On Tuesday, LVMH released its Q3 2023 results, which disappointed investors, causing the company’s shares to drop by 6% and continue declining in subsequent sessions. From their peak, LVMH shares have already fallen by 30%. Let’s analyze whether there is still a place for them in an investor’s portfolio.
Revenue growth has slowed down, but not critically.
In Q3, organic revenue growth (excluding acquisitions and currency fluctuations) was 9%, while the market expected 11%. Since this was a revenue update (formal financial reporting occurs semiannually), the company did not provide profit figures.
The best-performing segment was Sephora (cosmetics stores), with growth of 26% compared to expectations of 22%. The largest segment, Fashion & Leather, grew by 9% against an expected 10%.
Other segments came in slightly below forecasts. The worst performer was the Alcohol division, with a 14% revenue decline versus the expected -1%. However, this division accounts for only 9% of revenue, and an even smaller share of profit, so the impact is not very significant.
The best-performing segment was Sephora (cosmetics stores), with growth of 26% compared to expectations of 22%. The largest segment, Fashion & Leather, grew by 9% against an expected 10%.
Other segments came in slightly below forecasts. The worst performer was the Alcohol division, with a 14% revenue decline versus the expected -1%. However, this division accounts for only 9% of revenue, and an even smaller share of profit, so the impact is not very significant.
Regional overview
Revenue from China grew by 40% year-over-year, but this represents a slowdown from the 40–50% growth seen in the first half of the year. Another notable slowdown occurred in Europe, where the business increased by only 7%, compared to 19% growth in Q2. Meanwhile, the U.S. showed improvement, with growth of 2% compared to a 1% decline in Q2.
Leon’s View
The current LVMH valuation at a P/E of 20.4x is approaching historical averages (19.4x), making the stock worth considering as a buy, although we do not expect a rapid recovery in the luxury market.
LVMH is undoubtedly the favorite in this sector due to its strong fundamentals, excellent brand portfolio, and ability to continue raising prices. Our target price is €812 per share (upside of 21%).
LVMH is undoubtedly the favorite in this sector due to its strong fundamentals, excellent brand portfolio, and ability to continue raising prices. Our target price is €812 per share (upside of 21%).