Luxury conglomerate LVMH experienced robust growth across its various business divisions in the first half of 2023, with the exception of its wines and spirits sector, which faced challenges from economic headwinds and elevated retailer inventory levels in both the US and China.
According to the company’s latest financial report released on Tuesday, revenue for the Wines and Spirits division declined by 4% to €3181 million compared to the same period last year, making it the only segment that exhibited a drop in performance.
Profit from recurring operations for Wines and Spirits during the first half of the year amounted to €1,046 million, representing a 9% decrease from the previous year. The revenue from Champagne and wines contributed €477 million, while cognacs and spirits accounted for €568 million.
Although Champagne and wines saw a promising 5% growth in published figures, primarily driven by European and Japanese markets, the overall performance was dragged down by the sluggishness of the cognacs and spirits segment. Revenue from the latter category decreased by 12% based on published figures and 11% on a constant consolidation scope and currency basis.
LVMH attributed this decline to the unfavorable economic conditions in the US and China, which experienced an adverse impact on the market due to high retailer inventory levels and challenging economic environments during the first half of the year.
The US luxury market saw a notable slowdown in consumer spending on expensive wines, handbags, and jewelry, indicating a cautious approach among luxury shoppers amidst uncertain economic conditions. China, a key growth driver for LVMH before the pandemic, is still in the process of recovering from the effects of the pandemic.
Given the overall macroeconomic uncertainty, LVMH remains cautious about the outlook for the rest of the year. The luxury group warns that the economic environment, particularly in the US, continues to be uncertain, despite sustained high growth levels throughout the pandemic. Consequently, the company approaches the second half of the year with determination and prudence to navigate the challenges ahead.