Shares of LVMH Slump After Sales Miss, Sending Rival Luxury Goods Makers Lower

LVMH Moet Hennessy Louis Vuitton, the Paris-based conglomerate known for its ownership of esteemed luxury brands such as Dior, Moët, and Louis Vuitton, faced a significant setback on Wednesday as it reported financial results that left investors underwhelmed. The lackluster performance indicated that the post-pandemic surge in demand for high-end items like Champagne and luxury handbags might be coming to an end.

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The company disclosed that growth in its sales started to decelerate in the third quarter of 2023. This slowdown was attributed to demand reverting to pre-pandemic levels, mirroring the broader downturn in the global economy. Consequently, LVMH stock witnessed a substantial 6% drop on that day, leading to ripple effects across the luxury goods sector, impacting competitors like Burberry, Hermes International, Prada, and even Christian Dior, which owns a significant 41% stake in LVMH.

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The tepid growth in sales, primarily influenced by softer performance in its US and European operations, resulted in LVMH failing to meet analysts' expectations. The company reported revenues of €19.96 billion ($21.19 billion) for the third quarter of 2023, representing a decline of 1%. In contrast, analysts surveyed had anticipated sales of €20.57 billion.

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LVMH also faced challenges in its Asian segment, with revenues from its businesses in the continent, excluding Japan, increasing by just 11%. This could be perceived as a sign that the pace of sales growth in China is not rapid enough to offset declines in Western markets.

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Analysts, led by Chiara Battistini at JPMorgan, commented on the situation, highlighting the ongoing debate about the normalization of the luxury goods sector. LVMH's performance confirmed that this normalization was taking place, possibly at a slightly faster pace than previously anticipated.

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In a broader context, European stocks experienced modest weakness on this day, particularly affecting the French CAC 40, which struggled due to the decline of LVMH.

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Meanwhile, in other parts of Europe, shares in Fresenius Medical Care witnessed a significant plunge of 19%. This drop was triggered by Novo Nordisk's announcement that its weight-loss drug, Ozempic, had shown success in a trial related to kidney disease. This news boosted shares of the Copenhagen-based drugmaker, Novo Nordisk.

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