Killik & Co positive on LVMH as concerns about demand for luxury goods diminish

LVMH shares were sharply higher on Friday after the luxury goods group announced a very respectable increase in sales in 2023, helping to dispel fears about a broad decline in demand for luxury goods.

LVMH were 12% higher at the time of writing on Friday after announcing group sales grew 13% on an organic basis to €86.2bn in 2023.

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The luxury sector has been under pressure due to concerns that the cost-of-living crisis is finally starting to drag on the wealthy’s propensity to splash out on big-ticket items.

Sales in LVMH’s Fashion & Leather Goods division rose 9% to €11.3bn, suggesting the concerns about a luxury slowdown were overblown, if only for LVMH’s brands.

Perfumes & Cosmetics sales rose 10%, and Wines & Spirits sales grew 4%. Watches & Jewelry sales growth was sluggish, rising just 3%. Watches of Switzerland recently warned of slow demand for high-end watches so this seems to be a sector-wide issue.

“The numbers, although broadly in line with sell-side estimates, are being well received by the market this morning. Concerns over a slowdown in the luxury goods market have weighed on LVMH shares over the last twelve months following a period of extremely strong growth, and the results show that while growth is naturally moderating, it remains at a healthy level, particularly in the all-important Fashion & Leather Goods division,” said Mark Nelson, Senior Equity Analyst at Killik & Co.

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“We remain positive on the medium-term growth prospects for the luxury goods sector and on LVMH’s industry leading position. The shares trade on a price to December 2024 earnings ratio of 22.6x. (Buy)”

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