Weak sales in China at LVMH, the owner of Dior, Tiffany and more, sent a shudder through the luxury sector.
Shares in LVMH dropped on Wednesday after the luxury goods giant warned about an “uncertain economic and geopolitical environment” and its latest earnings disappointed analysts.
The conglomerate — which owns Dior, Tiffany, Fendi and more — is a bellwether for the industry. Its financial results, released on Tuesday after European markets closed, has sent a shudder through the luxury sector, particularly in response to slowing sales in the hugely important Chinese market.
LVMH, which is run by the French billionaire Bernard Arnault, said that sales for last quarter fell 3 percent from the same period the previous year. The company also reported a decline in sales in its fashion and leather goods unit, which makes up about half of the conglomerate’s revenue, for the first time since early in the coronavirus pandemic.
Shares of other fashion and lifestyle brands also declined, including Hermès and Kering, the owner of Gucci.
Investors are jittery about the Chinese economy. Beijing introduced a package of measures last month that spurred a major rally in Chinese stocks, but details remain vague about the extent of the measures to bolster weak consumer spending, stabilize the real estate market and strengthen banks.
China recently announced retaliatory penalties on European brandy — LVMH owns Moët Hennessy — in response to higher tariffs imposed by the European Union on Chinese-made electric vehicles.
“Consumer confidence in mainland China today is back in line with the all-time low reached during Covid,” Jean-Jacques Guiony, LVMH’s chief financial officer, told analysts on Tuesday.
Some industry observers are betting that LVMH will cope. “We are not sure this quarter particularly changes the LVMH story,” analysts at Bernstein wrote in a note. Even without a lot of detail, the stimulus signals in China are encouraging and demand will return, the analysts said.
China’s housing minister is set to hold a news conference on Thursday and is expected to outline more measures to bolster growth.
Danielle Kaye contributed reporting.
Source: Elections - nytimes.com
