French luxury powerhouse LVMH faced a setback in its third-quarter sales, marking a 3% drop that fell short of analyst estimates, signaling the first decline in quarterly sales since the pandemic took hold. The decline was attributed to weakening demand in key markets like China and Japan.
Despite generating 19.08 billion euros in revenue for the quarter, LVMH's organic sales dipped by 3%, missing the consensus estimate of 2% growth. This unexpected underperformance rattled investors, causing concerns about the luxury sector's recovery.
Chief Financial Officer Jean-Jacques Guiony highlighted a sharp decline in Chinese consumer confidence to record lows within the COVID-19 era. The sales figures from LVMH and smaller luxury players like Ferragamo only added to the market's uncertainty.
The fashion and leather goods division, a core revenue driver for LVMH, experienced a significant 5% sales decline, failing to meet the 4% growth forecast. While there was a slight improvement in European and American markets, performance in China and Japan lagged behind.
In the crucial Asian markets, excluding Japan, where the Chinese market holds significant weight, sales plummeted by 16%. Hopes pinned on government stimulus measures to revive luxury spending failed to materialize, further dampening outlooks for the sector.
With a slowdown in Japan as well, where growth decelerated from a 57% jump to 20%, LVMH's third-quarter results presented a bleaker picture than anticipated. Analysts warn that the sector may face its toughest quarter in four years, projecting a 1% decline in organic sales compared to the previous year.