LVMH Reports 3% Revenue Decline Amid Trade Tensions

LVMH, the world's largest luxury goods conglomerate, reported a decline in total revenue for the first quarter of 2025, marking a disappointing start to the fiscal year. The company's total revenue for the quarter was 203.11 billion euros, falling short of analysts' expectations of 211.4 billion euros. This decline is attributed to the escalating trade tensions that have made high-end luxury consumers more cautious in their spending.

The company's organic revenue, which excludes the impact of acquisitions and divestments, decreased by 3% compared to the same period last year. This is a significant shift from the previous year, when organic revenue grew by 1%. Analysts had anticipated a 1.1% increase in organic revenue for the first quarter of 2025.

During the earnings call, LVMH's management indicated that the company is considering price increases to mitigate the impact of U.S. tariffs. They also mentioned efforts to control general and administrative expenses and adjust marketing costs. The company expressed uncertainty about the U.S. President's announcement to temporarily delay the implementation of certain tariffs for 90 days.

A closer look at LVMH's core businesses reveals that the fashion and leather goods segment, which is the company's largest revenue generator, experienced a significant decline. The segment's organic revenue decreased by 5%, far exceeding analysts' expectations of a 0.55% decline. This marks a fivefold increase in the decline rate compared to the same period last year.

The second-largest segment, selective retailing, also saw a decline in organic revenue, falling by 1%. This segment had previously been one of the fastest-growing areas for LVMH. The watch and jewelry segment reported zero growth in organic revenue, while the perfumes and cosmetics segment saw a 1% decline. The wine and spirits segment experienced the most significant decline, with organic revenue decreasing by 9%.

Geographically, LVMH's revenue in Europe remained positive, while the U.S. market, which had shown zero growth in the previous year, saw a 3% decline in organic revenue. The Japanese market, which had benefited from strong spending by Chinese tourists in the previous year, also turned negative. In other Asian markets, including China, organic revenue declined by 11%, matching the decline rate from the previous year and exceeding analysts' expectations of a 4.69% decline.

This decline in revenue highlights the impact of trade tensions on the luxury goods sector. High-end consumers, who are typically less affected by economic downturns, are now showing signs of caution due to the uncertainty caused by trade disputes. This trend is particularly evident in the fashion and leather goods segment, which is traditionally a strong performer for LVMH.

The decline in the selective retailing segment is also a cause for concern. This segment had been a key growth driver for LVMH in recent years, and its decline suggests that even the company's most resilient businesses are not immune to the effects of trade tensions. The zero growth in the watch and jewelry segment, along with the decline in the perfumes and cosmetics segment, further underscores the challenges facing the luxury goods industry.

The significant decline in the wine and spirits segment is particularly noteworthy. This segment had been a consistent performer for LVMH, and its decline suggests that even traditionally stable businesses are feeling the impact of trade tensions. The decline in revenue from other Asian markets, including China, is also a concern. These markets have been a key growth driver for LVMH in recent years, and their decline suggests that the company may need to rethink its strategy in these regions.

In conclusion, LVMH's first-quarter results highlight the challenges facing the luxury goods industry in the current trade environment. The company's decline in revenue, particularly in its core businesses, suggests that even the most resilient players in the industry are not immune to the effects of trade tensions. As the trade dispute continues to evolve, it will be important for LVMH and other luxury goods companies to adapt their strategies to navigate the uncertain environment.