LVMH Q3 sales rise 1% as fashion and leather goods slips 5% on China

LVMH Moët Hennessy Louis Vuitton reported a 1% rise in third-quarter organic revenue to €18.5 billion, after the market closed on Monday. Growth came in below the 1.3% analysts had expected in a Visible Alpha consensus, and the first big luxury group to report this season unsettled investors further.

The fashion and leather goods division, which generates nearly half of group revenue and houses Louis Vuitton, Dior and Loro Piana, fell 5% organically in the three months to 30 September. That reversed the second quarter, when the unit broke a two-year losing streak.

The decline was worse than a consensus forecast of a 1.6% drop, and deeper than the 1.8% fall analysts had modelled. LVMH blamed the slide on a slowdown in demand in China, while the United States, Europe and Japan delivered what the company called good growth.

Why China is the problem

Louis Vuitton is by far the biggest brand in the fashion arm and the group's anchor. Dior, the French house founded in 1946, is the other name investors watch, and HSBC has pointed to its slower-than-expected pick-up.

China's tax crackdown on wealthy individuals is the latest headache for the sector, and analysts had cut expectations in recent weeks because of it. Louis Vuitton also faced a nationalistic backlash over a trademark dispute with tea chain Molly, which used a logo resembling the floral motif on Vuitton monogram handbags.

US credit card spending on luxury goods tracked by Citi fell for a third straight month in September, pointing to a possible normalisation of demand in the world's top luxury market. Adding to the pressure, the fallout from the Iran war has weighed on the sector as it mires in a three-year slowdown.

How the other divisions performed

Wines and spirits kept its momentum with a 6% organic increase in the quarter. LVMH said champagne saw a continuing recovery, with Moët & Chandon enjoying a high-profile second season as the official champagne of Formula 1, while Hennessy cognac recorded good momentum in Asia.

Perfumes and cosmetics were flat in the quarter, though Parfums Christian Dior benefited from launches of J'adore Intense, Sauvage Extrait and Dior Addict eau de parfums. Guerlain posted substantial growth behind L'Heure Bleue and its Rouge G lipstick, and Acqua di Parma marked 110 years.

Watches and jewellery rose 6%, driven by strong jewellery. Tiffany strengthened its HardWear, Knot and Sixteen Stone lines, while Bvlgari's new Eclettica line of high jewellery and prestige watches generated what the group called record-breaking revenue. TAG Heuer enjoyed high-profile Formula 1 visibility.

Selective retailing climbed 8%, with Sephora posting strong growth and further share gains as it entered Belgium and Croatia. Le Bon Marché grew on its events slate, and most of DFS's businesses were sold. The group also sold Marc Jacobs to WHP Global on 1 September.

What the maisons did in the quarter

In the fashion arm, the creative renewal paid off in parts. Louis Vuitton revisited the original trunk canvas with a new Monogram Emblème jacquard weave for the monogram's 130th anniversary, and collections by Nicolas Ghesquière and Pharrell Williams saw strong momentum.

Dior rode Jonathan Anderson's designs, with demand especially strong in ready-to-wear and leather goods. The house opened a new flagship in September on Via Monte Napoleone in Milan. Loro Piana put up an excellent performance and opened a knitwear centre in Ghemme, Italy.

Celine's collections by Michael Rider were a major success, as was Fendi's Baguette revisited by Maria Grazia Chiuri. Loewe under Jack McCollough and Lazaro Hernandez, and Givenchy under Sarah Burton, continued renewal. Rimowa and Berluti confirmed their good momentum.

HSBC downgraded LVMH to Hold from Buy last month, cutting its price target to €490 from €600 and citing the weight of the fashion and leather goods unit. It flagged a challenging macro backdrop and a slower-than-expected pick-up at Dior.

LVMH shares have fallen more than 41% this year, enough to cost the group its crown as France's most valuable company to L'Oréal and push Bernard Arnault out of the top 10 of the Bloomberg Billionaires Index. European luxury groups have shed about €330 billion in market value since January.

Morningstar analyst Jelena Sokolova said investors would scrutinise the conference call for signs Chinese demand is stabilising, and for evidence that Dior's new collections and Louis Vuitton's product pipeline can close the gap. She called the medium-term outlook encouraging.

In our profile of Bernard Arnault, we found a playbook built on buying prestige brands cheaply and pairing creative autonomy with rigid financial control from Paris, which produced fashion-division margins above 25% and €84.7 billion in revenue across 75 houses in 2024. The third quarter tests that engine.

We also reported Louis Vuitton's China sales slide after the Molly Tea trademark backlash. This quarter's fashion decline shows that pressure still concentrated in the division where the group earns most of its profit, with family control of LVMH at 50.01% of capital.

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