French luxury giant LVMH, the world’s largest luxury goods conglomerate, has reported a 3% drop in third-quarter sales, marking its first quarterly decline since the onset of the COVID-19 pandemic.
The revenue, which totaled €19.08 billion (approximately $20.8 billion), missed market expectations and has raised concerns among investors, especially regarding demand in key markets like China and Japan.
The reported sales figures fell short of the 2% organic growth that was forecasted by Barclays, leading to widespread disappointment across the market.
These results come after a volatile period for luxury stocks. China’s government had introduced stimulus measures that briefly raised hopes of a luxury market recovery, but these measures have yet to deliver the anticipated rebound in consumer spending.
Jean-Jacques Guiony, LVMH’s Chief Financial Officer, acknowledged the slump in Chinese consumer confidence, describing it as one of the lowest levels seen since the pandemic. Despite this, he expressed optimism about the long-term potential of the Chinese market.
Fashion and Leather Goods Struggle
One of the hardest-hit divisions was fashion and leather goods, which accounts for nearly half of LVMH’s total revenue and a significant portion of its profit.
Sales in this division, which houses iconic brands such as Louis Vuitton and Dior, saw a 5% decline, sharply underperforming expectations of 4% growth.
This was the first drop for the segment since 2020, raising concerns about a broader slowdown in the luxury sector.
While this division saw some improvement in European and American markets, the weakness in China and Japan persisted, significantly dragging down overall performance.
Asia Leads the Downturn
LVMH’s performance in Asia excluding Japan worsened, with sales in the region falling by 16%, a deeper decline compared to the 14% drop recorded in the previous quarter.
The ongoing property crisis in China has been a major factor in eroding consumer confidence, with high end shoppers pulling back on discretionary spending.
Hopes that the Chinese government’s stimulus measures would swiftly revitalize the luxury market have not yet materialized.
Meanwhile, Japan which had previously been a bright spot for LVMH experienced a sharp slowdown in growth, with a 20% rise in sales, down from the previous quarter’s staggering 57% increase.
This was attributed to the strengthening of the yen, which dampened demand.
