LVMH Shares Tumble As Weak China, US Demand Weighs On Sales
LVMH stock fell as much as 7.6% in early Paris trading, bringing the decline this year to 22%.
LVMH shares dropped after the luxury group published weaker-than-expected sales, weighed down by sluggish demand for high-end goods in China and the US and the threat of a trade war.
The stock fell as much as 7.6% in early Paris trading, bringing the decline this year to 22%.
Revenue at the French luxury group’s fashion and leather goods division, its largest unit, dropped 5% on an organic basis in the first quarter, LVMH Moët Hennessy Louis Vuitton SE said in a statement Monday. Analysts had expected a decline of 0.55%.
“Investor concerns around underlying demand recovery are likely to be amplified based on these results,” RBC analysts led by Piral Dadhania wrote in a note. “The results indicate a more difficult trading environment for the broader luxury sector.”
Shares of luxury rivals including Hong Kong-listed Prada SpA and Gucci owner Kering SA also fell.
Led by billionaire Bernard Arnault, Louis Vuitton-owner LVMH is the first European luxury group to release first-quarter results. The company is considered a bellwether for the industry because it sells a wide range of high-end goods, from Christian Dior jackets to Tiffany engagement rings, Tag Heuer watches and Dom Perignon Champagne.
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The luxury market is struggling to emerge from a period of sluggish growth caused in part by Chinese shoppers reining in costly purchases. The industry’s outlook has grown even gloomier since US President Donald Trump this month placed 10% tariffs on imports from the European Union, while pausing plans for a 20% levy for 90 days.
The tariff reprieve has put the group in “unknown territory,” Chief Financial Officer Cecile Cabanis said on a conference call after the results. LVMH will consider price increases to help offset the impact of the tariffs, and also has room to adjust marketing costs, she added. While it could expand output capacity for Louis Vuitton and Tiffany in the US, it doesn’t plan to radically change its US production, she said.
Cabanis also said that the so-called aspirational categories of luxury, such as beauty products and Cognac, had seen an initial negative impact following the tariffs announcements.
The “aspirational clientele is always more vulnerable in less positive economic cycles and uncertainties, and it might have had some impact in the recent weeks,” she said, referring to the duties.
US sales, which accounted for 24% of LVMH’s total in the quarter, fell by 3%, missing expectations for a small gain. The region that includes China fared worse, with sales there sliding 11%, more than double estimates. Only Europe showed growth.
All divisions saw sales decline except watches and jewelry, which was flat. Wines and spirits posted the biggest drop, of 9%. Former CFO Jean-Jacques Guiony moved in February to oversee the struggling division, which is suffering from tariffs imposed by China on its Hennessy Cognac.
More luxury news is coming this week. Moncler SpA, the maker of expensive ski jackets, and Birkin-bag maker Hermès International SCA will both report sales, while LVMH’s Arnault is expected to speak at the annual shareholders’ meeting Thursday.
