LVMH sales weaker than expected as luxury sector awaits US trade deal
France-based LVMH, which owns over 70 brands ranging from handbags, high-end fashion and watches to spirits and hotels, has traditionally drawn on its size and geographical footprint to maximise profits and withstand headwinds. Yet the group is struggling to shake off consumer fatigue and reignite desire for luxury items.
Sales for the second quarter to the end of June were down 4% to 19.5 billion euros (22.95 billion dollars), falling short of a consensus forecast for a 3% decline compiled by Visible Alpha, cited by UBS. Sales at the group's fashion and leather division, accounting for the bulk of profits, were down 9%, below expectations for a 6% drop.
Chief Financial Officer Cecile Cabanis said on a call she was still "rather confident" about the rest of the year as the group expected trade talks between the EU and the Trump administration to deliver good news soon.
Asked how LVMH would view a potential general tariff rate of 15% anticipated for exports to the United States, Cabanis said that would be an "overall good outcome for the general mood of our clients".
With the exception of wines and spirits, some of LVMH's labels still have room to draw on their pricing power to mitigate the tariff impact, she said.
In China, where a real estate crisis has dampened appetite for luxury goods, the group saw some improvement, Cabanis said, adding that the success of Louis Vuitton 's new ship-shaped store in Shanghai demonstrated the brand still had the clout to attract worldwide attention.
Most luxury sector analysts still view the extended downturn that followed a post-pandemic boom as cyclical, induced in part by the prolonged slump in China, bouts of inflation and a yet unresolved trade dispute with the United States. But after two years of slowing sales following a post-pandemic boom, unease about the health of the industry is growing and high-end labels are scrambling to revitalise their offer.
Consultancy Bain expects sales of luxury goods worldwide to fall between 2% and 5% this year after a 1% drop last year.
LVMH has recently changed designers at Dior, Celine, Givenchy and Loewe, but they will need time to make their mark.
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