LVMH reports first sales drop since pandemic

LVMH, the world's largest luxury goods conglomerate, reported a surprising 3% decline in third-quarter sales, marking its first quarterly drop since the COVID-19 pandemic. The company's revenue for the period ending September was 19.08 billion euros ($20.8 billion), falling short of analysts' expectations and raising concerns about the luxury sector's overall health.

The disappointing results were primarily attributed to weakening demand in key Asian markets, particularly China and Japan. LVMH's Chief Financial Officer, Jean-Jacques Guiony, noted that Chinese consumer confidence had slumped to levels not seen since the height of the pandemic. Despite this, the company maintains its long-term optimism about the Chinese market.

The fashion and leather goods division, which includes iconic brands like Louis Vuitton and Dior, experienced a 5% sales decline, significantly underperforming against forecasts of 4% growth. This division, accounting for nearly half of LVMH's revenue and three-quarters of its recurring profit, saw improvements in European and American markets but struggled in China and Japan.

In Asia excluding Japan, sales declined by 16%, worsening from the previous quarter's 14% drop. This downturn is partly attributed to China's ongoing property crisis, which has dampened consumer confidence. Meanwhile, Japan's growth slowed dramatically to 20% from 57% in the previous quarter, influenced by a stronger yen.

The luxury sector has been on a rollercoaster ride in recent weeks, with brief hopes of recovery sparked by stimulus measures in China. However, LVMH's results, along with declines reported by other luxury firms like Ferragamo, suggest these measures have yet to reinvigorate the market significantly.

Analysts predict that these results will likely lead to increased market volatility in the short term.