Luxurious conglomerate LVMH reported first-quarter gross sales up 3 p.c on an natural foundation, confirming fears that luxurious demand would proceed to sputter as slowing financial development, excessive inflation, renewed demand for journey and experiences and buyer fatigue with logo-heavy merchandise all take a toll on the sector.
The outcome was in step with analyst estimates however decrease than projections for international inflation (anticipated to be 5-6 p.c this yr) and made the primary quarter LVMH’s slowest quarter since 2020.
Manufacturers and Classes
The group’s key style and leather-based items division grew 2 p.c on an natural foundation.
LVMH doesn’t escape gross sales for particular person manufacturers, however gave a couple of hints on how particular items are doing. Whereas Louis Vuitton and Loro Piana each had an “glorious” begin to the yr, the group emphasised “artistic momentum” at its different homes (implying less-than-stellar monetary outcomes). Louis Vuitton’s gross sales development was “barely above” the division’s common, whereas Christian Dior’s was “barely under,” chief monetary officer Jean-Jacques Guiony stated.
Watches and jewelry gross sales fell 2 p.c, lower than one yr after the reopening of Tiffany & Co’s “Landmark” flagship in New York. Later this yr, the American jewelry large will face more durable comparisons because it annualises the reopening of its historic mega-store. The outlook for LVMH’s watch manufacturers isn’t notably sunny both. “So far as watches are involved, I affirm that we aren’t notably optimistic, however we don’t count on disaster,” Guiony stated.
Wine and spirits was the worst-performing division, with gross sales falling 12 p.c, whereas the group’s Selective Retailing unit provided the brightest spot: “Exceptional development” at cosmetics chain Sephora drove the division up 11 p.c at the same time as duty-free retailer DFS continued to wrestle, LVMH stated. Fragrance and cosmetics gross sales grew 7 p.c.
Aspirational Slowdown
Gross sales rose 2 p.c in the important thing US market, in addition to in Europe.
Gross sales in Asia (excluding Japan) sank 6 p.c, reflecting tough comparisons to surging spend final yr, when Chinese language authorities relaxed most coronavirus restrictions, and the rebound of long-haul tourism, which prompted many patrons to make purchases outdoors Asia.
Within the US and Europe, the market stays polarised as top-spending purchasers proceed to shell out for luxurious items, and aspirational luxurious consumers who’ve been tougher hit by fast inflation stay much less acquisitive. “So long as inflation will likely be an element we don’t count on to do miracles with this group of shoppers and we count on solely a gradual enchancment,” Guiony stated. Amongst Chinese language purchasers, demand was much less polarised, he added.
Market Response
LVMH’s slowdown could already be priced in by markets, as rival Kering’s warning final month that first-quarter revenues would seemingly decline by 10 p.c (together with a 20 p.c drop at Gucci) had already provoked a sector-wide sell-off. And the efficiency amongst Chinese language prospects is healthier than it seems: worldwide, gross sales grew by near 10 p.c, Guiony stated.
Nonetheless, a sluggish efficiency in style and leather-based items — the group’s most worthwhile division — received’t be taken as a constructive signal. And slower development may lead LVMH to tighten its belt, which may impression different firms serving the style sector: “I’d moderately not begin to reply about value financial savings or else we’ll be there for the remainder of the night,” Guiony stated.
Disclosure: LVMH is a part of a gaggle of traders who, collectively, maintain a minority curiosity in The Enterprise of Vogue. All traders have signed shareholders’ documentation guaranteeing BoF’s full editorial independence.
