LVMH sales fall 3% as Chinese demand for luxury goods worsens
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The world’s biggest luxury group, which is headed by Mr Bernard Arnault, generated $27.2 billion in revenue for the three months ending in September.
PHOTO: AFP
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PARIS - French luxury giant LVMH reported a 3 per cent fall in third-quarter sales on Oct 15, undershooting estimates in its first decline in quarterly sales since the Covid-19 pandemic as demand in China and Japan weakened, likely exacerbating investor worries.
The world’s biggest luxury group generated €19.08 billion (S$27.2 billion) in revenue for the three months ended September, a 3 per cent fall on an organic basis, stripping out the effect of currencies, acquisitions and divestitures.
The figure missed a consensus estimate of 2 per cent organic growth cited by Barclays.
The group “badly” undershot expectations, with “misses across the board”, said analyst Luca Solca at Bernstein.
The sales report, the first of the quarter from the large luxury companies, comes after a roller coaster for luxury stocks in recent weeks, as stimulus measures in China briefly fuelled hopes of a recovery.
Chinese consumer confidence has slumped to the all-time lows of the Covid-19 era, LVMH chief financial officer Jean-Jacques Guiony said on an analyst call, though he added that the company still believed in the future of the market.
The LVMH sales, and a bigger decline at smaller Italian company Ferragamo, will do little to steady the market.
Fashion, leather goods sales undershoot forecasts
The fashion and leather goods division, home to Louis Vuitton and Dior labels, reported a sales decline of 5 per cent, well below consensus expectations for 4 per cent growth, and the first fall for the business since 2020.
“The fashion division saw slight improvement with Europeans and Americans but worse performance with Chinese and Japanese,” Mr Guiony said.
Fashion and leather goods comprise almost half of LVMH revenue and nearly three-quarters of its recurring profit.
In Asia excluding Japan, of which the Chinese market has a dominant share, the sales decline worsened to a 16 per cent slide from a 14 per cent drop in the previous quarter.
A post-pandemic spending spree lost momentum in 2023, and China’s property crisis has weighed on shoppers’ confidence.
Hopes that government stimulus measures could quickly reignite enthusiasm for high-end merchandise have yet to be fulfilled.
In Japan, LVMH said growth sharply slowed to 20 per cent from the previous quarter’s 57 per cent jump due to a stronger yen.
The results will likely be viewed negatively by the market, said analyst Piral Dadhania at RBC, noting that they indicated a “more pronounced slowdown than expected”.
UBS has predicted that the third quarter will be the worst for the sector in four years, with a 1 per cent decline in organic sales year on year. REUTERS
