LVMH: Growth Decelerates After European and U.S. Consumption Weakens As We Expected

We are maintaining our fair value estimate of EUR 640 per share for wide-moat LVMH as the company reported a moderated pace of growth in the third quarter. Constant-currency growth was 9%, a deceleration from 17% delivered in the first half. The fashion and leather goods division, the biggest and most profitable in the group, grew by 9% at constant currencies versus 20% in the first half. The wine and spirits division was particularly weak with a 14% constant-currency decline, largely driven by cognac weakness in the U.S. market. Perfumes and cosmetics sales were up 9% and watch and jewelry sales were up 3% with better performance of jewelry versus watches and stronger sales at Bulgari (which has stronger exposure to China) than Tiffany. Sales in selective retailing, the least profitable division of the group, were up 26% in the quarter, in line with the first half.