In an unexpected turn of events, LVMH (Moët Hennessy Louis Vuitton) reported a decline in sales last quarter, with its fashion and leather goods division experiencing a 5% drop. According to Reuters, the decline was primarily attributed to reduced spending by consumers in Mainland China. The luxury giant also warned that “economic uncertainty and geopolitical conditions” would impact its overall performance.
On October 15, LVMH announced that its revenue for the third quarter (July to September) fell by 3% year-over-year, totaling €19.1 billion, contrary to analysts’ expectations of a 1% growth. This marked the first sales decline for the fashion and leather goods sector since the COVID-19 pandemic began in 2020, falling significantly short of the consensus forecast from Visible Alpha. This division is often viewed as a key barometer for the luxury market.
Following the disappointing financial report, LVMH’s American Depositary Receipts (ADRs) dropped as much as 10%. The report was released after the close of the Paris stock market.
In a press release, LVMH noted that the revenue slump was “primarily due to the appreciation of the yen, resulting in very low growth in the Japanese market.” However, CFO Jean Jacques Guiony highlighted to analysts that consumer confidence in Mainland China has fallen to levels not seen since the pandemic.
The Financial Times pointed out that for the past decade, Chinese shoppers have been the largest driving force behind the growth of the luxury industry. Now, however, they are beginning to curtail their spending due to concerns over China’s economic outlook and a sluggish real estate market.
In the third quarter, LVMH’s revenue in Asia (excluding Japan) plummeted by 16%. In the U.S., sales remained flat, while Japan still saw double-digit growth, albeit with a noticeable slowdown compared to the first half of the year. Sales in the group’s jewelry, watch, wine, and spirits segments also declined in the third quarter.
Citigroup analyst Saviote described LVMH’s performance as “unusual” given their status as a leader in the luxury sector, prompting him to lower the company’s full-year revenue projections by 3% to 5%. RBC Capital Markets analyst Dahania echoed this sentiment, indicating that the results reflected a more pronounced slowdown than anticipated.
When asked about the recent market stabilization measures introduced by Beijing, Guiony said it is still too early to assess their potential impact on demand but emphasized that “this shows they are taking this issue very seriously.”
The post-pandemic luxury consumption boom has faded, and although LVMH had previously shown resilience, it now appears to be on a downturn. Competitors like Burberry and Kering have fared worse, with recent sales figures reflecting double-digit declines. In contrast, brands targeting ultra-wealthy customers, such as Hermès, have remained strong; Hermès is scheduled to release its sales results next week.
Year-to-date, Hermès shares have risen nearly 10%, while LVMH’s stock has fallen about 14%, and Kering, which owns Gucci, has seen a 41% decline.
