Slowing Luxury Demand: LVMH's China Problem Raises Alarm

The French luxury giant LVMH is facing a serious problem in the Chinese market. The company reported a 3% decline in revenue for the third quarter on Tuesday, bringing it down to just under $21 billion. This development marks the first decline since the pandemic. The revenue drop was particularly pronounced in Asia outside Japan—essentially in China—with a 16% decline. Post-COVID consumer enthusiasm in the country already waned last year, while a real estate crisis has undermined consumer confidence. The hoped-for boost from government stimulus measures has so far not materialized. Analysts were disappointed after they had predicted moderate growth. An industry expert told Reuters that LVMH had 'grossly' missed expectations and fell short of forecasts 'in every respect.' Particularly, the core fashion and leather goods division, which includes brands like Louis Vuitton and Dior, recorded a 5% revenue decline. This is well below the forecasts for a 4% increase and marks the first decline since 2020. Negative news from LVMH's Italian competitor Ferragamo, which recorded an even stronger decline, exacerbates the gloomy mood in the luxury sector. The current figures from LVMH are expected to negatively impact luxury stocks, as the company is considered a barometer for the entire industry. UBS analysts now predict that the third quarter will be the worst for luxury brands in four years.