LVMH reported third-quarter organic sales growth below analyst expectations on Monday, as its fashion and leather division posted a 5% fall. Weak Chinese demand drove the miss, and the update is likely to heighten concerns about the luxury sector's recovery.
LVMH reported organic sales growth of 1% in the third quarter, short of expectations, as demand for its fashion and leather brands, including Louis Vuitton and Dior, deteriorated on weak Chinese demand. The world's largest luxury group is the first major sector player to report third-quarter results.
Organic sales, which strip out currency swings, rose 1% from a year earlier to €18.5 billion ($20.7 billion). Analysts had expected growth of 1.3%, according to a Visible Alpha consensus.
Fashion and leather division falls 5%
The fashion and leather goods division, which generates nearly half of group revenue, posted a 5% fall in organic sales. Analysts had expected a 1.8% decline.
Regionally, sales in Asia, dominated by China, fell 5% from a year earlier, while sales in the US rose 5%. Chief Financial Officer Cecile Cabanis told analysts: "Asia was penalised by a sharp macro-led deterioration in Chinese consumer sentiment".
China pressure adds to sector worries
China's tax crackdown on wealthy individuals has become the latest headache for luxury brands, which are already grappling with the fallout from the Iran war and signs of slowing consumer spending in the US. Louis Vuitton, by far the group's largest brand, has also faced a backlash in China over a copyright dispute with tea chain Molly Tea.
The results land as the $350 billion luxury industry is mired in a three-year slowdown. Europe's leading luxury groups have lost around €330 billion in market value since the start of the year, with LVMH alone shedding roughly 40%.
LVMH's US-listed shares fell nearly 3% after the trading update was published.
Source: CNBC
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