Shares
in
luxury
giant
LVMH
(MC)
are
up
10%
this
morning
on
higher-than-expected
earnings,
amid
prior
concerns
of
a
slowdown
in
luxury
spending
across
Europe
and
China.
On
Thursday
night,
the
world’s
largest
luxury
brands
business,
which
owns
Givenchy,
Louis
Vuitton,
and
Sephora
cosmetics,
said
its
full-year
2023
sales
had
reached
€86.15
billion
(£73.5
billion)
–
above
market
consensus.
It
will
now
increase
its
dividend.
Investors
were
particularly
pleased
by
the
performance
of
LMVH’s
luxury
goods
and
clothing
brands,
which
includes
luxury
handbags
and
“ready-to-wear”
clothing,
whose
revenue
topped
€11.3
billion
in
the
final
quarter
of
2023,
a
9%
increase.
Morningstar
equity
analyst
Jelena
Soklova
had
originally
expected
the
division
to
grow
7%.
The
company
did,
however,
post
slowing
revenue
growth
for
the
division
across
2023
when
compared
to
the
year
before.
At
the
time
of
writing
shares
in
the
Paris-headquartered
company
are
up
10.8%,
fuelling
optimism
the
luxury
sector
is
proving
more
resilient
than
investors
had
originally
feared.
Gerrit
Smit,
manager
of
the
Stonehage
Fleming
Global
Best
Ideas
Equity
fund
says
the
company’s
performance
included
pleasant
surprises.
“LVMH
delivered
as
well
as
shareholders
could
have
expected.
The
main
feature
is
that
organic
growth
in
the
fourth
quarter
at
+10%
has
not
deteriorated.
It
has
been
surprisingly
strong
in
Japan,
with
the
rest
of
Asia
and
the
US
also
accelerating,”
he
says.
“Most
importantly,
organic
growth
has
held
up
at
+9%
in
Fashion
&
Leather
Goods,
by
far
its
largest
business
group.
Structurally,
LVMH’s
largest
brands
in
this
category
have
taken
market
share.
Overall
it
is
a
comforting
result
in
an
uncertain
environment.”
The
news
has
had
a
positive
effect
on
UK-listed
luxury
brands,
including
Burberry,
which
is
up
2.8%
at
the
time
of
writing,
despite
its
earlier
profit
warning.
Diageo,
which
is
due
to
report
its
own
earnings
next
week,
is
also
higher
at
4%,
making
it
the
top
performer
on
the
FTSE
100
today.
Fair
Value
Estimate
for
LVMH
Morningstar
analyst
Jelena
Sokolova
recently
upgraded
her
Fair
Value
Estimate
(FVE)
for
LVMH
to
€670
from
€640
per
share,
to
incorporate
the
time
value
of
money
“offset
by
slightly
more
pessimistic
expectations
for
2023
sales
and
profits.”
“We
expect
Louis
Vuitton
brand
to
grow
3%
faster
than
the
luxury
leather
goods
supported
by
an
outsize
marketing
budget,
brand
recognition,
and
pricing
power”,
she
wrote
in
a
report
dated
January
8.
Key
Morningstar
Metrics
• Fair
Value
Estimate:
€670;
• Current
Price:
€661;
• Morningstar
Rating:
★★★;
• Morningstar
Economic
Moat
Rating:
Wide;
• Morningstar
Uncertainty
Rating:
Medium.
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