For the first time since the pandemic, LVMH’s sales of luxury fashion dropped, as Chinese reluctance to spending on high-end handhelds has driven sales in the country down.
On Tuesday, LVMH Moët Hennessy Louis Vuitton SE stated that organic revenue at LVMH’s key units including Louis Vuitton and Christian Dior has gone down 5% in 3Q, contrary to analysts forecast for a small gain. 3Q24 was the worst-performing quarter since 2Q20 when the world entered quarantine. The group’s overall sales have dipped 3%.
LVMH Chief Financial Officer Jean-Jacques Guiony remarked during the quarterly presentation that the majority of the luxury brand’s market including China is facing an economic downturn as consumer confidence in the Chinese market has nosedive to the level of the Covid period.
RBC Capital Markets analyst Piral Dadhania noted that the report signals a more noticeable decline than anticipated.
The world leader in the luxury industry saw its American depositary receipts tumble by approximately 10% after the quarterly report came out. Meanwhile, LVMH rivals in the U.S. like Ralph Lauren Corp. and Estee Lauder Co. also slump on Wall Street. ADRs of Kering SA plunged by nearly 4% as well.
Chinese consumers’ appetite for expensive non-essentials has ground to a halt amid fears of a potential recession and a property market crisis. This led to the Chinese government announcing a stimulus plan last month to rejuvenate its economy.
Guiony commented that it is difficult to determine the effectiveness of such a plan, but at least the Chinese authority has demonstrated its effort in tackling this issue.
LVMH’s organic sales in the region including China plunged 16% in the quarter, deeper than analysts estimated. The decline showed signs of weakness in the world’s leading luxury brand after its resiliency in the Chinese markets amid cooling demand.
Meanwhile, sales in Japan also underperform as the strong Yen discourages Chinese consumers who usually travel there to shop for opulent products. Western Countries’ performance is also very disappointing.
The spending boom from the pandemic era has grown weary since last year, especially for brands that mainly cater to the “Aspirational Customer.” However, the most exclusive brands, like Hermes International SCA, which will report its quarterly sales next week, have held out better against the decline.
The world’s leading fashion brand, run and controlled by Bernard Arnault, one of the world’s richest men, has around 75 luxury brands covering fashion, jewelry, hotels, and spirits. In 3Q, all of the group’s main units failed to meet the analyst’s expectations.
