LVMH Shares Plummet as Luxury Powerhouse Unveils Surprising Slump in Sales Growth
LVMH shares drop 8% as luxury giant reports significant sales growth slowdown in Q3, following a strong first half performance
LVMH saw a decline of up to 8% in its shares on Wednesday following the announcement that revenue growth in the third quarter was significantly slower compared to the first half of the year. The luxury goods conglomerate reported its earnings on Tuesday, stating that sales were returning to pre-pandemic levels, indicating the conclusion of three years of exceptional growth driven by pent-up consumer demand. This strong performance has led to a 65% increase in the company's stock since October 2020.
Jean-Jacques Guiony, LVMH's chief financial officer, stated during a call with analysts on Tuesday that after experiencing three successful years of growth, the company is now seeing growth figures align more closely with historical averages. According to Reuters, LVMH shares in Paris had declined by nearly 6% by early afternoon on Wednesday, although they had recovered slightly from earlier losses.
In the third quarter, the company experienced a 9% increase in revenue, reaching nearly â¬20 billion ($21 billion). This growth is lower than the 17% rise seen in the second quarter and the first quarter. LVMH, the parent company, owns renowned fashion and beverage brands, including Louis Vuitton and Moët & Chandon. It is regarded as an important indicator for the overall performance of the luxury industry.
Specifically, the wines and spirits division of the company faced a significant decline in sales during the third quarter, experiencing a drop of 14%. LVMH attributed this decline to various factors, including the impact of the economic climate, high inventories at retailers, and a "normalization" of demand following the pandemic. In particular, demand for its Hennessy cognac in the United States was adversely affected.
LVMH is facing weak demand in China, which is one of its largest markets. The economic recovery that occurred after Covid restrictions were lifted last year has quickly faded. LVMH's revenue in Asia excluding Japan increased by 11% in the recent results, which is less than a third of the 34% growth seen in the second quarter. The company does not disclose specific figures for China.
