The 2024 results for LVMH slightly exceeded revenue expectations but showed a worsening deterioration in margins during the second half of the year.
Key Financial Metrics vs. Bloomberg Consensus
- Revenues:b€84,683 million (-1.7%) vs. €84,382 million (-2.1%) expected.
- Gross Margin: €56,765 million (67.0% margin) vs. €57,540 million (68.2%) expected.
- EBIT: €19,571 million (-14.2%) vs. €20,450 million (-9.4%) expected.
- EBIT: €12,550 million (-17.3%) vs. €13,380 million (-11.8%) expected.
- Free Cash Flow: €10,478 million (+29%) vs. €12,748 million expected.
- Net Financial Debt: €9,228 million (-14%) vs. €10,746 million in 2023.
Organic Revenue Growth
Organic revenues increased by 1% for the year. In the fourth quarter, sales amounted to €23,930 million (+0%) vs. €23,428 million (-2.2%) expected, with organic growth of +1.0% vs. -1.0% expected.
Divisional Performance
- Fashion & Leather: -1% vs. -2.8% expected.
- Wines & Spirits:b+8% vs. -6.9% expected.
- Perfumes & Cosmetics: +2% vs. +3.5% expected.
- Watches & Jewellery: +3% vs. -2.8% expected.
- Selective Retailing: +7% vs. +3.1% expected.
Geographic Performance
- US: +3% vs. +3.7% expected.
- Europe:b+4% vs. +3.4% expected.
- Asia: -10% vs. -12.1% expected.
- Japan: +8% vs. +14.7% expected.
Dividend Proposal
The group will propose a dividend for 2024 of €13, the same amount as in 2023.
Q4 Performance Analysis
Q4 sales slightly beat expectations and regained some traction compared to the previous quarter, growing +1% in organic terms (vs. -3% in Q3, +1% in Q2, +3% in Q1). After a very weak Q3, all divisions recovered, although without reaching the pace of 1H24. The most important division, Fashion & Leather (50% of sales and 75% of EBIT), fell -1% vs. -2.8% expected and -5% in Q3. Notable performances include Watches & Jewellery (+3% vs. -3% expected) and Selective Retailing (+7% vs. +3% expected).
Geographic Trends
All geographic areas showed positive growth, except Asia, although the decline in Asia was less than expected (-10% vs. -12% expected and -16% in Q3). The trend shows a gradual improvement in the US (+2% in Q1, +2% in Q2, +0% in Q3, +3% in Q4) and Asia (-6%, -14%, -16%, -10%). The group is very optimistic about the US, while in China, the recovery is expected to take two years.
Margin Analysis
Margins continue to suffer, and the deterioration seen in 1H24 is accelerating. Gross Margin declined -295 b.p. to 65.3% in 2H24 (vs. -56 b.p. in 1H24) and ordinary EBIT margin -483 b.p. to 20.7% (vs. -184 b.p. in 1H24). The stabilization of revenues was achieved at the expense of lower prices, as reflected in the fall in gross margin. Operating expenses rose +2.2% in the first half, resulting in a deterioration of almost -500 b.p. in the EBIT margin. EBIT declined -24.7% and EBNA -21.1% in the first half. For the year, Operating Cash Flow fell -7.8% to €27,220 million, but Free Cash Flow increased +29% due to a decrease in investments (-21%) and in Working Capital (-58%). Net Financial Debt amounts to €9,228 million vs. €10,746 million in 2023, bringing the NTI/EBITDA to 0.5x.
Market and Industry Outlook
LVMH's results indicate that the recovery of some luxury segments, as shown by Richemont in Watches & Jewellery a few weeks ago, is not generalized. However, the worst seems to be behind us. Asia stabilizes at weak levels, the US recovers dynamism after Trump's victory and the wealth effect caused by stock market rises, Bitcoin, and gold, and Europe maintains traction supported by tourism. Lower inflation and interest rates will attract back to the sector the less premium and more aspirational consumer who has been absent in 2024 due to the loss of purchasing power. A decline in NAB of -17.3% in 2024 should be compensated by an increase in volumes and margin recovery via cost savings, highly targeted investments, and successful marketing campaigns that maintain brand visibility.
CEO's Remarks
The CEO acknowledges that price increases in recent years have been "extravagant" in some cases and must be "justified, realistic, and honest" or they will cause demand to retreat. Although multiples remain somewhat above their historical average (2025 P/E of 25.5x vs. 24.2x excluding CV19 years), visibility is improving.
Recommendation on LVMH Shares
We expect moderate sales growth and stabilization of margins in 2025, in a year that, according to the CEO, has started on a better note and which in 2H25 will face a more comfortable comparison with a weak 2H24. The correction of the stock after the earnings release offers a more comfortable entry point. We raise our recommendation to Buy (previously Sell) and our Target Price to €800 (previously €665).
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