LVMH: Arnault now rich list top dog
Just when it looked as though the luxury goods market might be running out of puff, along comes the big daddy of them all, LVMH, to steady the ship with the announcement of a better performance than expected in the final quarter of 2023.
It was never going to match the bumper growth rates achieved when the world was bouncing back from the pandemic, but sales growth of a more than respectable 10% impressed the market enough for the share price to jump 13% in the day.
This was particularly welcome after bad news from Burberry, Hugo Boss and Watches of Switzerland, and LVMH managed to keep its earnings before interest and tax margin well ahead of its peer group at a distinctly chunky 26.5%.
Bernard Arnault, the company’s chair and CEO, pointed to “the exceptional attractiveness of our brands” as a differentiating factor, and concluded that “we look to the year 2024 with confidence”. Clearly, confidence is something you can afford when you’ve knocked Elon Musk and Jeff Bezos into silver and bronze position respectively at the weigh-in for the world’s biggest wallet.
Arnault will turn 75 in March, and while LVMH has extended his retirement deadline, he won’t be around forever and fans of a good succession drama are looking towards the next generation. Two of his children are already on the LVMH board, two are being nominated and a fifth is waiting in the wings, and the process of choosing a successor should guarantee some lively discussion around the Arnault dinner table washed down by his house wine, Château Cheval Blanc.
Tesla: EV hits speed bumps
After doubling in 2023, Tesla’s share price has come off by 26.5% this year, including 12% last Thursday when it warned the market that sales growth would be notably lower in 2024. Revenue growth came in at the slowest rate for more than three years at 3%, and while Tesla met its target of delivering 1.8-million cars in 2023, it failed to give a delivery target for 2024. A series of price cuts bit into margins, while capital expenditure remained at record levels of more than $10bn in 2023.
Consumer enthusiasm for the electric vehicle (EV) revolution seems to have cooled off due to concerns over the price of vehicles, range, collapsing second-hand values, rampaging insurance costs and the lack of reliable charging infrastructure in many countries.
Adoption rates vary wildly by country, with Norway predictably leading the charge at 89% of new car registrations, way ahead of a mere 7.6% in the key US market. Musk is hoping that this will rise when Tesla launches a lower-priced model in the second half of 2025, which will also compete with a flood of Chinese manufacturers starting to move into the export markets.
Tesla was overtaken by BYD last quarter as the world’s biggest-selling EV manufacturer, and Musk was quoted last week as saying that Chinese manufacturers would “demolish” global rivals without significant trade barriers. This is becoming a factor in the US presidential election, with President Joe Biden promising that he won’t allow the Chinese to dominate the EV market, while The Donald is itching to construct tariff walls that will dwarf his previous efforts on the Mexican border.
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