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LVMH shares fell 7% on Wednesday, a day after the world’s largest luxury goods group reported an unexpected decline in third-quarter sales and warned of an “uncertain economic and geopolitical environment.”
The Paris-based conglomerate, run by French billionaire Bernard Arnault, suffered a slump in profits due to weak spending by Chinese consumers. In the three months to September 30, group revenue fell 3% year-on-year to 19.1 billion euros. Analysts had expected sales to rise 1%.
Sales at LVMH’s core fashion and leather goods division, considered the bellwether of luxury goods, fell 5%, missing the Visible Alpha analyst consensus for a 1% increase.
This is the first time the sector has recorded a decline in sales since 2020, when businesses and markets were shut down due to the coronavirus pandemic.
LVMH said the contraction in group earnings for the third quarter, announced after markets closed on Tuesday, was “mainly due to the slowdown in growth seen in Japan, primarily due to the appreciation of the yen.”
Shares in other luxury goods groups also fell, with Kering down 5.4%, Dior down 5.8% and Hermès down 2.9%.
Consumer confidence in mainland China is at its lowest level in the coronavirus era, Chief Financial Officer Jean-Jacques Guiony told analysts.
Chinese shoppers, who have been a driving force behind the industry’s growth over the past decade, are restraining spending, worried about their country’s worsening economic outlook and a weak housing market.
LVMH’s sales in Asia ex-Japan fell 16% in the third quarter, while sales in the United States, its largest luxury goods market, were flat.
Sales growth in Japan remained double-digit, but slowed compared to the first half.
LVMH’s fashion and leather goods division includes the group’s biggest brands, including Louis Vuitton and Dior, and accounts for nearly half of the group’s sales.
Sales at LVMH’s Jewelry & Watches and Wine & Spirits divisions also both fell in the third quarter.
Citigroup analyst Thomas Chauvet said this was an “unusual and significant sales error for a luxury brand” and expected LVMH’s full-year group revenue forecast to be revised down by 3% to 5%. He added that he is doing so.
Kering, which owns Burberry and Gucci, has seen sales decline by double digits in recent quarters.
Paris-based rival Hermès has been helped by a more resilient ultra-high-net-worth customer base.
LVMH shares have fallen nearly 14% this year, while Kering shares have fallen 41%. Hermès stock is up nearly 10%.
“We see LVMH as the weakest among luxury stocks,” Bernstein analyst Luca Sorca said.
The results come at a time of change at LVMH, with Arnault’s five adult children taking on more prominent roles within the group.
