LVMH suffers steep drop in fashion sales as the rich cut spending
Shares in the world's largest luxury group fell 2 per cent after the division behind Louis Vuitton, Dior and Givenchy reported a 9 per cent drop in organic sales over the past three months to €9 billion.
That compared with a 5 per cent decline in the previous quarter and marked the sharpest fall among LVMH's business lines, which span alcohol, watches and jewellery.
For the first half, sales in the fashion and leather goods division were down 7 per cent on an organic basis to €20.7 billion, while profit from recurring operations fell 18 per cent to €6.6 billion.
The Paris-listed group said tough comparatives had contributed to the decline, noting the first half of 2024 had been boosted by strong tourist spending, particularly in Japan.
Group-wide sales fell 4 per cent on an organic basis to €19.5 billion in the second quarter, in line with analyst forecasts. First-half sales declined 3 per cent to €39.8 billion, also in line with consensus. Operating income before non-recurring items dropped to €9 billion, from €10.65 billion a year earlier.
The wine and spirits division, home to Moët and Hennessy, also posted a fall in revenue and profit, citing the impact of trade tensions on customers in key markets such as the United States and China.
• How will LVMH and its luxury competitors cope with tariffs?
LVMH, led by the billionaire Bernard Arnault, noted continued weak demand for cognac, although it said trends for champagne had improved in the second quarter. Revenue in the division fell 4 per cent over the three months, bringing the first-half decline to 7 per cent.
The French group, which owns 75 luxury brands and has a market capitalisation of €233 billion, has faced challenges across the board this year. A broader slowdown in the US and in China, where a property crisis continues to weigh on consumer sentiment, has hit revenues in its main divisions. This mirrors broader weakness across the luxury sector.
Its Swiss rival Richemont has also struggled, although a stronger performance in luxury jewellery helped offset softer sales in watches and fashion during the second quarter. At LVMH, the jewellery arm recorded flat sales over the same period.
Cécile Cabanis, LVMH's chief financial officer, acknowledged the macroeconomic environment was 'full of uncertainty' but said she remained 'rather confident' about the rest of the year. She pointed to potential good news from trade talks between the European Union and the Trump administration.
Asked how LVMH would respond to a possible 15 per cent general tariff on US-bound exports, Cabanis said such a move would be 'an overall good outcome for the general mood of our clients'.
She added that, with the exception of wines and spirits, several LVMH labels still had pricing power to help offset any impact from tariffs. The company announced plans to open a factory in Texas by 2027 in light of President Trump's tariff regime.
Separately, Cabanis said the company would not keep any brands in its portfolio that were unprofitable, citing recent stake disposals of Off-White and Stella McCartney.
Shares in LVMH, down 28 per cent over the past year, closed 9.7 cents, or 2 per cent, lower at €470.25.
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