LVMH reports first YoY sales decline since the pandemic

LVMH (LVMUY) reported a 3% organic decline in Q3 2024 sales to €19.08 billion, missing the market’s expectations of €19.94 billion in revenue and an anticipated 0.9% organic growth. The miss marked the company’s first decline in quarterly sales since the pandemic, driven by economic uncertainty and rising prices that affected consumer spending on luxury goods.

The company's flagship Fashion & Leather Goods division, which includes brands like Louis Vuitton and Christian Dior, posted revenue of €9.15 billion, falling short of analyst estimates of €9.67 billion. This decline is notable because the division is a core driver of LVMH’s overall performance, and its struggles indicate a broader slowdown in demand for high-end fashion globally.

Geographically, LVMH faced pressure in Japan, where sales growth was hindered by the stronger yen, leading to lower-than-expected performance. Despite being a bright spot for luxury companies in recent quarters, driven by Chinese tourist spending and currency dynamics, price increases from luxury brands in Japan dampened demand. LVMH’s Japanese sales, which had been a boost to revenue, now contributed to the quarterly decline.

In Wines & Spirits, sales fell 8% organically, with champagne demand normalizing after post-COVID surges, while Hennessy cognac struggled due to weak demand in China. However, U.S. sales showed signs of recovery, especially in the second quarter. The segment also expanded internationally with new product launches and partnerships, including a joint venture with Beyoncé for an American whiskey brand.

The Perfumes & Cosmetics division grew 5% organically, benefiting from innovations and selective distribution strategies. Christian Dior fragrances like Sauvage and J’adore continued to perform strongly, and Fenty Beauty expanded its retail presence in China, contributing to growth. This segment has been a bright spot, contrasting the weaker performance in fashion and spirits.

The Watches & Jewelry division saw a slight decline, impacted by subdued demand globally. Despite this, Tiffany & Co. continued to generate buzz with its "With Love, Since 1837" campaign and new collections, while Bulgari celebrated its 140th anniversary with high-profile campaigns. The segment remains a key focus for LVMH’s future growth, despite near-term challenges.

Selective Retailing, which includes Sephora, performed well with 6% organic growth in the first nine months of 2024, driven by strong demand in North America and Europe. However, travel retailer DFS continued to struggle, with tourist traffic still below pre-pandemic levels, particularly in Asia. Sephora’s robust performance helped offset some of the weaker results from other segments.

Overall, LVMH’s disappointing Q3 results reflect broader challenges in the luxury sector, particularly in China and Japan, and rising prices. While the company remains optimistic about its long-term prospects, citing strong brand desirability and product quality, the near-term outlook has been clouded by macroeconomic headwinds and shifting consumer demand.