Skip to main content

Report: Analysis of LVMH Results for 2024

Overview
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).
Labels:

Comments

Post a Comment

Popular posts from this blog

CPI Again

Wall Street experienced a correction on Friday with noticeable vigor (S&P500 -1.5%, NDX -1.6%). Employment statistics confirmed the robustness of the American job market, which heightened concerns about a more aggressive Federal Reserve and led to an increase in bond yields (T-Note at 4.76%). The rise in oil prices, following a new set of US sanctions on Russia, did not provide any support. This upward trend is continuing today (WTI up by 2.1% to $78.2 and Brent up by 1.9% to $81.3), contributing to fears of ongoing inflation. This week is particularly significant as the US Consumer Price Index (CPI) will be released next Wednesday. There’s an anticipated increase in the overall rate to +2.9% from +2.7%, while the core rate is expected to hover around +3.3%. The effects of these figures will be binary: a worse-than-expected result could pressure bond yields and stifle stock market growth, while a better result could provide some relief. This week can be seen as split into two segme...
Post a Comment
Read more

Weekend Wishes

Countdown to Trump's Inauguration: Stock Market Update The stock market began the week poorly, but a  positive surprise  regarding  US   inflation , alongside robust results from Wall Street banks, shifted the momentum as investors geared up for  Donald Trump 's inauguration . Next week will see a slight increase in quarterly earnings releases, featuring  Netflix ,  Johnson & Johnson ,  GE Aerospace ,  Procter & Gamble , and  Abbott  in the US. In  Europe ,  Investor AB ,  Givaudan , and  Ericsson  are expected to report. Additionally, the week will be highlighted by significant events such as the  Davos Forum  and the  Bank of Japan 's  rate decision on Friday. Of course, we can't overlook the inauguration of the new US President on Monday, which may bring some  dramatic announcements  early in his term. Weekend Wishes As we approach a week filled with signi...
Post a Comment
Read more

Bonds are the key

The bond sell-off seems to be moderating slightly (Bund 2.52% T-Note 4.66%), but yields are still too high for stocks to advance. Yesterday, they just flattened, distracted and worried about US employment data to be released tomorrow, which is likely to be stronger than desired, which would push the Fed away from cutting rates... which would favor bond yields not giving in. That is the main obstacle. However, surprisingly, the ADP Private Employment Survey came out somewhat weak yesterday (122k vs 140k expected vs 146k previous). But tomorrow's employment figures (2:30 PM) are the decisive ones, by official figures. Payrolls or Non-Farm Payroll Creation of only 160k vs 227k previous, Private Employment 135k vs 194k, Unemployment Rate repeating at 4.2% and Wages also repeating at +4.0% are expected. These figures, rather weak, would be good for stocks to stabilize and try to rebound a bit because yields would relax somewhat. But it is advisable not to trust because it would be stran...
Post a Comment
Read more