fashion & Leather Goods posted double-digit revenue growth of 20%, well supported by exceptional performances from Dior, Louis Vuitton, Marc Jacobs, etc. On the other hand, the Wine & Spirits division experienced a decline of 3% in sales and 9% in operating profits. This number was due to lower sales of Hennessy cognac in the U.S. and ongoing high inventory levels among its retailers.
Regional Balance
The main focus of the results was on the U.S. numbers, where sales were down by 1% in the second quarter. In the first half, revenues in the U.S. increased by 3%, as compared to a 24% surge during the same period in 2022. The company stated that customers in the U.S. are refraining from purchasing as many luxury items as before due to economic pressures and mounting inflation.
The company is cautious regarding the slowdown in the region and feels more sales pressure in second-tier cities, where there has been significant growth in recent years.
On the contrary, the company’s performance in Europe and Asia was solid, mainly driven by rebounding activities in China. Europe witnessed an 18% increase in sales in Q2, with tourists contributing to nearly half of that gain.
Is LVMH Stock a Good Buy?
Post-results, RBC Capital analyst Piral Dadhania confirmed his Buy rating on the stock, predicting an upside of 17.3% in the share price.
According to TipRanks’ analyst consensus, MC stock has a Strong Buy rating backed by all 10 Buy recommendations.
The average share price forecast is €976.9, which is 19.5% higher than the current price level.
