LVMH profits below expectations

LVMH has sunk £150m into the Paris Olympic Games which open formally on Friday. But do its own financial results show it going for gold? Ron Emler investigates.

Louis Vuitton created the trunk that has carried the Olympic torch and the medal trays for the victory ceremonies. Jeweller Chaumet designed the medals, all of which include a piece of wrought iron from the Eiffel Tower.

And although the Loi Evin prohibits direct advertising and promotion by alcohol brands of sporting events in France, Moet Hennessy’s portfolio will be at the forefront in all the hospitality venues.

Bronze performance

But LVMH’s own performance in the first half of this year was hardly Olympian, meriting only a bronze medal at best.

After the post-Covid boom, sales by the world’s biggest luxury goods company grew by just 1% organically to €20.98bn in the three months to June, slowing from the first quarter and missing analysts’ predictions of a 3% increase.

First-half operating profits of €10.7bn also fell below expectations and net profits were 14% lower than last year.

However, the group’s operating margin of 25.6%, significantly exceeded pre-Covid levels.

Weakest

The Moet Hennessy wines and spirits arm was again the weakest, trailing in behind the fashion, jewellery and luggage divisions.

Moet Hennessy sales were €2.8 billion, 12% lower than in the first six months of 2023, while its operating profit fell by 26% to €777 million.

Champagne sales fell but remained above 2019 levels, the company said, while weak cognac sales in the subdued Chinese market were in part offset by a return to growth in the US, a market in which rivals have alleged Hennessy has competed on price for market share.

LVMH said that the Provence rose Château d’Esclans “stepped up its international expansion”.

USA

Hennessy’s return to growth in the US will heighten examination of Diageo’s full year results next week and of Pernod Ricard’s numbers in early September.

America is the biggest and most profitable market for premium spirits but the post-pandemic slowdown has hit sales and margins as consumers have traded down in the face of further price rises.

China, too, has shown only sluggish growth for premium alcohols this year in the face of a housing finance catastrophe and surging youth unemployment.

“The results for the first half of the year reflect LVMH’s remarkable resilience,” said chief executive Bernard Arnault, who, according to Forbes, saw his personal wealth slashed by about €135m after the numbers were released.

LVMH’s shares have fallen by 7% so far this year, a trend which has accelerated since March.

Looking forward Arnault said: “While remaining vigilant in the current context, the group approaches the second half of the year with confidence and will count on the agility and talent of its teams to further strengthen its global leadership position in luxury goods in 2024.”