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A surprisingly strong US jobs report has changed the outlook for interest rates. When the economy adds jobs this quickly, it often leads to higher inflation, which may force the Federal Reserve to raise interest rates to cool things down. This matters for LVMH because higher rates make borrowing more expensive and can weigh on the spending power of luxury shoppers.
While LVMH sells to the world's wealthiest people, its growth still relies on broader economic confidence. If rates stay higher for longer, it could prolong the current slowdown in the luxury market. The stock fell slightly on the news as markets adjusted to the higher likelihood of a rate hike later this month.
Source: Proactive Investors
LVMH has exited its investment in SirDavis, a whisky brand it co-launched with Beyonce. This move allows the artist to take full ownership of the brand. For LVMH, this is a small adjustment to its massive portfolio of 75 brands and is unlikely to have a meaningful impact on its total earnings. The sale fits into a broader effort to manage the Wines & Spirits division, which has faced a difficult market lately. By offloading this stake, the company can focus its resources on its larger, more established champagne and cognac houses like Moët & Chandon and Hennessy.
Source: Reuters
Management has recently regained its footing with two straight quarters of exceeding expectations after a long stretch of misses. This suggests they have finally set a bar that accounts for the current cooling in luxury spending.
| Expectation | |
|---|---|
| EPS | $2.61 |
| Revenue | $48.78B |