LVMH, EasyJet Face a Darkening Economy: EMEA Earnings Week Ahead

A worsening economic backdrop leaves a dark cloud hanging over European companies preparing to report this earnings season.

(Bloomberg) — A worsening economic backdrop leaves a dark cloud hanging over European companies preparing to report this earnings season.

Updates this week from luxury purveyor LVMH Moet Hennessy Louis Vuitton SE, fragrance manufacturer Givaudan SA and discount airline EasyJet Plc will be closely watched for signs of dimming demand and margin pressure.

Higher yields and concern about Chinese shoppers holding back drove consumer products companies to the bottom of the Stoxx Europe 600 Index in September. Although luxury stocks have rebounded of late, valuations are a long way off April highs.

Pricing in the airline industry faces tough year-on-year comparisons after 2022’s inflation spike, which could weigh on future performance now that peak summer demand has passed, according to Bloomberg Intelligence.

As inflation starts to cool across the region, manufacturers like Givaudan need to shift their focus to volume growth instead of price increases, analysts said.

Highlights to look out for this week:

Monday: OMV AG (OMV AV) reported production and refining margins for the third quarter that beat the average analyst estimates.

Tuesday: LVMH’s (MC FP) revenue growth should outpace the luxury goods average, according to BI’s Deborah Aitken. Its debt burden is low, leaving strong cash flow for investment, buybacks and sizable deals. Third-quarter organic revenue is expected to have climbed almost 12%, driven in large part by the company’s Fashion & Leather Goods segment, which is seen up 11%, according to estimates compiled by Bloomberg.

Read more: Luxury a Short-Term Loser, Long-Term Winner on China Exposure

Wednesday: No major reports of note

Thursday: EasyJet’s (EZJ LN) summer quarter is expected to have withstood the challenges of air traffic control strikes, wildfires in Greece and a technical glitch in the UK during peak season. Revenue probably grew 27% year-on-year and the load factor likely increased to 93.8%, consensus shows. Attention now turns to what follows the summer boom as demand slows and load factors normalize from the pandemic, according to BI’s Conroy Gaynor. Full-year results will be released on Nov. 28.

  • Givaudan (GIVN SW) will offer a first glimpse of second-half volume trends in its nine-month sales update. Stockbuilding through the pandemic put the fragrance maker’s sales under pressure in the first six months of the year and confidence in its longer-term forecasts hinges on signs that destocking has ended, BI analyst Duncan Fox said. Givaudan is targeting average like-for-like sales growth of 4% to 5% annually from 2021 to 2025. This year, however, the company is expected to fall short of the target, with less than 3% growth, consensus shows.

Friday: No major reports of note

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–With assistance from James Cone, Laura Malsch and Michael Msika.

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