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Luxury stocks tumbled on Wednesday after industry giant LVMH reported a sharper-than-expected drop in quarterly sales due to weak consumer demand in China.
Shares in Paris-listed LVMH, run by French billionaire Bernard Arnault, fell as much as 7.5% in early trading, hitting their lowest since July 2022, before rebounding somewhat and ending the day down 3.7%. The transaction was completed. Shares of the Louis Vuitton and Dior brand owners have fallen about 18% so far this year as global demand for luxury goods slows.
Other luxury goods stocks also fell, with Cartier owner Richemont down 1.2%, Hermès down 1.6% and Kering, which is in the middle of a turnaround for top brand Gucci, down 1.1%.
Cosmetics giant L’Oréal also fell 2.3% as investors worried that a tougher outlook for luxury goods would spill over into more affordable skin care and cosmetics.
Barclays analyst Carol Majo said LVMH’s third-quarter sales decline was due to “worsening trends among Chinese customers, while there was no significant improvement for customers of other nationalities.” ” he said. “We believe this failure will be perceived as a negative outlook for the rest of the sector as a whole, reflecting the fact that the sector’s earnings drag continues.”
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Third-quarter sales at LVMH’s core fashion and leather goods division fell 5% from a year earlier, missing consensus expectations for a 1% increase. This is the first time that the sector’s sales have decreased since 2020 during the coronavirus pandemic.
Overall revenue for the company was 19.1 billion euros, down 3% year-on-year. Analysts had expected a 1% increase.
LVMH’s sales in Asia (mostly China) fell 16% in the third quarter, while sales in the United States, its largest luxury goods market, were flat. Sales growth in Japan was lower than in the first half, but still maintained double-digit growth.
The group’s chief financial officer, Jean-Jacques Guiony, told analysts that consumer confidence in mainland China has reached its lowest level in the coronavirus era. “Currently, most of our markets, including mainland China, are facing economic challenges,” he said.
Chinese shoppers, who have fueled much of the industry’s growth over the past decade, have restrained their spending due to concerns about their country’s worsening economic outlook and a weak housing market. At the same time, global demand for luxury goods, particularly from aspiring middle-class consumers who accumulated extra savings during pandemic lockdowns, has waned, and growth has grown rapidly to accommodate these new customers. Pressure is mounting on luxury goods companies that have been
LVMH’s latest information, which begins the luxury goods company’s reporting period, confirms the challenging industry backdrop of recent months, with the China cluster slowing from high-single-digit growth in the first half of this year to a “mid-single-digit contraction.” “We are in the process of doing so.” ” said Jefferies analyst James Gruzinich.
“It’s unlikely that[China’s]recent stimulus announcements have changed the trend,” he added.
