Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sales growth weakened at French luxury group LVMH in the second quarter, missing expectations as demand for high-end goods fades following a multiyear boom.
Revenues at the world’s biggest luxury company, which owns brands ranging from Louis Vuitton and Dior to jeweller Tiffany, grew 1 per cent on an organic basis to €20.98bn in the three months to June — a slower pace than in the first quarter and below consensus expectations for a 3 per cent rise.
Sales at the French company’s closely watched fashion and leather goods division, its largest by revenues and profits, slowed to 1 per cent on an organic basis in the second quarter, while operating profits fell 6 per cent.
Group first-half operating profits of €10.7bn also came in below expectations, which were compiled by analysts at Stifel, with particular pressure on its wines and spirits divisions as well as watches and jewellery.
“The results for the first half of the year reflect LVMH’s remarkable resilience,” said chief executive Bernard Arnault. “While remaining vigilant in the current context, the group approaches the second half of the year with confidence, and will count on the agility and talent of its teams to further strengthen its global leadership position in luxury goods in 2024.”
Champagne sales fell but still remained above 2019 levels, the company said, while weak cognac sales in the subdued Chinese market were in part offset by a return to growth in the US. Selective retailing, which includes LVMH’s travel retail business as well as beauty retailer Sephora, was a bright spot, growing 5 per cent in the second quarter.
LVMH, which had a market capitalisation of around €333bn on Tuesday, is viewed as a bellwether for the industry due to its size and the fact that its over 75 companies span the luxury segments from watches and bags to travel.
As the industry has slowed over the past year, LVMH has remained in the middle of the pack as companies in difficulty such as Kering and Burberry lag while high end brands such as Hermès and Brunello Cucinelli pull ahead, benefiting from their wealthier client bases.
Shares in LVMH have declined by around a fifth over the past year to trade at €692 per share, reflecting declines across much of the industry.
Among luxury groups that have reported so far this quarter, several have flagged weak demand in China. Richemont, the owner of jeweller Cartier, reported roughly flat sales in its most recent quarter, where growth in the US and Europe was able to offset a sharp decline in China.
LVMH’s outlook for the second half of the year will remain cautious, especially on China, according to Rogerio Fujimori at Stifel, reflecting the mood across the sector. However he expects stronger growth in the second half “due to an easing comparison base in China and Europe, but visibility is limited”.
Weaker demand in China has been particularly noticeable across the industry even as the wealthiest tier of Chinese clients continues to travel abroad to shop. The world’s second-largest economy has served as luxury’s growth engine for much of the last decade, even with the impact of strict Covid lockdowns.
Read the full article here
