Shares in luxury goods brands slumped after Louis Vuitton’s LVMH reported an unexpected fall in third-quarter sales amid China’s economic slowdown.
Shares in LVMH, which also owns Dior, Tiffany and Moët & Chandon, fell by as much as 7% in early trading, briefly hitting a two-year low, before regaining slightly, after it warned of an “uncertain economic and geopolitical environment”,with falling sales in Asia.
It came after weaker spending by Chinese consumers on cognac, designer handbags and clothing hit group revenues, which fell to €19.1bn (£16bn) in the three months to the end of September, 3% lower than the same period a year earlier.
The company said the fall in revenue, which was released after market close on Tuesday, “mainly arose from lower growth seen in Japan, essentially due to the stronger yen”.
The slide in LVMH shares prompted wider weakness across the luxury goods sector, as shares also fell in its smaller rival Kering, the owner of Gucci, as well as Hermès and Burberry.
Sales in the group’s fashion and leather goods division, considered a bellwether for the luxury goods sector, slid by 5%. It marked the first slowdown in the division’s quarterly sales since the Covid pandemic closed shops across the world.
Sales in Europe grew by just 2%, despite the firm’s hopes that the “high visibility” of Louis Vuitton’s leather goods during recent sporting events would drive revenue. Its trunks were used during the Paris Olympic and Paralympic Games, while it also transported the trophy for the America’s Cup sailing race currently being held in Barcelona.
LVMH, whose majority owner is the billionaire Bernard Arnault, and its rivals have been suffering for several months as Chinese consumers, spooked by a slowing economy, have reined in their spending. The slump in Chinese demand for designer handbags and clothing in China has put the brakes on rising sales of luxury goods brands over the past decade and prompted analysts to lower their forecasts for the sector.
China’s economic stimulus measures, announced in September, were aimed at restoring consumer confidence, and briefly fuelled hope of a recovery in demand for the luxury sector. However, analysts believe the measures have not yet had an impact on consumer spending.
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LVMH’s revenue in Asia, excluding Japan, tumbled by 16% in the three months to 30 September. Sales were also affected by the strengthening of the Japanese yen, which is “reducing the region’s desirability among Chinese shoppers seeking luxury goods at a more favourable price than in their home country,” said Alice Price, an analyst at the market research firm GlobalData.
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