LVMH quarterly sales drop as luxury group warns of ‘uncertain’ outlook

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LVMH’s sales fell in the third quarter as the world’s largest luxury group warned of an “uncertain economic and geopolitical environment”.

Group revenues at the conglomerate controlled by French billionaire Bernard Arnault dropped 3 per cent to €19.1bn, below Visible Alpha consensus estimates of a 1 per cent increase.

Sales in the core fashion and leather goods division, which is seen as a bellwether for the industry, fell 5 per cent year on year compared with the same period a year ago, also missing Visible Alpha analysts’ consensus of 1 per cent growth.

“There were misses across the board,” said Luca Solca, analyst at Bernstein.

LVMH’s American depositary receipts were down almost 7 per cent on the results, which came after the Paris stock market closed.

The fashion and leather goods division, comprising the group’s biggest brands, including Louis Vuitton and Dior, accounts for nearly half of group sales.

Sales of jewellery and watches as well as wines and spirits also fell.

The Paris-based company said the contraction “mainly arose from lower growth seen in Japan, essentially due to the stronger yen”.

Chief financial officer Jean-Jacques Guiony told analysts on Tuesday that consumer confidence in mainland China had reached Covid-era lows.

Chinese buyers, who fuelled much of the industry’s growth in the past decade, have reined in their spending as they worry about the darkening economic outlook and weak housing market.

Sales in Asia outside of Japan fell 16 per cent in the third quarter, while sales in the US, the biggest luxury market, were flat compared with the same period a year ago.

Sales in Japan, fuelled by Chinese tourists seizing on a weak yen, remained in the double digits, but moderated from the first half of the year.

With more than 75 brands, LVMH spans luxury segments from the fashion and leather goods division to watches, jewellery and travel. 

Kering, which owns Gucci, and Burberry have suffered double-digit falls in sales in recent quarters. Meanwhile, Paris-based rival Hermès has been helped by a more resilient ultra-wealthy client base. 

LVMH shares have fallen nearly 14 per cent this year, while Kering is down 41 per cent. Hermès is up almost 10 per cent. 

“We see LVMH as the weakest among the quality names,” Solca said. “Richemont we believe will be better, Hermès will be best.”

The results come at a time of change at LVMH, with Arnault’s five adult children taking on more prominent operational roles in the group.