European luxury stocks experienced a downturn on Tuesday following LVMH's announcement of weaker-than-expected sales in its fashion and leather goods division, raising concerns about the sector's recovery. Shares of LVMH dropped 1.6% by 09:09 GMT, while other luxury brands were also affected: Hermes fell 2.4%, Kering 2%, Moncler 1.5%, Dior 1.4%, and Richemont 1.1%.
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LVMH revealed that its organic sales in the fashion division, which accounts for nearly half of its overall revenue, declined by 5%, significantly undershooting the Visible Alpha consensus forecast of a 1.8% decrease. The company cited a "less buoyant environment" in China as a contributing factor to the disappointing results. Overall group organic sales rose by 1% to €18.5 billion ($20.68 billion), falling short of expectations for a 1.3% increase.
For the first nine months of the year, LVMH reported revenues of €57.1 billion, representing a 2% decline in reported terms but a 2% increase on an organic basis. The performance of the watches and jewelry division, which includes brands like Bulgari and Tiffany, also moderated, growing 6% compared to 9% in the first half of the year.
When addressing the recovery potential for Louis Vuitton, LVMH Chief Financial Officer Cecile Cabanis remarked that although it may take time, there are likely no shortcuts to achieving recovery. In contrast, the selective retailing segment saw strong organic growth of 8%, driven by market share gains at Sephora due to exclusive product launches and expansion into Belgium and Croatia. Wines and spirits reported a 6% organic growth, buoyed by a resurgence in champagne sales in Europe and strong demand for Hennessy cognac in Asia. Perfumes and cosmetics grew 1%, aided by successful launches including Dior's J'adore Intense and Sauvage Extrait.
The leading luxury groups in Europe have faced a three-year slowdown, resulting in approximately €330 billion in lost market value since the beginning of the year, with LVMH alone experiencing a nearly 40% decline.