A Dior store, in Paris, on Jan. 27, 2020.Gonzalo Fuentes/Reuters
French luxury giant LVMH reported a 3-per-cent fall in third-quarter sales on Tuesday, undershooting estimates in its first decline in quarterly sales since the pandemic as demand in China and Japan weakened, likely exacerbating investor worries.
The world’s biggest luxury group generated €19.08-billion (US$20.8-billion) in revenue for the three months ending in September, a 3-per-cent fall on an organic basis, stripping out the effect of currencies, acquisitions and divestitures.
The figure missed a consensus estimate of 2-per-cent organic growth cited by Barclays.
The group “badly” undershot expectations, with “misses across the board,” said Luca Solca, an analyst at Bernstein.
The sales report, the first of the quarter from the large luxury companies, comes after a roller coaster for luxury stocks in recent weeks, as stimulus measures in China briefly fuelled hopes of a recovery.
Chinese consumer confidence has slumped to the all-time lows of the COVID-19 era, LVMH chief financial officer Jean-Jacques Guiony said on an analyst call, though he added the company still believed in the future of the market.
The LVMH sales, and a bigger decline at smaller Italian firm Ferragamo, will do little to steady the market.
“LVMH being the sector proxy for many, this print will inevitably cause more short-term volatility,” said Flavio Cereda, co-manager of GAM’s Luxury Brands investment strategy, a fund that owns shares in luxury stocks.
The fashion and leather goods division, home to Louis Vuitton and Dior labels, reported a sales decline of 5 per cent, well below consensus expectations for 4-per-cent growth, and the first fall for the business since 2020.
“The fashion division saw slight improvement with Europeans and Americans but worse performance with Chinese and Japanese,” Mr. Guiony said.
Fashion and leather goods comprise almost half of LVMH revenue and nearly three-quarters of its recurring profit.
In Asia – excluding Japan – of which the Chinese market is a dominant share, the sales decline worsened to a 16-per-cent slide from a 14-per-cent drop in the prior quarter.
A spending spree after pandemic restrictions were lifted lost momentum last year, and China’s property crisis has weighed on shoppers’ confidence. Hopes that government stimulus measures could quickly reignite enthusiasm for high-end merchandise have yet to be fulfilled.
In Japan, LVMH said growth sharply slowed to 20 per cent from the previous quarter’s 57-per-cent jump due to a stronger yen.
The results will likely be viewed negatively by the market, said Piral Dadhania, an analyst with RBC, noting they indicated a “more pronounced slowdown than expected.”
UBS has predicted that the third quarter will be the worst for the sector in four years, with a 1-per-cent decline in organic sales year-on-year.