LVMH Shares Soar After Record 2023 Results

PARIS Shares in LVMH Moët Hennessy Louis Vuitton soared on Friday as investors cheered the group’s record 2023 results and positive outlook, reversing some of the recent slide in luxury sector stocks.

LVMH shares rose 12.8 percent to 773.10 euros in trading after the world’s biggest luxury group reported sales rose 8.8 percent to 86.15 billion euros last year, up 13 percent on a comparable basis. This was above a consensus forecast of 85.83 billion euros, according to a poll of analysts’ estimates compiled by FactSet.

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Analysts said the results were reassuring, signaling that the group was able to rapidly adjust its cost base and protect margins despite a normalization of luxury spending. They also noted positive brand momentum, with a resilient Chinese customer base and signs of improvement in the U.S. market.

The news had a ripple effect, with most sector stocks also posting gains. Kering was up 6.6 percent; Compagnie Financière Richemont gained 6.2 percent; Hermès International rose 6.6 percent, and Burberry Group posted a 4.9 percent increase.

“It was a total rerating of the sector, even if investors do not expect the same decent results from all the other companies,” said Mario Ortelli, managing partner of the luxury advisory company Ortelli&Co. “It’s a sector that until a few months ago was a star, and in the last six months lost its luster. The investors realize that probably they were too harsh.”

In results reported after the market close on Thursday, LVMH said group sales rose 5.5 percent at actual exchange rates to 23.95 billion euros in the fourth quarter, following a 1 percent increase in the previous three months. This represented a rise of 10 percent on a like-for-like basis, up from the 9 percent recorded in the third quarter.

Organic sales for its key fashion and leather goods division rose 9 percent in the fourth quarter, in line with market expectations.

Bernard Arnault, chairman and chief executive officer of LVMH, said he expected the positive momentum to carry over into this year.

“Personally, I’m very confident,” he said. “We’re going to start to see the impact of future interest rate cuts, and I also expect a positive impact on the U.S. economy from the upcoming [presidential] election. Each time there’s an election in the U.S., the market is more dynamic.”

Erwan Rambourg, global head of consumer and retail research at HSBC, noted Arnault took the “exact reverse view” to many hedge funds, which have forecast poor U.S. demand in an election year.

He also lauded chief financial officer Jean-Jacques Guiony delivering on his commitment to hold margins broadly stable. Guiony said the operating margin eased to 26.5 percent in 2023 from 26.6 percent the previous year.

“You buy luxury stocks for sales momentum, not as much for margins. But you did have a thesis with hedge funds that margins needed to moderate and it helps that that thought has been invalidated,” Rambourg said.

The analyst said he was impressed by the “very constructive” tone of management comments and by Arnault’s “frankly great sense of humor,” referring to the tycoon’s playful comments about potential future acquisitions. “[It] gave the impression that he’s not (and his group is not) losing much sleep at night about what’s next,” he said.

While the intraday fillip was estimated to have boosted LVMH’s market capitalization by as much as 40 billion euros, Ortelli cautioned that the market was still vulnerable to swings.

“The market is very nervous. If two important companies report in the same day a completely different thing, the market will go down, so nothing is forever in the stock market — as in fashion,” he said.

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