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LVMH shares dropped 7 per cent on Wednesday, a day after the world’s largest luxury group reported an unexpected fall in third-quarter sales and warned of an “uncertain economic and geopolitical environment”.
Weak spending by Chinese consumers depressed revenue at the Paris-based conglomerate controlled by French billionaire Bernard Arnault. Group revenues fell 3 per cent to €19.1bn in the three months to September 30 compared with the same period last year. Analysts had been expecting revenues to increase 1 per cent.
Sales at LVMH’s core fashion and leather goods division, seen as a bellwether for the luxury sector, fell 5 per cent, also missing Visible Alpha analysts’ consensus for a rise of 1 per cent.
It is the first time the division has recorded falling sales since 2020, when the Covid-19 pandemic closed businesses and markets.
LVMH said the contraction in third-quarter group revenues, which were released after the market closed on Tuesday, “mainly arose from lower growth seen in Japan, essentially due to the stronger yen”.
Shares in other luxury groups also weakened, with Kering down 5.4 per cent, Dior off 5.8 per cent and Hermes 2.9 per cent lower.
Chief financial officer Jean-Jacques Guiony told analysts that consumer confidence in mainland China had reached Covid-era lows.
Chinese shoppers, who have fuelled much of the industry’s growth in the past decade, have reined in spending as they worry about their country’s darkening economic outlook and weak housing market.
LVMH’s sales in Asia outside of Japan fell 16 per cent in the third quarter, while those in the US, the biggest luxury market, were flat.
Sales growth in Japan remained in the double digits, but moderated from the first half of the year.
LVMH’S fashion and leather goods division includes the group’s biggest brands, such as Louis Vuitton and Dior, and accounts for nearly half of group sales.
Sales at LVMH’s jewellery and watches division, and wines and spirits unit, both also fell in the third quarter.
This was an “unusual and material sales miss for the luxury bellwether”, said Thomas Chauvet, analyst at Citigroup, adding that he anticipated a 3 to 5 per cent downgrade to expectations for LVMH’s full-year group revenues.
Burberry and Kering, which owns Gucci, have suffered double-digit falls in sales in recent quarters.
Paris-based rival Hermès has been helped by a more resilient ultra-wealthy client base.
LVMH shares have dropped nearly 14 per cent this year, while Kering’s stock is down 41 per cent. Hermès’ shares are up almost 10 per cent.
“We see LVMH as the weakest among the quality names,” Bernstein analyst Luca Solca said.
The results come at a time of change at LVMH, with Arnault’s five adult children taking on more prominent roles at the group.
