LVMH Moët Hennessy Louis Vuitton SE this week provided a more detailed analysis of the deepening downturn in China’s luxury goods market, reporting that sales in mainland China fell by a double-digit percentage in the third quarter, while the group, which traditionally relies on big-spending consumers, also saw overseas sales decline. UNN reports this, citing Bloomberg.
Details
Weak spending contributed to a 5% decline in organic revenue in Asia, excluding Japan, the only region where the luxury giant recorded a year-on-year decrease. Purchases by Chinese shoppers abroad fell by several percentage points, while overall demand improved toward the end of the quarter ended September 30, Chief Financial Officer Cécile Cabanis told analysts during a conference call.
China’s slowing economic growth, long regarded as an indicator of the industry’s health, is raising doubts about the sustainability of the broader luxury market recovery and could be a warning sign for competitors, including Yves Saint Laurent owner Kering SA and Hermès International SCA, which are due to report their financial results, the publication writes. Less than a year ago, China was contributing to the industry’s recovery, but deteriorating economic sentiment is once again putting pressure on spending in the luxury goods segment.
"The news flow from China over the summer was not particularly good," Cabanis said. "So it really affected positive sentiment and created a short-term subdued environment in China."
Demand for luxury goods in China is declining across many categories. Consumer caution amid the broader economic downturn is restraining domestic spending and prompting some shoppers to turn to cheaper local brands. At the same time, the recent weakening of the stock market and tighter taxation of overseas assets are putting pressure on some of the country’s wealthiest consumers.
"It’s difficult for everyone right now," said Jacques Roizen, co-founder of Shanghai-based consulting firm Foresight Performance Partners. "LVMH’s portfolio, as a major company, is an industry index, and other publicly traded companies in the luxury goods segment will not be able to significantly outperform it."
The slowdown in demand in China contrasted with spending by American shoppers, which rose by several percentage points.
Louis Vuitton also faced a public backlash following a trademark dispute with local tea shop chain Molly Tea, which drew criticism in China during the quarter and added pressure on LVMH’s largest brand. Cabanis said that, although it was difficult to quantify the impact, consumer resistance hurt Louis Vuitton, at least at the beginning of the period.
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The downturn in China is occurring against the backdrop of an overall slowdown in the recovery of the luxury goods market, which is facing pressure from the conflict in the Middle East and cost-of-living concerns that are curbing spending on goods and services worldwide.
This pressure is already being felt in the luxury goods sector. Sales of the 25 largest luxury brands in China fell by more than 10% in July, Bloomberg previously reported. This threatens to derail the recovery that began less than a year ago, when an artificial intelligence-fueled stock market boom helped revive luxury spending.
LVMH’s renewed growth in revenue and earnings per share this year "has become unstable" as China’s slowdown deepened in the third quarter, Bloomberg Intelligence analysts Deborah Aitken and Karin Pitton wrote.
"There have been changes in China’s consumer environment, and this is prompting us to intensify our self-help efforts," CFO Cabanis said. "We need to do more, but we have not stopped investing in China."
LVMH shares plunged over 8% amid doubts about recovery in the luxury goods segment28.01.26, 16:54