The world of opulence, which catapulted LVMH to the pinnacle of Europe’s corporate elite and its founder to global wealth supremacy, now stands at a crossroads.
A downswing in sales at the helm of prestigious brands like Louis Vuitton and Christian Dior has sent shockwaves through the luxury industry. This sector, accustomed to stratospheric growth, has been jolted by the unexpected.
LVMH Moet Hennessy Louis Vuitton SE suffered its most significant intraday stock tumble in nearly two years, plummeting by as much as 8.5%. It briefly erased its substantial yearly gains. Smaller competitors, including Richemont, Kering SA (the proud owner of Gucci), and Hermes International, were not spared either.
The signals of a slowing luxury goods market are not a revelation. This industry had already lost some of its luster as China’s economic revival stalled, and US consumer demand cooled. However, LVMH’s recent sales figures, although not disastrous, have accelerated a downturn that wiped out approximately $245 billion from the collective market value of Europe’s seven largest luxury companies since April.
«I used to favor LVMH because they consistently surpassed expectations, but this time they have faltered,» commented Bruno Vacossin, Senior Portfolio Manager at Palatine Asset Management. «This underlines that the sector is not immune to an economic deceleration.»
Last month, LVMH relinquished its title as Europe’s most valuable company to Danish pharmaceutical giant Novo Nordisk A/S, and its founder and CEO, Bernard Arnault, slipped to second place on the Bloomberg Billionaires Index, trailing behind Elon Musk.
In the third quarter, organic revenue for LVMH’s largest unit, fashion and leather goods, showed a modest 9% increase. While not signaling a demand crash, it fell below analysts’ expectations and was only half the pace of the preceding six months.
These results have dampened hopes for a robust demand resurgence, particularly in China, and suggested that softness in demand has become more widespread. Revenue growth in Asia, excluding Japan, decelerated from 34% in the previous quarter to 11%. Growth in Europe more than halved.
Sales in the wines and spirits division plunged by 14%, significantly below expectations, briefly causing a dip in shares of Cognac-maker Remy Cointreau. LVMH boasts Champagne labels like Dom Perignon and Hennessy Cognac, which have experienced a dip in US demand due to resistance against price hikes.
«After three exceptional years of growth, we are now returning to figures more aligned with historical averages,» noted LVMH Chief Financial Officer Jean-Jacques Guiony during the quarterly presentation.
Guiony also cautioned investors not to anticipate the sustained 30% annual growth rates of the past few years for LVMH’s second-largest fashion brand, Christian Dior.
Currently, LVMH’s stock is trading at a discount to the tech-heavy Nasdaq 100 Index in the US. This marks a shift from its historical premium over tech companies, prompting questions about whether luxury stocks are Europe’s counterpart to the tech-dominated US market.
Hermes and Kering will release their sales figures later this month. Hermes, with its iconic Birkin and Kelly bags that continually outstrip supply, has historically withstood economic turbulence. Their stock remains up by over 20% this year.
Kering, however, has navigated challenges following recent management transitions, along with a new creative director at Gucci, their flagship brand, whose creations won’t hit store shelves until February. Their stock has dipped by approximately 10% this year.
