LVMH reported disappointing third-quarter organic sales growth on Monday, indicating a decline in demand for its fashion and leather brands, including Louis Vuitton and Dior, primarily due to weak consumer interest in China. The world's largest luxury group revealed that organic sales increased by only 1% to €18.5 billion ($20.7 billion), below analysts' expectations of 1.3% growth, according to Visible Alpha consensus.
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The fashion and leather goods division, which accounts for nearly half of LVMH's revenue, experienced a 5% drop in organic sales, significantly worse than the predicted 1.8% decline. Since the beginning of the year, major luxury companies in Europe have lost approximately €330 billion in market value, with LVMH alone seeing a reduction of around 40%.
Sales in Asia, primarily impacted by China, decreased by 5% year-on-year, while US sales rose by 5%. LVMH's Chief Financial Officer Cecile Cabanis noted that the decline in Asia was linked to a sharp downturn in Chinese consumer sentiment, which has heavily impacted discretionary spending. The company's luxury brands are also facing challenges due to China's tax crackdown on affluent individuals, alongside existing pressures from the Iran war and signs of slowing consumer spending in the US.
Louis Vuitton, LVMH's flagship brand and the largest within its portfolio, has been affected by a backlash in China following a copyright dispute with the tea chain Molly Tea, which used a logo similar to that of Louis Vuitton's signature monogram. This issue has sparked criticism on social media. Following the trading update, LVMH's shares listed in the US fell nearly 3%.