LVMH, a worldwide premier luxury group, has reported its most sluggish quarterly sales growth since the early pandemic recovery phase in 2021. The subdued performance was largely influenced by a decline in Chinese demand and weaker champagne sales, marking a stark contrast to previous years of robust revenue surges. This slowdown emerges as a crucial indicator of the broader challenges facing the luxury sector.
In the first quarter of the year, LVMH’s like-for-like sales in Asia, excluding Japan—a market heavily influenced by Chinese consumers—fell by 6%. Meanwhile, the company saw modest growth in the US and Europe, with sales up by 2%. Japan stood out with a remarkable 32% increase, driven by a weaker yen and heightened spending by Chinese tourists.
Zuzanna Pusz, an analyst at UBS, noted that LVMH initiated the luxury earnings season with a “softer start to the year,” as anticipated by market predictions. The slowdown is attributed to challenging year-over-year comparisons and global weakening trends, despite LVMH’s sustained resilience compared to its competitors.
Kering, a rival luxury conglomerate, recently issued an uncommon profit warning, citing sluggish sales at its major brand, Gucci, particularly in the Chinese market. This highlights broader sectoral pressures as the shopping boom spurred by the pandemic starts to dissipate. Bain, a consultancy firm, forecasts a muted growth of 1 to 4% for personal luxury goods in 2024, a sharp downturn from the 8 to 10% growth estimated for 2023.
Despite these challenges, LVMH’s shares experienced a more than 2% increase in morning trading following the announcement. The Paris-based group’s fashion and leather goods division, which includes flagship brands Christian Dior and Louis Vuitton, reported a 2% growth on an organic basis, totaling €10.5 billion in the first quarter. Although this marks a significant deceleration from the 18% growth during the same period last year, it demonstrates some resilience amidst a tough economic landscape.
Demand within LVMH’s primary division remained buoyed by Chinese consumers, domestically and abroad. However, the growth rate for global sales to this demographic has moderated to about 10%, reflecting a normalization following the post-lockdown surge in early 2023.
Jean-Jacques Guiony, LVMH’s chief financial officer, pointed out that while US sales at Louis Vuitton were roughly flat, European sales experienced slight declines. This variability underscores ongoing adjustments within major markets. Guiony also emphasized the significant role of Chinese consumers, noting the tougher comparison base and overall normalization of growth in Asia’s largest market.
Furthermore, Guiony indicated expectations for “a very gradual improvement” in the US market, as consumers with constrained budgets due to rising interest rates and inflation begin returning to stores. He cautioned, however, that any significant recovery would unfold over several quarters, if not years, rather than abruptly.
The group’s watches and jewelry division, which includes US-focused jeweler Tiffany—acquired for $16 billion in 2020—also underperformed, particularly impacted by its exposure to aspirational American customers. Additionally, the wines and spirits division recorded the weakest performance, with like-for-like sales plummeting by 12% in the first quarter, continuing a downturn from the previous year as global champagne demand waned.
Overall, group sales at LVMH grew by 3% on an organic basis to €20.7 billion, aligning with consensus expectations. However, negative currency effects primarily from the yen and the renminbi dragged the reported figures into negative territory, reflecting the complex dynamics affecting the luxury market in a post-pandemic world.
