LVMH reported a 3 per cent increase in first quarter sales on Tuesday, marking a slowdown as rising prices prompted more shoppers who aspire to own its handbags and other luxury goods to hold back on splashing out thousands of dollars.
The slower quarterly sales growth reflected comparisons with the same period in 2023, when sales were boosted by the lifting of COVID-19 curbs in LVMH’s key market of mainland China and comes amid worries about a prolonged global slowdown which has knocked luxury companies’ shares over the past year.
The world’s largest luxury group, owner of Louis Vuitton, Tiffany & Co. and Bulgari, said sales for the quarter ending in March were up 3 per cent year-on-year on an organic basis to €20.69-billion ($22-billion), matching analyst expectations.
On a reported basis, sales at the group were down 2 per cent, largely due to currency effects.
LVMH, which is Europe’s second-largest listed company and worth nearly €400-billion, is the first luxury goods maker to report quarterly earnings, setting the tone as worries grow about demand in China, the world’s No. 2 economy.
Gucci-owner Kering last month issued a surprise warning that first quarter sales would slump 10 per cent, with sharp declines in Asia, casting uncertainty for the sector’s outlook.
LVMH said its Asia sales, excluding Japan, were down 6 per cent, with growth of 2 per cent in both Europe and the United States.
The luxury industry is adjusting to slower demand after a period of stellar sales growth following the pandemic, when shoppers emerged from lockdowns with extra savings and a pent-up desire to treat themselves.
Luxury sector growth rates are expected to slow to mid single digits this year, down from nearly 9 per cent last year and double digits the previous two years, Barclays predicts.
Travelling Chinese shoppers are expected to fuel growth, although investors are increasingly concerned about the pace of recovery in China itself, where declining property prices and high youth unemployment have dampened demand for high-end fashion and leather goods.
However, LVMH Chief Financial Officer Jean-Jacques Guiony told journalists he was “quite happy” with Chinese demand.
Purchases of Louis Vuitton products by Chinese buyers globally grew by around 10 per cent, he said, with an increasing proportion taking place outside the mainland as they resume travelling, particularly in Japan and to some extent in Europe.
Sales at LVMH’s fashion and leather goods division, which includes Louis Vuitton and Dior, climbed 2 per cent, matching expectations.
Sales in the division, which sells small Lady Dior handbags priced at €5,400 and roomy Louis Vuitton Speedy bags for €10,000, had risen by 9 per cent year-on-year the previous quarter.
LVMH, a conglomerate spanning spirits, jewellery, cosmetics and fashion which is regarded as a bellwether for the wider luxury goods industry, does not give a breakdown for its brands.
Its shares have been volatile since the luxury slowdown emerged, and are down 11 per cent over the past year.
Shares of Kering, which is revamping Gucci, and Burberry are down 40 per cent and 55 per cent, respectively. Hermes, meanwhile, has outpaced rivals as the ultra-rich continue to splurge on the label’s high-priced Birkin handbags, with shares up 16 per cent over the year.