LVMH, the world’s largest luxury group, reported a 3% rise in first-quarter sales on an organic basis, reaching 20.69 billion euros ($22 billion). This figure aligns with analyst expectations but reflects a slowdown compared to the same period last year, which saw a boost following the relaxation of COVID-19 restrictions in key markets like China. The Paris-based conglomerate, which owns high-profile brands such as Louis Vuitton, Tiffany & Co., and Bulgari, experienced a 2% decline in reported sales, largely due to adverse currency effects. This report arrives amidst growing concerns over a global economic slowdown that has negatively impacted luxury stock values over the past year.
Sales in Asia, excluding Japan, dropped by 6%, while Europe and the United States each posted a growth of 2%. Analysts at Bernstein considered these results reasonably stable, given the challenging comparison with a strong quarter the previous year. They anticipate that higher growth rates may resume in the second quarter. The luxury sector is currently adjusting to a dip in demand following a surge after the pandemic when consumers, emerging from lockdowns with increased savings, showed a heightened interest in luxury goods. However, Barclays forecasts that growth rates will decelerate to mid-single digits this year, down from nearly 9% in 2023. In China, where economic factors such as falling property prices and high youth unemployment have cooled the luxury market, LVMH’s CFO, Jean-Jacques Guiony, remains optimistic.
He noted a 10% increase in global purchases of Louis Vuitton products by Chinese buyers, with a significant portion occurring outside mainland China, as Chinese tourists have begun traveling more frequently, particularly to Japan and Europe. The fashion and leather goods division of LVMH, which includes iconic brands like Louis Vuitton and Dior, saw a 2% increase in sales, aligning with forecasts. This division had previously reported a 9% year-on-year growth in the preceding quarter. In the U.S., the company has observed sustained strength among high-end clients and a slow recovery among aspirational buyers, still adjusting to the industry’s recent price hikes. Guiony expressed that it would take time for these customers to fully adapt to the new pricing landscape.
LVMH, a bellwether for the broader luxury goods industry, does not provide detailed breakdowns for its individual brands. Over the past year, the company’s shares have dropped by 11% amidst signs of a luxury market slowdown. In contrast, shares of Kering and Burberry have fallen significantly more, while Hermes has seen an increase, driven by continued strong demand for its high-end products like the Birkin handbags.
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