Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
LVMH’s sales fell more than expected in the first quarter, striking a downbeat note for the luxury industry as it braces for the fallout from US President Donald Trump’s tariffs.
Organic sales in LVMH’s fashion and leather goods division, which includes Louis Vuitton and Christian Dior, fell 5 per cent year-on-year to €10.1bn in the first three months of the year.
Performance in the group’s key division, which is seen as a bellwether for the broader luxury industry, missed consensus expectations for a 1 per cent rise by a wide margin. Bernstein analyst Luca Solca said LVMH’s results marked a “soft start” to 2025.
LVMH, the world’s leading luxury group, is the first company in the industry to report quarterly results since Trump announced blanket tariffs on America’s trading partners this month. Economists fear the trade war between the US and China, the world’s two biggest luxury markets, will have a chilling effect on the global economy.
Group sales at LVMH fell 3 per cent to €20.3bn, compared with consensus estimates that they would be flat.
“In a disrupted geopolitical and economic environment, LVMH remains both vigilant and confident at the start of the year,” the company said.
The Paris-listed group, luxury’s biggest player with a market value of €244.2bn, has not been immune to the downturn afflicting the industry, which enjoyed a historic boom during the pandemic.
Subdued demand from Chinese consumers, a central cause of the luxury market’s struggles, continued unabated. LVMH’s sales in Asia, excluding Japan, fell 11 per cent in the first quarter.
LVMH chief financial officer, Cécile Cabanis, said there had been “no change in domestic demand in China”. McKinsey estimates that demand in the mainland Chinese luxury market contracted by between 18 and 20 per cent in 2024.
LVMH, which is controlled by billionaire Bernard Arnault, the group’s chief executive and chair, said US sales fell 3 per cent in the first quarter.
Cabanis cited poorer performance in its beauty business, which includes retail chain Sephora and had enjoyed strong sales a year earlier, as the main driver of the decline in the US. A 9 per cent decline in sales in the group’s wine and spirits business also contributed.
The group’s sales fell 1 per cent in Japan but were up by 2 per cent in Europe.
The unexpected severity of Trump’s tariffs prompted luxury analysts last week to dial back their expectations for a US-led rebound in consumer spending across the sector.
While buyers of luxury goods have a greater capacity to absorb price rises than less affluent consumers, industry executives fear recent market turmoil will erode consumer confidence and inhibit discretionary spending across the income scale.
HSBC now expects 2025 luxury sector earnings to be flat, in contrast to previous expectations for 5 per cent growth. Bernstein is more downbeat, forecasting a 2 per cent industry contraction this year in contrast to previous expectations for a 5 per cent rise.
Read the full article here