We might have expected that the weakness of the Chinese economy would have a negative impact on the figures of European luxury companies (of which the Chinese consumer is the main client), but the blow is harder than expected. This Tuesday, LVMH announced its results for the financial year ending September and the company suffered the first drop in sales since the pandemic. This bad taste led investors to dismantle their positions in the luxury brand, which It lost around 4% during the session and took with it the main European luxury companies.
The revenues of the company which owns brands such as Louis Vuitton or Christian Dior reached 60.753 million euros during the first nine months of the year, a figure that represents a drop of 2% compared to the figure presented for the same time of year. .previous and the worst sales figure since the second quarter of 2020when the worst results of the pandemic began to be seen. The truth is that the French company’s sales have continued to decline year-on-year during the three quarters of 2024.
The weakness of the Chinese economy (which led the government of the Asian giant to approve an entire recovery plan to try to revive it) is the main obstacle that LVMH must face. As the company’s financial director, Jean Jacques Guiony, explains, Weak Asian consumer demand is consistent with historic lows which were recorded during Covid and added that the problem does not only lie in China since “most of our markets are currently facing economic challenges”.
The negative reading of the results led investors to choose to sell LVMH shares and the value suffered a drop of around 4% over the day (in the most difficult moments of the session, the drop reached 7.5%). , the worst since the beginning of September. With this new setback, the French company finds itself less than 1.5% from current year lows which marked last month and which placed its price at its lowest levels in more than two years. For the current year, LVMH’s decline exceeded 18%, representing a loss of market value of nearly 69 billion euros this year.
The experts were also quick to revise their assessments of the company and a dozen reduced their price targets. At home, the average price target for the luxury firm’s shares is at 726.33 euros per share which, even if it still leaves an upside potential for the group of 21%, is almost 2% lower than the average valuation of this Tuesday before the results and up to 13% less than the 833 euros at which the Analysts expected the end of 2024 from LVMH. beginning of the year. This is also the lowest valuation the company has received in almost three years.
The blow was not only dealt to the owner of Louis Vuitton, but extended to the rest of the companies in the European luxury sector: Christian Dior (the subsidiary is independently listed on the stock exchange, although in the accounts it is counted in LVMH) loses more than 3% of its value and Kering (owner of brands like Gucci or Yves Saint Laurent) falls by more than 2%. For the moment, the falls of other companies like Burberry, Hermès or Pernod Ricard are a little more controlled, which are around 1%.
